Follow-up on Audit of Professional Services Contracting

December 2014

7050-8-37 (CRS)

Reviewed by ADM(RS) in accordance with the Access to Information Act. Information UNCLASSIFIED.

Acronyms and Abbreviations

Introduction

The Internal Auditing Standards for the Government of Canada require Chief Review Services (CRS) to conduct follow-ups on the progress of implementation of management action plans (MAP). The purpose of this follow-up is to determine the progress made on the implementation of the MAPs in response to the 2010 Audit of Professional Services Contracting. This follow-up was included in the CRS Risk-based Audit Plan for 2013/14 to 2015/16.

The objective of the 2010 audit was to assess professional services contracting activities within the Department of National Defence (DND); more specifically, to determine whether the following activities are taking place:

• contracting strategies and their terms and conditions promote value for money;
• training, monitoring, and oversight ensure compliance and encourage best value; and
• information is complete, consistent, and sufficient for management purposes.

The findings of the 2010 audit are summarized as follows:

Contracting Strategies. There was a lack of documented evidence to prove that alternatives were taken into consideration to promote value for money and that the use of professional services contractors was rationalized.

Contract Terms and Conditions. Terms and conditions in professional services contracts did not always optimize value for money and did not address the risk of employer-employee relationships.

Monitoring, Oversight, and Training. While mandatory training on contracting was in place and reference material was available, a risk-based monitoring program on the use of professional services activities within DND was needed to identify and address key risk areas.

Information and Reporting. Professional services contracting information was insufficient to track trends, measure progress, and identify areas of risk for monitoring purposes.

Methodology

This follow-up does not represent a second audit of the same issues, but rather it is an assessment of the progress made in implementing the MAP items. Accordingly, no retesting was done to determine if these action plans were achieving the desired results. The following methods were used:

• Detailed assessment of the progress of the MAP items reported by the Office of Primary Interest (OPI).
• Interviews with OPIs.
• Examination of information and documentation.

• The overall criteria to assess the progress can be found at Annex A.

Statement of Conformance

The audit follow-up conclusions contained in this report are based on sufficient and appropriate audit evidence gathered in accordance with procedures that meet the Institute of Internal Auditors’ International Standards for the Professional Practice of Internal Auditing. The audit follow-up thus conforms to the Internal Auditing Standards for the Government of Canada, as supported by the results of the quality assurance and improvement program. The opinions expressed in this report are based on conditions as they existed at the time of the audit follow-up and apply only to the entity examined.

Overall Assessment

The original audit contained four recommendations and MAPs. This follow-up found that two MAPs are fully implemented and two MAPs that have multiple action items are partially implemented. Departmental policy on procurement now provides more guidance on risks associated with professional service contracting. Such guidance not only brings to light the risks of certain contract terms that managers should avoid if possible, but also requires them to create an audit trail to confirm that such risks were taken into consideration. This guidance has been reflected in the training material that is relevant to professional services contracting, and it is required to obtain contracting authority. Instructions on these risks improves risk management and leads to a better understanding of the purpose of collecting contract details in the Department’s Contract Data Management System (CDMS). While this database has been improved to capture areas of risk specific to professional services contracts, this information is not currently being used for risk-based monitoring.

There remains a risk that contracting for professional services is not subject to an appropriate level of monitoring to help promote effectiveness and efficiency. While the monitoring unit initiated a framework for formal risk-based reviews, in November 2013 this unit was amalgamated with another directorate of Assistant Deputy Minister (Materiel) (ADM(Mat)) that is not currently focused on monitoring professional services contracting.

The OPI concurs that not all MAPs are fully completed and indicated that staff will continue to work on outstanding actions.

A scorecard of the MAP items can be found in Annex B, and a more detailed assessment of progress with updated target dates of completion can be found at Annex C.

Annex A—Assessment Criteria

These are the criteria used to assess the level of completion for each MAP identified in the 2010 Audit of Professional Services Contracting:

1. No Progress or Insignificant Progress (0-24% complete)

No action taken by management or insignificant progress. Actions such as creating a new committee, having meetings, and generating informal plans are insignificant progress.

2. Planning Stage (25-49% complete)

Formal plans for organizational changes have been created and approved by the appropriate level of management (at a sufficiently senior level, usually at the Executive Committee level or equivalent) with appropriate resources and a reasonable timetable.

3. Preparation for Implementation (50-74% complete)

The entity has begun necessary preparation for implementation, such as hiring or training staff, or developing or acquiring the necessary resources to implement the recommendation.

4. Substantial Implementation (75-99% complete)

Structures and processes are in place and integrated into some parts of the organization, and some achieved results have been identified. The entity has a short-term plan and timetable for full implementation.

5. Full Implementation (100% complete)

Structures and processes are operating as intended and are implemented fully in all intended areas of the organization.

6. Obsolete or Superseded

Audit recommendations that are deemed to be obsolete or have been superseded by another recommendation.

Annex B—MAP Scorecard

Table 1. MAP Scorecard

Annex C—Summary of MAP Status

Table 2. Status of the Implementation of the MAP Items for Recommendation 1

Table 3. Status of the Implementation of the MAP Items for Recommendation 2

Table 4. Status of the Implementation of the MAP Items for Recommendation 3

Table 5. Status of the Implementation of the MAP Items for Recommendation 4a

Table 6. Status of the Implementation of the MAP Items for Recommendation 4b