Real Property and Accommodations Audit

Office of the Chief Audit Executive

February 2016

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© Her Majesty the Queen in Right of Canada, 2016.
Catalogue No. Ch6-37/2016E-PDF
ISBN: 978-0-660-05108-6

Table of Contents

List of Acronyms

CCI
Canadian Conservation Institute
HRBSC
Human Resources Business Service Committee
HRMWB
Human Resources and Workplace Management Branch
IBP
Integrated Business Plan
PCH
Canadian Heritage
PWGSC
Public Works and Government Services Canada
RPMF
Real Property Management Framework
TB
Treasury Board

Executive Summary

The Department of Canadian Heritage (PCH) currently accommodates approximately 1,700 people across the country. Its portfolio consists of 24 office locations, a visitor’s kiosk, a warehouse, and a laboratory facility.  PCH is a tenant department that occupies space managed by Public Works and Government Services Canada (PWGSC).  However, PCH is also the custodian of the Canadian Conservation Institute (CCI), a special operating agency which supports the heritage community in conserving Canada’s heritage collections.

The Real Property and Accommodations (RPA) division of the Human Resources and Workplace Management Branch (HRWMB) is responsible for managing the Department’s real property portfolio throughout Canada.  The management of real property at PCH includes strategic accommodation and design management, major infrastructure investments, building services, and moving services, and is intended to be a systematic, structured process covering real property activities on a whole-of-life basis.

Since April 1, 2014 the real property functions for the CCI building have been centralized under HRMWB prompting the need to update the departmental Real Property Management Framework (RPMF) as required by Treasury Board (TB) Policy on the Management of Real Property.  PCH manages its real property following the RPMF, TB Policies and PWGSC regulations.

The overall objective of this audit was to provide assurance on the effectiveness of the governance, risk management and controls for the Department’s RPA management practices.  The scope of the audit covered activities in place for RPA for fiscal years 2014-15 and 2015-16 to the substantial completion of the audit work in September 2015.

The audit team observed several examples of effective controls and management practices which are listed below:

Governance:

  • The Human Resources Business Services Committee (HRBSC), which includes representatives of senior management from the majority of PCH branches, is responsible for the oversight of the activities related to real property and accommodations.

Risk Management:

  • Monthly meetings with PWGSC representatives and RPA employees are conducted in order to discuss on-going projects, including any emerging issues and risks, and changes in related legislation.

Internal Controls:

  • A memorandum of understanding between PCH and PWGSC has been implemented that authorizes the use of tenant direct work and specifies related roles and responsibilities to help protect PCH’s interests.
  • RPA have implemented a number of formal tools in order to support consistency of its practices and the maintenance of the CCI building and also to provide accommodation services throughout PCH.  These tools include building equipment maintenance documents, procedures for client’s demands and complaints, and a calendar of moves.
  • Post implementation reviews have been conducted by the Department to identify lessons learned from regional workplace 2.0 implementation projects.

Although the Department has formalized its processes and procedures for monitoring and coordinating the activities related to real property and accommodations management, the audit team identified three (3) opportunities for improvement to management practices and processes that should be addressed through the recommendations found in the body of the report.

Audit Opinion and Conclusion

In my opinion, the Department’s real property and accommodations operations has satisfactory processes in place to ensure operating effectiveness and efficiency.  Some improvements were noted including updating the oversight committee mandate, consolidation of reporting against performance indicators and strengthening the risk identification and assessment related to RPA.

Statement of Conformance

In my professional judgment as Chief Audit Executive, this audit was conducted in conformance with the Institute of Internal Auditors' International Standards for the Professional Practice of Internal Auditing and with the Internal Auditing Standards for the Government of Canada, as supported by the results of the quality assurance and improvement program.  Sufficient and appropriate audit procedures were conducted, and evidence gathered, to support the accuracy of the findings and conclusion in this report.  The findings and conclusion are based on a comparison of the conditions, as they existed at the time, against pre-established audit criteria that were agreed with management and are only applicable to the entity examined and for the scope and time period covered by the audit.

Original signed by

__________________________________________________
Natalie M. Lalonde
Chief Audit Executive
Department of Canadian Heritage

Audit Team Members
Siriseng Malichanh, Audit Manager
Chrystianne Pilon, Senior Auditor
Trisha Laul, Student
With the assistance of external resources

1. Background

The authority for this audit is derived from the Department’s Risk Based Audit Plan for 2015-16 to 2017-18 which was recommended by the Departmental Audit Committee and approved by the Deputy Minister in March 2015.

Real property are significant corporate resources that, when managed well, enable effective and efficient government programs, inform strategic decision-making and facilitate horizontal initiatives.  The management of real property is a systematic, structured process covering real property activities on a whole-of-life basis.  It includes activities related to planning, acquisition, use and disposal for which both custodian and tenant departments are responsible.

The Department of Canadian Heritage (PCH) currently accommodates approximately 1,700 people across the country.  Its portfolio consists of 24 office locations, a visitor’s kiosk, a warehouse, and a laboratory facility.  PCH is a tenant department that occupies space managed by Public Works and Government Services Canada (PWGSC).  However, PCH is the custodian of the Canadian Conservation Institute (CCI), a special operating agency which supports the heritage community in conserving Canada’s heritage collections.  The Department also manages unique accommodations with the National Capital Commission consisting of a no cost agreement for the use of a warehouse at 84 Bayview and office space at 30 Metcalfe Street.

The Real Property and Accommodations (RPA) division of the Human Resources and Workplace Management Branch (HRWMB) is responsible for managing the Department’s real property portfolio throughout Canada.  The RPA division consists of 11 full time equivalents reporting to the Director, Corporate Security and Real Property.  The management of real property at PCH includes strategic accommodation and design management, major infrastructure investments, building services, and moving services, and is intended to be a systematic, structured process covering real property activities on a whole-of-life basis.

Since April 1, 2014, the real property functions for the CCI building have been centralized under HRMWB.  CCI has specialized real property requirements such as heating, ventilation (including laboratory exhaust), air conditioning, electrical systems, plumbing and drainage system, whereby adding new responsibilities regarding operations and building maintenance.  This also prompted the need to develop a departmental Real Property Management Framework (RPMF) as required by Treasury Board (TB) Policy on the Management of Real Property.  The objective of this framework is to help ensure real property is managed in a sustainable and financially responsible manner throughout its life cycle and to support the cost-effective and efficient delivery of programs.  PCH manages its real property following the RPMF, TB Policy on the Management of Real Property and PWGSC regulations, for instance the Government of Canada Workplace 2.0 Fit-up Standards.  All projects that would result in a fit-up of either higher or lower quality or that otherwise would create non-standard office accommodation will be considered non-compliant and subject to the approval process.  This process is governed externally by PWGSC to ensure a consistency across government.

2. Objective

The overall objective of this audit was to provide assurance on the effectiveness of the governance, risk management and controls for the Department’s Real Property and Accommodations structures and processes.

The audit had four sub-objectives to provide assurance that:

  1. PCH’s policies and procedures related to Real Property and Accommodations are in compliance with related legislation and central agency requirements.
  2. Efficiency and effectiveness of governance and risk management to support management of Real Property and Accommodations, including management of the Canadian Conservation Institute’s space, equipment and employee requirements.
  3. Efficiency and effectiveness of management controls and procedures to identify and respond to user’s needs related to Real Property and Accommodations in an innovative manner.
  4. Efficiency and effectiveness of processes to manage greements/contracts related to Real Property and Accommodations.

3. Scope

The scope included activities in place for RPA for fiscal years covering 2014-15 and 2015-16 up to the substantial completion of the audit work in September 2015.  The scope also included agreements and contracts related to RPA with PWGSC, NCC, as well as external service providers.

4. Approach and Methodology

The audit methodology included, but was not limited to:

  • A review and analysis of PCH materials (e.g., documents, decks, manuals, procedures, reports, etc.) of relevance to Real Property and Accommodations;
  • A review and analysis of relevant federal and central agency legislation and requirements with respect to Real Property and Accommodations;
  • A review and analysis of memoranda of understanding and other service agreements with external parties;
  • Interviews with management and staff that are directly involved with Real Property and Accommodations and its processes, procedures and practices, as well as key internal stakeholders; and
  • The examination of documentation supporting a sampling of service requests and three major renovation projects, including moves and the implementation of Workplace 2.0 in two regional offices.

5. Findings and Recommendations

This section presents detailed findings and related recommendations for the audit.  The findings are based on a combination of the evidence gathered through the audit methodology for each of the audit criteria.  Appendix A provides a summary of all findings and conclusions for each of the criteria assessed by the audit team.

5.1 Governance

Terms of Reference of the Human Resources and Business Services oversight committee have not been updated to reflect management’s responsibilities in regards to the management of real property.

As required by TB Policy on Real Property Management, PCH has implemented a Real Property Management Framework (RPMF).  The framework provides details of the governance structure and roles and responsibilities related to real property and accommodations management consistent with central agency requirements.  The RPMF specifically references the relevant federal and central agency policies that PCH is expected to follow.

As detailed in the RPMF, the Human Resources and Business Services Committee (HRBSC) has responsibility for the oversight of real property and accommodations and reports to the Executive Committee.  The RPMF further defines Departmental real property responsibilities as follows:

  • HRBSC reviews endorses, and approves decisions on sound people, workplace and information technology management to support the Department’s business lines and to align with government of Canada policies and programs.”
  • DG HRWMB ensures that real property management remains strategic in supporting the mandates, objectives and programs of the Department and/or Branch.”

The responsibilities and mandate of HRWMB are also noted in the Integrated Business Plan (IBP) which specifies that HRWMB provides advice and services in the area of real property and workplace accommodations.  It also mentions that HRWMB “offers full real property services to the CCI.”  The HRBSC’s roles and responsibilities in relation to real property as the custodian for CCI, are not described in the Committee’s Terms of Reference.

A clearly communicated and well understood oversight committee mandate that includes roles and responsibilities with respect to real property management is important to properly monitor or mitigate any issues related to RPA in a timely manner.

Recommendation

  1. The Director General of HRWMB, in collaboration with the Corporate Secretariat, should ensure that the Terms of Reference of the Human Resources Business Service Committee be updated to reflect its roles and responsibilities related to PCH real property and ensure these responsibilities are defined, communicated and well understood.

Performance Measurement and Monitoring

A formal performance measurement strategy to measure the achievement of the objectives of real property and accommodations management is not in place.

Treasury Board’s Policy on Management of Real Property requirements specify that “the overall performance of real property is regularly and systematically assessed for functionality, utilization, and physical and financial performance.  Key performance indicators and targets must be developed based on appropriate benchmarks”.

Management has acknowledged its requirement to report on the overall performance of the Department’s real property assets, as indicated in section 5 (Reporting) of the RPMF.  According to the Framework, the RPA unit will operate using sound information management practices to collect relevant asset, financial, and program information to inform decision making and to report on the usage, maintenance, and overall performance of the Department’s real property assets.

Based on an examination of meeting minutes of the HRBSC as well materials presented at the meetings, and discussion with interviewees, the audit team noted that some updates were provided to the oversight committee in regards to real property and accommodations.  These included presentations on Accommodation Projects Results Update which provided a status on on-going projects and projects completed in the year, and the Shared Meeting Room Proposal to present the benefits of centralizing management of meeting rooms.

The audit team could not find evidence to support regular consolidated reporting against pre-defined performance indicators on the progress and end results of the real property and accommodations projects.  Management confirmed that performance indicators as well as a performance measurement strategy has not yet been implemented.

Sufficient and relevant information to monitor progress on real property and accommodations is important to assess the achievement of results and to support an efficient decision making process, particularly with respect to employee well-being, safety and client satisfaction.

Recommendation

  1. The Director General of HRWMB should develop and implement a robust performance management strategy that will enable management to monitor and report on its progress and results against defined performance measures, including outcome-based measures.

5.2 Risk Management

Risk registers for Real Property and Accommodations were not updated on a regular basis during the period under scope and did not provide a comprehensive view of all key risks of relevance to the Department’s real property and accommodations.

When done on a regular basis, formal risk assessment allows management to monitor their environments for conditions, or changes to conditions, that may result in risk or opportunity.

As part of the Integrated Business Planning (IBP) at PCH, sectors and branches are required to complete a risk assessment of their areas.  Sector/branch-level risks are identified and risk mitigation strategies are defined and documented.  These risks are high level risks of relevance to the HRWMB as a whole, and do not identify risks specific to real property and accommodations.

The audit team found that risk registers related to real property and accommodations were not maintained or updated on a regular basis.  Specifically, in the audit team’s review of documentation, it was noted that a risk assessment of the then Facilities Management was completed in fiscal 2013-2014.  No risk assessment exercise was completed for fiscal 2014-15 and the next assessment was completed in June of 2015.

The audit team found that the risk registers completed did not provide a comprehensive view of all key risks of relevance to the Department’s RPA.  Specifically, the team noted that the 2013-14 risk assessment identified two risks that were related to the Workplace 2.0 fit-up and the PCH parking policy.  These two risks were rated as low and therefore did not require any management follow-up in accordance with PCH’s risk assessment criteria.

The risk assessment for RPA division completed in June 2015 identified four risks related to the following; compliance with the Policy on Management of Real Property and Workplace 2.0 Fit-up, rated as medium, and PCH Parking Policy and Guide to Green Meetings, rated as low.  No mitigation action plans were deemed required for the two risks rated as medium.

In the audit team’s review of the 2015-16 IBP, it was noted that the report mentioned a number of risks that were not considered in the RPA unit risk assessments.  These risks included:

  • PCH’s aging infrastructure which may jeopardize the health and safety of employees and;
  • Centralization of real property which may increase liability related to specialized laboratory knowledge and additional management oversight.

The audit team would have expected the 2015-16 IBP risks be discussed and assessed as part of the real property and accommodations risk assessment completed in June 2015.  The team would also have expected that other risks, such as the structural problems at les Terrasses, the roof replacement at CCI, and the risks related to the implementation of Workplace 2.0 be discussed further and be followed by an identification of mitigation factors resulting in residual risks.

Recommendation

  1. The Director General of HRWMB should strengthen its formal risk assessment process to allow for the identification, assessment and management of risks for Real Property and Accommodations.

5.3 Internal Controls

A number of mechanisms are in place to identify and respond to user needs related to real property and accommodations.

A number of tools and processes have been implemented to maintain real property facilities and respond to user needs in regards to work space accommodations.

Accommodations

A central mailbox is available for clients to request services. Client demands are logged into a database to track the status of the projects/clients requests.  The audit team reviewed 15 client demands and found that overall on-going communication with clients was maintained and progress was monitored in order to ensure proper responses to clients.

Post implementation reviews have been conducted by the Department to identify lessons learned from regional Workplace 2.0 implementation projects completed to date.  The exercise consisted of assessing the results of the implementation to determine if objectives were met, and analyzing the challenges met during the implementation to be considered in future projects.

Maintenance of Real Property (CCI)

The Angus preventive maintenance software has been implemented to maintain CCI equipment and facility.  The system tracks equipment maintenance schedules and dispatches automatically the work required to building staff.  Equipment maintenance manuals are maintained on site.

PCH has the maintenance staff with the required skill set to maintain CCI building.  For example, staff is fully trained in specialized HVAC maintenance and repairs.  PCH requires contracts for various certifications, such as building automated control systems, electricians and plumbers.  To ensure the continuity of operations of the CCI, RPA has secured agreements with suppliers for these specialized requirements.

Project Management

A number of controls were in place to effectively and adequately allocate financial and non-financial resources to projects.

RPA unit manages large accommodation or maintenance projects that are high in cost and impact for the Department.  To accomplish identified project objectives and outcomes, the audit team has identified a number of controls in place to ensure resources are allocated in a responsible manner.

All projects greater than $250K must be approved by the HRSBC and all projects greater than $1M must be approved by the Executive Committee.  The delegation of authority are also specified in the agreement with PWGSC which specifies the delegation for client demands directed to property managers.  A corporate RPA budget is prepared and maintained on an ongoing basis.  The budget lists the activities and project estimates for all cost centres, operational costs for the CCI facilities, as well as budgets for training, travel and administrative costs, among others.

A memorandum of understanding between PCH and PWGSC which specifies the roles and responsibilities of all parties, including the property management company, has been implemented.  In addition to meeting on a regular basis, twice a year, a barometer of the relationship between PWGSC and PCH is prepared to discuss issues, prioritize progress of projects, and agree on action plans.

Overall Conclusion

The main purpose of this audit was to provide assurance that Real Property and Accommodations are being managed efficiently and effectively, particularly in regards of its governance, risk management and internal controls.  Based on the audit findings, our opinion is that RPA has sound governance processes in place to support the continued achievement of its objectives and effective management controls and practices.  Improvements should be made to define oversight committee mandate in regards to real property and to consolidate reporting against performance indicators on the progress and end results of the real property and accommodations projects.  A mechanism should also be implemented to systematically identify, assess and mitigate risks related to Real Property and Accommodations.

Appendix A – Audit Criteria

The conclusions reached for each of the audit criteria used in the audit were developed according to the following definitions.
Numerical CategorizationConclusion on Audit CriteriaDefinition of Conclusion
1 Well Controlled
  • well managed, no material weaknesses noted and effective.
2 Controlled
  • well managed and effective, but minor improvements are needed.
3 Moderate Issues

Has moderate issues requiring management focus (at least one of the following two criteria need to be met):

  • control weaknesses, but exposure is limited because likelihood of risk occurring is not high;
  • control weaknesses, but exposure is limited because impact of the risk is not high.
4 Significant Improvements Required

Requires significant improvements (at least one of the following three criteria need to be met):

  • financial adjustments material to line item or area or to the department;
  • control deficiencies represent serious exposure; or
  • major deficiencies in overall control structure.

Note: Every audit criteria that is categorized as a “4” must be immediately disclosed to the CAE and the subjects matter’s Director General or higher level for corrective action.

Audit Sub-Objective 1:  PCH’s policies and procedures related to Real Property and Accommodations are in compliance with related legislation and central agency requirements.
Criteria #Audit CriteriaConclusion
1.1 PCH has developed and implemented facilities management related policies, guidelines, and procedures that are aligned with government-wide policies. 1
1.2 Mechanisms are in place to identify and monitor changes to relevant federal policies and legislation and align operating directives, procedures, and guidelines with relevant federal policy requirements. 1
1.3 Responsibility for monitoring compliance with relevant legislative requirements is clearly communicated and followed in practice. 2
Audit Sub-Objective 2:  Efficiency and effectiveness of governance and risk management to support management of Real Property and Accommodations, including management of the Canadian Conservation Institute’s space, equipment and employee requirements.
Criteria #Audit CriteriaConclusion
2.1 An effective governance structure is in place where roles, responsibilities, and accountabilities are clearly communicated and understood to enable strategic oversight of the Department’s management of real property and accommodations. 3
2.2 Sufficient information related to real property and accommodations is provided to the oversight bodies, management, and partners on a timely basis to enable effective decision making. 2
2.3 Expected results are clear, measurable, communicated, and directly support the achievement of the Department’s current and future objectives related to real property and accommodations, including direct client services. 3
2.4 Responsibility for monitoring and updating performance measures is clear and communicated. Results of performance measurement are documented, are reported to the appropriate levels, and are factored into decision-making. 3
2.5 A mechanism exists to systematically identify, assess and mitigate, monitor and report on risks to the achievement of the government’s and PCH’s objectives related to real property and accommodations. 3
2.6 Branch’s Human Resources planning is clearly aligned with current and future resource requirements.  Planning tools exist and are consistently applied in support of strategic and operational planning processes. 1
Audit Sub-Objective 3:  Efficiency and effectiveness of management controls and procedures in place to identify and respond to user’s needs related to Real Property and Accommodations in an innovative manner.
Criteria #Audit CriteriaConclusion
3.1 Maintenance programs and plans exist to help ensure facilities are managed with consideration of asset life-cycle and cost information, with a view to achieving current and future needs. 1
3.2 Employees are provided with the tools and training they require to perform their duties related to real property and accommodations. 1
3.3 The activities, schedules and resources required to successfully implement real property and accommodations projects, including workplace accommodation plans, have been identified and integrated into business plans and budgets. 1
3.4 Effective mechanisms are in place to identify, respond to, and monitor stakeholder needs related to work space. 2
3.5 Post-implementation reviews in regards to workplace accommodation projects are performed and include assessments of benefits realization and lessons learned. 1
3.6 Controls and processes to ensure the disposal of assets in accordance with relevant legislation have been implemented and are followed. 1
3.7 Authority is formally delegated, communicated and aligned with the individuals’ responsibilities 2
Audit Sub-Objective 4:  Efficiency and effectiveness of processes to manage agreements/contracts related to Real Property and Accommodations.
Criteria #Audit CriteriaConclusion
4.1 Mechanisms are in place to identify, develop, and manage effective partnerships with other organizations which include PWGSC, NCC and other contractors for projects related to real property and accommodations. 1
4.2 PCH has systems and processes to secure, monitor, and manage key supplier contracts in meeting its requirements cost-effectively. 1

Appendix B - Management Action Plan

RecommendationActionsResponsibilityTarget Date
The Director General of HRWMB, in collaboration with the Corporate Secretariat, should ensure that the Terms of Reference of the Human Resources Business Service Committee be updated to reflect its roles and responsibilities related to PCH real property and ensure these responsibilities are defined, communicated and well understood.

The Human Resources Business Service Committee (HRBSC) roles and responsibilities are reviewed annually at which time the terms of reference are updated appropriately.  The Real Property Management Framework (RPMF) was approved in April, after the last update. Appropriate language will be proposed for the next review and update which is planned to begin in January 2016.  Meanwhile, decisions as part of the RPMF are covered under HR Policy Frameworks identified in Annex 1.

Director & Departmental Security Officer, Corporate Security and Real Property Directorate.

March 2016

The Director General of HRWMB should develop and implement a robust performance management strategy that will enable management to monitor and report on its progress and results against defined performance measures, including outcome-based measures.

Develop an operational plan which outlines projects and priorities identified in the Investment Plan and the Integrated Business Plan.  In addition, where feasible, the plan will capture major building modernization priorities and occupancy instruments whose end date is approaching in the next three years.  The operational plan will include an estimate for each project.

Present the Plan to HRBSC for information and approval where required.

Director & Departmental Security Officer, Corporate Security and Real Property Directorate.

January 2016

The operational plan will also include the following key performance measures which will be tracked in order to establish benchmarks and appropriate targets annually :

Space utilization rate by region: Tracking the number of meters squared utilized per employee ensures sound decision making for space occupancy decisions.

Vacancy rate by sector/branch (+/- 10%): Tracking and presenting the number of vacant spaces per sector/branch ensures that each senior manager is managing space responsibly.  It is expected there will be a +/-10% variance given the fluctuation of the workforce.

Flexible working arrangements: Tracking the number of flexible working arrangements will demonstrate that senior managers are adopting the workplace 2.0 principles and the priorities outlined in the Blueprint 2020 vision of the public service of the future.

March 2016

Present a project status report to HRBSC at mid-year and include any modifications required and more precise financial estimates.

October 2016

The 2017-18 Operational Plan will include the results of the approved projects from the 2016-17 plan and indicate if targets where met.  Moreover, the plan will serve to establish new performance targets moving forward.

February 2017

The Director General of HRWMB should strengthen its formal risk assessment process to allow for the identification, assessment and management of risks for Real Property and Accommodations.

In May 2015 the Director General of HRWMB resumed the risk assessment cycle and approved modifications to the “Integrated Monitoring and Risk Assessment Framework”.  As part of the framework, HRWM staff “must apply the policies to ensure that his/her work complies with the procedures” and managers “interpret and monitor the application of policies/guidelines and provides guidance and advice”.  The framework provides a step by step process for risk identification and assessment. Implementing the framework will ensure that risks are systematically assessed annually and action plans to mitigate risks are developed and monitored accordingly.

Director General, HRWMB

Completed

The methodology outlined in the framework will be used to identify real property and accommodations risks for Canadian Heritage and develop action plans for risks identified as medium or higher.  The action plans will include measures to mitigate the risks.  Implementation of these measures will be monitored by both the program manager and the Policy Development, Planning and Monitoring Division.

Director & Departmental Security Officer, Corporate Security and Real Property Directorate.

March 2016

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