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November 16, 2007
Table of Contents
Appendix A - Contract Review Checklist
Canada School of Public Service (CSPS) was instituted on April 1st, 2004 following the integration of three entities that had previously operated independently, namely the Public Service Language School, Training and Development Canada and the Canadian Centre for Management Development.
The CSPS, also known as the School, issues approximately 1,000 contracts annually. Contracting activities are primarily for goods and professional services that are used in the development of courses, and course delivery, across the country. Total contracts amount to approximately $12 million annually.
In April 2005, Finance Canada undertook to provide selected internal audit services to the CSPS on an interim basis. As part of this arrangement, the Internal Audit and Evaluation Division of Finance Canada engaged Consulting and Audit Canada (CAC), now designated Audit Services Canada (ASC), to conduct an audit of CSPS procurement activities.
The objective of the audit was to verify compliance of a sample of CSPS contracting practices to the Financial Administration Act, Government Contract Regulations, the Treasury Board Contracting Policy, and, with applicable policies and procedures in effect at the School. A sample of 32 contract files was selected and each file was subjected to an analysis using a checklist (Appendix A) designed for assessing compliance for key phases of the contracting process.
The audit found instances of non-compliance with certain policy requirements. Detailed observations can be found in the report and recommendations in this report are related to:
It is expected that the implementation of these recommendations will improve contracting practices at the School.
In August 2005, Audit Services Canada (ASC) was contracted to perform an audit of contracting activities conducted by the Canada School for the Public Service (CSPS) during fiscal year 2004-05. The Internal Audit and Evaluation Division (IAED) of Finance Canada/Treasury Board Secretariat of Canada oversaw contract performance.
CSPS (also known as 'The School') was created on April 1st, 2004 following the integration of three organizations: the Public Service Language School, Training and Development Canada and the Canadian Centre for Management Development. The School provides its services across Canada through six regional offices: Atlantic, Quebec, Ontario, Central, Alberta and Pacific Regions.
Since its inception, CSPS has worked at standardizing policies and procedures that were in effect in each organization before the integration. To this effect, in November 2004, a contracting policy was promulgated.
Within CSPS, a Procurement and Contracting Unit (PCU) was created to provide a centrally managed function for the procurement of goods and services required by the School. PCU issues contracts, memoranda of understanding (MOU's) and other procurement documents for the acquisition of goods and professional services. From its inception to the time of the audit, CSPS issued, on an annual basis, approximately 1000 contracts for a total value of $12 million.
Within the School, cost centre managers are responsible for defining requirements and developing Statements of Work (SoWs). PCU is responsible for examining such requirements and for coordinating the tendering and vendor selection process for departmental contracts. All contracts are to be issued in compliance with the Financial Administration Act, Government Contract Regulations, Treasury Board Contracting Policy, and, applicable policies and procedures in effect at the School.
Authorities to approve contracts are held by PCU personnel and are decentralized to five levels of the organization, ranging from Administration Officers (level V) to the President (level I). The authorities to enter into contracts are described in a delegation chart and are dependent on the type of contract document issued (ex. local purchase order), the procurement process (competitive vs. non-competitive) and the nature of the contract (goods, services, etc).
The audit originally had the following objectives:
The objective was later narrowed to focus on compliance elements, as they concern the files examined. The revised objective of the audit was to verify compliance of selected CSPS contracting practices to the Financial Administration Act, Government Contract Regulations, the Treasury Board Contracting Policy, and, with applicable policies and procedures in effect at the School. Due to capacity issues being experienced by IAED at the time this audit was undertaken, assurance can only be provided on the single above-noted objective. A sample of 32 contract files was selected and each file was subjected to an analysis using a checklist (Appendix A) designed for assessing compliance for key phases of the contracting process.
Improvement opportunities and recommendations are submitted through this report for management attention.
The period covered by the audit is from September 1, 2004 to September 30, 2005. The School was created in April 2004 and the new School contracting policy came into effect during the fall of 2004.
This audit covers the contracting process from the initiation of the requirement to the issuance of the contract. Tests on financial signing authorities were limited to confirming that the incumbent had a valid financial signing authority (as documented on their signature card) for the period under audit and for the amount authorized.
Only contracts issued under the authority of the School were audited. Contracts issued by PWGSC on behalf of the School were excluded from the audit since most of the procurement processes are under the control of PWGSC. Call-ups against standing offers, however, were audited even though they were approved by PWGSC. In this case, the principal objective was to verify that the call-ups were issued in compliance with the terms and conditions of the applicable standing offers.
Financial delegations allocated by responsibility centre are conditional to the availability of budget. The availability of budget at the time the contract was signed was not verified. Instead, reliance was placed on this key control and tested to ensure the signor had the appropriate level of authorization at the time of signing. Similarly, responsibility centres under the authority of signatories were not verified.
The intent of this audit was to examine contracts issued by the CSPS to ensure that the procurement cycle complied with policy. Therefore the sample was selected, as outlined below, from the lists of contracts issued. The payment portion of the procurement cycle was not examined and therefore an opinion is not provided on the appropriateness of payments made for contracted services. Nor is an opinion expressed on the appropriateness of payments made for goods or services, which did not appear on the list of contracts.
Before initiating the fieldwork, a meeting was held with the Director and the managers of the Finance, Administration and Procurement Directorate. The goal of this meeting was to clarify the project mandate, to arrange the project timelines, and to solicit any management concerns regarding contracting at the School. The management team explained that, because the School is a relatively new organization and that each of its components used to apply its own policies and procedures, it was expected that certain remnants of old contracting practices would be uncovered when examining the contract files.
Various reference documents pertaining to contracting were audited during this phase. They included the following:
Throughout the audit, interviews were conducted with employees of the School to gather information and to obtain clarifications, opinions and facts. The following School representatives were interviewed:
Compliance with policy during the various contracting phases was assessed. The phases are defined as follows: the initiation process, the sourcing of potential bidders, the bid solicitation process, the bid evaluation and contractor selection, the contract, the delegation of authorities and the issuance of contract amendments. Procurement officer and finance files were examined for each contract. A sample of 32 contract files was selected and each file was subjected to an analysis using a checklist (Appendix A) designed for assessing compliance for each phase of the contracting process.
A sample of 32 CSPS contracts issued during the period from September 1st, 2004 to September 30, 2005 was selected after a preliminary analysis of the total population of contracts. The sample was chosen subjectively and was not statistically representative of the entire population of CSPS contracts. The categories below represent the sample components by category of contracts issued:Goods: 2
Total: 32 contract files
The total contract value of the sample was $1,230,874 and the average contract value was $39,907.
The audit criteria are shown in Appendix "A". When reviewing the delegation of authorities for section 32 of the FAA, the audit team examined the specimen signature cards to determine whether the signatories had the proper authority at the time they signed the official documents.
The audit revealed certain weaknesses in applying all elements of the TB Contracting Policy and Government Contracting Regulations, CSPS policy and the Financial Administration Act. Due to the fact that the sample selected was not statistically representative, the results of this audit cannot be extrapolated to comment on systemic CSPS contracting issues. The observations noted below concern only the procurement files examined, however, they do indicate that there are system-wide opportunities for improvement.
Observations are grouped under the following categories:
Financial Approvals and Authorities
Financial approvals are an integral component of the contracting process. It is imperative that persons signing contracts, or committing funds for contracts, have sufficient authority. In auditing the appropriateness of financial approvals and authorities, the audit team assessed whether the contracts examined were properly processed and approved. The audit team looked for proper FAA Section 32 approval, appropriate contract approval and adherence to contract terms. Authorities are formally delegated through the Financial Administration Act and are supported by delegation matrices and signature specimen cards. Not adhering to the delegated approval authorities is a contravention of the TB Policy on Delegation of Authority.
Contract File Documentation
Treasury Board Policy requires that master contract files contain supporting documentation around all key decision points to facilitate review and audit. Documenting procurement decisions also allows for a transparent account of transactions, should questions arise post award/execution. Our audit revealed several cases of inadequate documentation. The items most often missing were as follows:
Appropriateness of Contracting Processes
The Delegation of Authority Policy and the Contracting Policy dictate which contracting mechanisms can be used under different circumstances. While there is some flexibility in certain cases, the value of the contract being contemplated and the delegated authority limits usually dictate which mechanism is employed. Once a particular mechanism is employed, there are rules that govern its application. Our audit revealed situations where the rules were not applied correctly.
It is recommended that an audit of payments charged against CSPS accounts be conducted in the next fiscal year to ensure proper procurement processes are in place to support all payments made on behalf of the CSPS.
Management Action Plan
The following recommendations are provided to address the consistent application of policy and legal requirements in the contracting process. The consistent application of the enhancements detailed below should serve to minimize the recurrence of the above noted issues.
It is recommended that the Director General, Corporate Services institute the following process modifications/improvements:
Management Action Plan
Management Action Plan
Management Action Plan
Management Action Plan
It is recognized that significant work has been done by CSPS management since April 2004 to harmonize policies and procedures that applied to the various entities before their integration into the School. Although the integration took place ten months prior to the audit, it is recognized that it takes time to implement important operational changes. In that time, School management advanced harmonization work by implementing a contracting policy (in November 2004) and related procedures that apply to the whole organization.
With regard to this context, the audit team, in consultation with management of the School, selected a sample of contracts that were awarded after the integration to ensure that common policies and procedures had time to percolate to all parts of the organisation. The sample size of 32 contract files was relatively small and the results cannot be extrapolated to the whole population. Findings are presented with high assurance regarding adherence of the files examined to key policy requirements, outlined in Appendix A. Findings with respect to the files examined generally relate to financial approvals and authorities, the completeness of contract file documentation and the appropriateness of contracting mechanisms used. Based on the observations, it is noted that system-wide opportunities for improvement exist in CSPS contracting activities.
It is expected that the implementation of the recommendations noted in this report will improve contracting practices at the School.