Audit of Accommodation and Stewardship of Assets

Audit of Accommodation and Stewardship of Assets
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Executive Summary

Introduction

An Audit of Accommodation and Stewardship of Assets was included in the 2012-2013 Transport Canada (TC) Risk-Based Internal Audit Plan. Its inclusion was the result of a risk assessment process aimed at identifying higher risk areas where internal audit attention and limited internal audit resources should be focussed. A further reason was an April 2010 Prime Minister’s letter to the Minister of Public Works and Government Services Canada (PWGSC) and Treasury Board (TB) President asking that steps be taken to ensure federal departments appropriately manage spending on building and maintenance services

The area of TC with responsibility for accommodation and stewardship of assets (in headquarters) is the Facility Management Organization (FMO) within the Material, Contracting, Security and Facility Management Directorate in the Corporate Services group, which reports to the Director General, Finance and Administration, who in turn reports to the Assistant Deputy Minister, Corporate Services.

The objectives of the audit were to assess whether:

Transport Canada’s policies, practices and controls (i.e., its management control framework) are adequate to plan and manage facility activities; and
The activities of TC’s Facility Management Organization (FMO) support an effective and efficient facilities management process.

Conclusions

Overall the auditors can not provide assurance that the management control framework for accommodation services is adequate. Auditors found a lack of structure and tools that would provide the checks and balances to ensure transparency and value-for-money in FMO activities.

Examples of instances showing lack of contracting transparency and compliance included a Standing Offer Agreement “Request for Proposals” that understated the amount of work that would be asked of the successful bidder and overstated what would be required in terms of security clearances, contracting files that were unavailable or incomplete, contracting files that were not submitted for Senior Procurement Review Committee review, contracting files that were submitted to Senior Procurement Review Committee with incorrect information; and contracting files that did not show evidence of review, monitoring and oversight by Contracting and Material Management.

Examples of practices not consistent with the concept of value-for-money included a significant national capital region (NCR) work station vacancy rate, development of TC-specific standing offer agreements for services that could have been obtained more easily through PWGSC master agreements, significant expenditures on a software module and operator to track TC office space use in the NCR that was underutilized and eventually replaced by an Excel spreadsheet, long-term extensive use of full-time contract planners/designers at a cost much higher than government employees, continuation of full-time contract planner/designer and mover contracts even after a moratorium on all but the most essential moves, and multiple extensions of standing offer agreements that significantly increased their total value.

Other issues observed by auditors included warehouses and storage facilities with inadequate security and no lists of inventory and a risk of employer-employee relationships related to long-term contractors. Also, FMO did not have the policies, procedures and controls to ensure compliance with government policies. Overall, auditors observed a lack of management oversight of FMO activities, which allowed a culture of non-conformance to develop and continue.

A positive note was a number of changes in FMO practices since the audit began such as completion of service contracts involving long-term contractors, and some organizational renewal changes, may together bring corrective action in areas found deficient during the audit.

Recommendations

The Deputy Minister should clarify all ADMs’ accountabilities related to TC space management with a view to reducing TC and PWGSC expenditures for unneeded space. A lead ADM (the ADM Corporate Services) should be charged with bringing departmental space usage information to senior management committee with some regularity for the committee’s review and discussion.
The ADM Corporate Services should ensure there are clear objectives for the Facility Management Organization and there is an effective, TB policy compliant, framework of policies/programs/controls for each of its three units: Planning and Design, Building and Emergency Services (including warehouse security and inventory management), and Accommodation. FMO objectives should be regularly updated through a formal planning exercise.
The ADM Corporate Services should ensure that the Materiel, Contracting, Security and Facility Management Branch has the policies, practices and processes to ensure that Facility Management Organization contracts, contract management, and security arrangements are TB policy compliant.
Where PWGSC has supply arrangements for services that TC needs, the ADM Corporate Services should ensure that these supply arrangements are used by the Facility Management Organization. Any exception should be approved, in advance, by the Department’s senior management committee.
With respect to record-keeping, the ADM Corporate Services should ensure there is a sound understanding in both the Contracting and the Material Management branch and the Facility Management areas of Corporate Services of procurement-related record-keeping responsibilities of departments and the two functions fulfil these responsibilities from this time forward.

Statement of Conformance

This audit conforms to the Internal Auditing Standards for the Government of Canada, as supported by the results of an external assessment as outlined in Internal Audit’s quality assurance and improvement program.

Signatures

Dave Leach (CIA) Director, Audit and Advisory Services	Date: June 14, 2013
Laura Ruzzier, Chief Audit Executive	Date: June 14, 2013

1.0 INTRODUCTION

1.1 THE MATERIAL, CONTRACTING, SECURITY, AND FACILITY MANAGEMENT BRANCH

Transport Canada (TC) is the federal government department responsible for transportation policies and programs and the promotion of safe, secure, efficient and environmentally-responsible transportation.

The Department has approximately 5,300 full-time equivalent employees (FTEs), including 3,000 FTEs in the National Capital Region (NCR).

Within the Corporate Services Group, materiel, contracting, security and facility management are managed in NCR by the Material, Contracting, Security and Facility Management Branch. This branch has 29 FTEs in four units (Table 1).

The Director, Material, Contracting, Security and Facility Management, is an EX-1 level executive. The Director reports to the Director General, Finance and Administration, and the Director General, Finance and Administration, reports to the Assistant Deputy Minister, Corporate Services. The ADM, Corporate Services, reports to the Deputy Minister.

1.2 THE FACILITY MANAGEMENT ORGANIZATION

Within the branch, there is a Facility Management Organization (FMO) to provide facility-related advice to senior management and program managers and facility-related functional guidance to TC offices in regions. FMO, because of its role and responsibilities, through the management chain influences decisions about building leases, office space, and office furniture purchases across the NCR.

The Facilities Management Organization has three areas of activity:

Accommodation planning and design (office space requirements, office design, office furniture purchases);
Building and emergency services (moving services, painting services, inventory management, reservations for 13 of 48 boardrooms); and
Accommodation requirements (accommodation strategies, signature on TC’s behalf of TC “occupancy instruments” with PWGSC).

Until the number of full-time contractors was reduced on 31 March 2013, FMO had 13 FTEs plus a number of full-time contractors. Over the years, FMO has relied heavily on the services of contractors, in particular two planning/design companies and a moving company. Before 31 March 2013, each company was providing individuals to work full-time for FMO, and one continues to provide two such workers.

The FMO has a fixed budget, however its expenditures can and do vary considerably from year to year, depending on planning/design activity and purchases. Between 2008-09 and 2012-13, FMO expenditures ranged between $10.6M and $4.5M (Table 2), not including the TC share of TC NCR accommodation costs or planning/design/moving services and furniture costs paid by other parts of the department.

Table 1: Organization of the Materiel, Contracting, Security and Facility Management Branch on 31 January 2013 ^{Footnote 1}

Table 1 - Text version

On 12 April 2010, the Prime Minister wrote to federal departments asking that they appropriately manage building and maintenance costs with the intent of reducing costs. In November 2011, a moratorium was declared on NCR accommodation projects involving furniture reconfigurations, construction work, and moves not related to staffing and FMO began charging back the cost of moving/installation services to departmental clients with a view to raising awareness of the cost of services and decreasing expenditures.

Table 2: FMO expenditures, 2008-09 to 2012-13

Expenditures	2008-2009	2009-2010	2010-2011	2011-2012	2012-2013
Salaries	$749,960	$879,641	$691,393	$801,102	$1,267,320
Other Operating Costs	$1,470,752	$1,282,957	$2,040,499	$2,703,091	$3,448,191
Capital ^{Footnote 2}	$8,396,922	$7,165,438	$6,580,501	$964,884	$197,533
Total	$10,617,634	$9,328,036	$9,312,393	$4,469,077	$4,913,044
Minus Place de Ville Renewal Project expenditures paid through FMO	$124,969	$508,657	$1,140,162	$1,000,004	$495,973
Revised Total	10,492,665	8,819,379	8,172,231	3,469,073	4,417,071

1.3 AUDIT OBJECTIVES AND SCOPE

An Audit of Accommodation and Stewardship of Assets was included in the 2012-2013 Transport Canada Risk-Based Internal Audit Plan. Its inclusion was the result of a risk assessment process aimed at identifying higher risk areas where internal audit attention and limited internal audit resources should be focussed. A further reason was the April 2010 Prime Minister’s letter to the Minister of Public Works and Government Services Canada (PWGSC) and Treasury Board (TB) President, asking that steps be taken to ensure federal departments appropriately manage spending on building and maintenance services. ^{Footnote 3}

The objectives of the audit were to assess whether:

Transport Canada’s policies, practices and controls (i.e., its management control framework) are adequate to plan and manage facility activities; and
Facility Management Organization activities support an effective and efficient facilities management process.

The planning and examination phases of the audit were conducted by an external audit firm with direction/support from the Department’s internal audit function.

Except for contractual arrangements with companies that began prior to 2008-09, the audit covered accommodation and stewardship of assets activity in the National Capital Region from April 2008 to March 2012.

The audit scope did not include the Place de Ville Lease Renewal Project ^{Footnote 4}, regional facility management activities, or property management activities of the TC Real Property Management Group in the TC Programs Group (related to TC-owned property).

Audit planning began in September 2012, followed by the conduct phase. The audit was completed in May 2013.

1.4 AUDIT METHODOLOGY

The effectiveness of the Department’s policies, practices and controls for accommodation and stewardship of assets were assessed by:

Reviewing Government of Canada and TC accommodation and procurement policies/guides;
Reviewing FMO processes, reports and systems related to office moves, inventory management, charge-back for services, and procurement/contracting;
Reviewing work descriptions for positions with responsibilities related to facility management and facility management oversight;
Reviewing the Archibus systems used by TC to track work station utilization and manage corporate boardroom bookings;
A walk-through of 39 of 47 NCR floors to assess the Archibus system’s accuracy;
Reviewing terms of reference of departmental contracting committees;
Reviewing a judgemental sample of 43 FMO procurement/contract files (selected a representative cross-section of transactions (FY 2008-2012) by vendor ($ value, # of purchase orders);
Site visits to TC warehouses; and
Interviews (ADM Corporate Services; ADM Programs; ADM Safety and Security; DG Finance and Administration; Director, Materiel, Contracting, Security and Facility Management; Chief, Facility Management; several FMO employees and on-site consultants; former employee or contractor who had expressed concern about FMO contracting/purchasing activities).

Throughout the audit, the audit team communicated significant observations to the Director, Materiel, Contracting, Security and Facility Management, for validation.

1.5 AUDIT CONSTRAINTS

Changes in long-standing practices that occurred at the time of the audit;
Gaps in corporate memory because of retirements and recent departures;
Gaps in supporting documentation for procurement transactions which made it difficult to audit;
Delays in the provision of procurement transaction information.

Footnote 1

Vacant Funding Positions are unoccupied positions for which funding is available. Vacant unfunded positions are unoccupied positions that are not funded. It is a Corporate Services Group practice to include vacant unfunded positions in its organization charts.

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Footnote 2

Capital expenditures include costs for movers, designers and planners that should have been coded to Other Operating Costs.

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Footnote 3

Information about this letter was taken from a TC Moratorium on HQ Accommodation Projects deck dated Nov. 29, 2012 (RDIMS#7150363). The letter is not available, but the DG, Finance and Administration, provided an email sent by TBS on June 22, 2011 referencing the letter and informing of new/amended guidance to support departments in the management and scrutiny of accommodation services.

Return to footnote 3 referrer

Footnote 4

The Place de Ville Lease Renewal Project is a PWGSC-led project started in 2009 to develop a long-term federal government accommodation strategy for the downtown core of the NCR because many leases will expire in 2013-14. TC’s Place de Ville Steering Committee was established in 2011. A project team was staffed with an executive director and two consultants. The Executive Director reports to the ADM, Corporate Services. Funding for its operation is provided through FMO.

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