Audit of Travel Expenses

Audit of the Proactive Disclosure of Contracts over $10,000

February 2008 Audit of the Proactive Disclosure of Contracts over $10,000

Report Clearance Steps

Planning phase completed August 2006 Field work completed September 2007 Report writing November 2007 Report sent for management response December 2007 Management response received January 2008 Report completed January 2008 Report recommended by the External Audit Advisory January 2008 Committee Approved by the Deputy Minister February 2008

Prepared by Audit and Evaluation

Acknowledgments

The audit team, comprising Claudette Harrison, Lucie Héon, Thierry Chen, Stéphanie Brossard and Lise Gravel under the direction of Jean Leclerc, would like to thank those who contributed to this project, particularly Karen Anderson, Director General, Assets, Contracting and Environmental Management; Phillip Stirling, Director; Materiel – Policy and Systems and Jackie Archambault and Rachel Gignac, both officers with Materiel – Policy and Systems.

Original signed by:

Stephen McClellan Chief Audit Executive

Environment Canada ii Audit of the Proactive Disclosure of Contracts over $10,000

Table of Contents

EXECUTIVE SUMMARY...... 1 1.0 INTRODUCTION...... 3 1.1 Background...... 3 1.2 Objectives...... 4 1.3 Scope...... 4 1.4 Methodology...... 4 2.0 FINDINGS AND RECOMMENDATIONS...... 4 2.1 Departmental procedures...... 4 2.2 Reporting...... 5 2.3 Accuracy of the information on the website...... 7 3. CONCLUSION...... 8 Annex 1 - Illustration of the disclosure process...... 9

Environment Canada iii

Audit of the Proactive Disclosure of Contracts over $10,000

EXECUTIVE SUMMARY

Summary of findings and conclusions

Environment Canada must ensure that all contracts worth over $10,000 are publicly disclosed in a manner that promotes transparency and facilitates public access. This audit was included in the departmental Audit and Evaluation Plan 2006–2007 to 2008– 2009 that was approved by the Departmental Audit and Evaluation Committee.

Environment Canada’s Assets, Contracting and Environmental Management Directorate, Finance and Corporate Branch, is responsible for the process for disclosing contracts worth over $10,000. Designated procurement officers are responsible for determining whether or not contracts must be disclosed. Reports are prepared by the national coordinator and forwarded to the Assistant Deputy Ministers for review and approval. Final reports are forwarded to the Assistant Deputy Minister, Finance and Corporate Branch, for final sign-off and are routed through the Deputy Minister’s and Minister’s offices prior to posting on the departmental website.

The objectives of the audit were to determine whether the Department is in compliance with the Treasury Board Secretariat’s guidance document entitled Proactive Disclosure of Contracts over $10,000, and to determine whether the controls, procedures and systems implemented by the Department for proactive disclosure are adequate.

The audit focused on a review of the disclosure of contracts worth over $10,000 awarded by the Department for the fiscal year 2005–2006.

The methodology included a review of Treasury Board Secretariat and Environment Canada policies, guidelines and practices, as well as interviews with employees responsible for the disclosure of contracts. Procedures were detailed and documented through consultation with the Assets, Contracting and Environmental Management Directorate of the Finance and Corporate Branch. A comparative analysis was conducted between contract information in the departmental financial system and contracts posted on Environment Canada’s proactive disclosure website.

Based on the information examined during the audit, the Department has taken measures to ensure that proactive disclosure practices adhere to the Treasury Board Secretariat’s guidance document entitled Proactive Disclosure of Contracts over $10,000. In addition, the Department has developed it’s own guidelines and processes to assist in reporting the proactive disclosure of contracts in an accurate and timely manner. The audit revealed, however, that these guidelines are outdated and not readily accessible.

A first analysis was conducted. It found that the information disclosed in 2005–2006 on Environment Canada’s website was consistent with the information contained in the Department’s Proactive Contract Disclosure System. A second analysis was conducted and found that the information in the Purchase Order Module of the departmental financial system database did not match the information in the Proactive Contract Disclosure System and that 23 contracts had not been disclosed. The contracts had been inadvertently omitted because they were old-year contracts. This incident was due

Environment Canada 1 Audit of the Proactive Disclosure of Contracts over $10,000 to the fact that the contracts had been awarded by Public Works and Government Services Canada and had not been received by the Department in time for disclosure reporting. The contracts have since been retroactively posted on the departmental website. As a result, the Department has upgraded the Proactive Contract Disclosure System to ensure that these types of contracts are captured in the future and disclosed in a timely manner.

The audit also confirmed that the contracts reporting included all the data elements required by the Treasury Board Secretariat’s guidelines. Furthermore, the audit confirmed that the Department website contracts postings were in accordance with the Treasury Board Secretariat’s Common Look and Feel Standards.

Recommendations

It is recommended that the Assistant Deputy Minister, Finance and Corporate Branch, should

1) ensure that departmental guidelines are updated and disseminated when changes occur; and 2) explore a way to streamline the process for identifying the contracts that have to be disclosed.

1) Management response

The Finance and Corporate Branch fully agrees with and accepts this recommendation. As part of our policy update in connection with Treasury Board’s policy renewal exercise and the Policy Framework for the Management of Assets and Acquired Services, a wide range of policies and procedures are being reviewed and updated. The procedures for $10,000 contract disclosure will be included in these updates and will be widely disseminated once complete, including direct emails to key stakeholders and postings on the Assets, Contracting and Environmental Management Directorate website.

The Finance and Corporate Branch agrees with the recommendation and will explore measures to improve the efficiency of the procedures while ensuring data integrity in the context of the upgrade of the department’s financial system to Merlin 11i. Current plans call for the upgrade to be completed by the fall of this year. We anticipate that improvements to the disclosure procedures could be in place by the summer of 2009.

Environment Canada 2 Audit of the Proactive Disclosure of Contracts over $10,000

1.0 INTRODUCTION

1.1 Background

As part of its efforts to enhance transparency, the Government of Canada has introduced a number of measures to strengthen public-sector management and provide oversight of public resources, including the proactive disclosure of certain types of expenses or management actions:

 in December 2003, it became mandatory to publish travel and hospitality expenses for selected government officials;  on February 25, 2004, it became mandatory to publish information concerning the reclassification of occupied positions in the Public Service of Canada. Reporting requirements commenced in October 2004; and  on March 23, 2004, the government announced a new initiative on the mandatory publication of contracts over $10,000. Reporting on contracts commenced on October 31, 2004.

The implementation of these measures required departments to put in place systems and controls to ensure that all pertinent information is properly reported on their websites. In order to assist the departments, the Treasury Board Secretariat issued guidelines to help ensure that information is collected and presented consistently and in a manner that promotes transparency and accountability, and facilitates public access. In addition, departmental procedures and guidelines have been developed to facilitate the administration of the Treasury Board Secretariat requirements.

Specific to this audit is the proactive disclosure of contracts. According to the Treasury Board Secretariat’s Contracting Policy, government procurement contracting for goods and services, including construction services, should be conducted in a manner that enhances access, competition and fairness and results in best value to Canadians. The rules and principles governing contracting are detailed in the Treasury Board Secretariat’s Contracting Policy.

The Department must ensure that it supports the government’s commitment to publicly disclose information pertaining to contracts over $10,000, adequately and in a timely manner. The information must be published on a quarterly basis on the departmental website as per the Treasury Board Secretariat’s guidance document entitled Proactive Disclosure of Contracts over $10,000, and information must be provided in accordance with the Treasury Board Secretariat’s Common Look and Feel Standards. However, there are exceptions to the posting of contracts that pertain to information that would normally be withheld under the Access to Information Act or the Privacy Act.

1.2 Objectives

The objectives of this audit were to determine

 whether the Department is in compliance with the proactive disclosure guidelines by verifying that the published reports related to proactive disclosure reflect all contracting activities over $10,000; and

 whether the controls, procedures and systems implemented by the Department for proactive disclosure are adequate to capture all the necessary information, and to ensure accurate and timely reporting.

1.3 Scope

This audit covered the disclosure reporting of contracts over $10,000 for the fiscal year 2005–2006.

1.4 Methodology

The audit included researching and reviewing policies, guidelines and other relevant documents from the Treasury Board Secretariat and the Department. Interviews were conducted with Department employees and managers responsible for proactive disclosure reporting. A detailed description of the process and control mapping of proactive disclosure of contracts was conducted to determine whether the controls and practices were complete, accurate and in compliance with Treasury Board Secretariat guidelines.

An analysis was conducted comparing the contracts reporting posted on the departmental website against the information contained in the departmental financial system. Additional analyses were conducted to determine whether any contracts were disclosed more than once, and whether any of the contracts that did not require disclosure were included in the Disclosed Report. The analyses also ensured that the contracts that were not disclosed met the requirements for non-disclosure. In instances of discrepancies between the departmental financial system and the website, further verification was conducted.

2.0 FINDINGS AND RECOMMENDATIONS

2.1 Departmental procedures

The Department has implemented procedures to ensure that contracts worth over $10,000 are disclosed accurately and in a timely manner. A flowchart of the disclosure process is documented in Annex 1. The procedures are as follows:

1. At the end of each quarter, an employee from the Chief Information Officer Branch (CIOB) loads data from the departmental financial system into the Proactive Contract Disclosure System. The data originates from two sources: the Purchase Order Module, which contains all goods and services contracts, and the Accounts Payable Module, which contains all payments worth over $10,000 that are not matched to a contract. 2. The contracting officers across the country perform a preliminary review to ensure the integrity of the data. The officers identify transactions that should not be reported—that is to say, duplicates, amendments and categories that do not get reported as per the Treasury Board Secretariat guidelines on exclusions— and correct any errors in the method used to award the contracts in question. 3. In the Proactive Contract Disclosure System, the procurement officers indicate whether or not a contract should be disclosed. An explanation for non-disclosure is required for each undisclosed contract or payment over $10,000. 4. Reports from the Contract Disclosure System are prepared by the national coordinator in the Assets, Contracting and Environmental Directorate, Finance and Corporate Branch. The reports are then sent to the Assistant Deputy Ministers for final review and sign-off. Two reports—one for disclosed contracts reports and the other for undisclosed contracts—are generated by the Contract Disclosure System. The Disclosed Report contains all the contracts worth over $10,000 that require posting and the Undisclosed Report contains contracts that do not require disclosure as prescribed by the Treasury Board Secretariat. 5. The Assistant Deputy Ministers review the information to be disclosed, which is usually assigned to an administrative officer, and return the approved report to the national coordinator by a specified date. 6. The package with the final Disclosure Report is prepared and routed through the Assistant Deputy Minister, Finance and Corporate Branch, the Deputy Minister’s Office and the Minister’s Office prior to posting. This process must be done within 30 days following the end of the reporting period.

2.2 Reporting

The Department must disclose all applicable contracts accurately and in a timely manner, as per the Treasury Board Secretariat’s guidance document entitled Proactive Disclosure of Contracts over $10,000. Only procurement contracts for goods and services are to be reported. The guidelines include categories that are excluded from disclosure reporting, such as contracts for legal services; real property transactions; grants and contributions; service-level agreements between federal government institutions; and memoranda of understanding. In addition, the departmental guidelines include a more detailed listing of exclusions.

Any non-disclosure must be in accordance with Treasury Board Secretariat and Department guidelines. The reasons for non-disclosure are grouped under the following broad categories:  amendments and amounts reported incorrectly;

 contracts and call-ups cancelled or superseded by another contract;  contracts already reported in another quarter;  the fleet Credit Card Program (this represents credit card expenses for vehicle refueling; as each bill is below $10,000, it does not have to be disclosed);  PWGSC Tenant Direct Authorization related to real property; and  rental of space for workshops.

The Department has developed good guidelines to assist management and staff in carrying out their responsibilities associated with the disclosure of contracting. However, the guidelines should be updated and made readily accessible.

Disclosure Report

For the period covered by this audit, an analysis was conducted to compare the contracts posted on the departmental website against those contained in the Proactive Contract Disclosure System and in the departmental financial system. The analysis revealed that the data in the Proactive Contract Disclosure System matched the data posted on the departmental website. The Proactive Contract Disclosure System contained 2707 contracts.1

The analysis conducted of the departmental financial system and the Proactive Contract Disclosure System revealed that 23 contracts had been inadvertently omitted from the Proactive Contract Disclosure System. These contracts, representing less than one percent of the number of contracts disclosed and worth approximately $1.8 million, were awarded by Public Works Government Services Canada and had not been received by the Department in time for disclosure reporting. This issue was brought to the attention of the Chief, Policy and Systems, in the Assets, Contracting and Environmental Management Directorate. These contracts have since been retroactively posted on the departmental website. Furthermore, measures have been implemented to ensure that in future these types of contracts will be captured in the system and disclosed in a timely manner.

Undisclosed Report

An analysis was also conducted to determine whether the contracts that were not disclosed met the requirements for non-disclosure. The analysis revealed that the Undisclosed Report for 2005–2006 contained 794 contracts.2 Of the 794 undisclosed contracts, 179 of the contracts contained no explanation for the non-disclosure. The information was submitted to the Policy and Systems officer at the Assets, Contracting and Environmental Directorate, Finance and Corporate Branch, for clarification. A satisfactory rationale for non-disclosure was provided for all but two contracts.

A further analysis was conducted to determine whether any of the contracts that did not have to be disclosed had been inadvertently disclosed on the departmental website; both lists were matched and no overlap was found.

1 The Proactive Contract Disclosure System found 2788 contracts, of which 81 were duplicates. In reality, therefore, there were only 2707 contracts to be disclosed. 2 The Undisclosed Report for 2006–2006 contained 869 contracts, of which 75 were duplicates. In reality, therefore, there were only 794 undisclosed contracts.

Recommendations

It is recommended that the Assistant Deputy Minister, Finance and Corporate Branch, should

1) ensure that departmental guidelines are updated and disseminated when changes occur; and 2) explore a way to streamline the process for identifying the contracts that have to be disclosed.

The Finance and Corporate Branch fully agrees with and accepts this recommendation. As part of our policy update in connection with Treasury Board’s policy renewal exercise and the Policy Framework for the Management of Assets and Acquired Services, a wide range of policies and procedures are being reviewed and updated. The procedures for $10,000 contract disclosure will be included in these updates and will be widely disseminated once complete, including direct emails to key stakeholders and postings on the Assets, Contracting and Environmental Management Directorate website.

The Finance and Corporate Branch agrees with the recommendation and will explore measures to improve the efficiency of the procedures while ensuring data integrity in the context of the upgrade of the department’s financial system to Merlin 11i. Current plans call for the upgrade to be completed by the fall of this year. We anticipate that improvements to the disclosure procedures could be in place by the summer of 2009.

2.3 Accuracy of the information on the website

As required by the Treasury Board Secretariat, the Department reports and updates contract information on the departmental website on a quarterly basis, corresponding to the Department’s fiscal year, within 30 days of the end of each reporting period. Given the large volume of contracts that require processing, the 30-day reporting requirement is sometimes insufficient. In the event that a contract is inadvertently omitted, the contract must be posted in the subsequent reporting period, or as soon as is feasible.

Departmental contract website posting must be in accordance with the Treasury Board Secretariat’s Common Look and Feel Standards. Environment Canada’s Green Lane website homepage at http://www.ec.gc.ca provides a link to the Proactive Disclosures Web page. As required, contract information is grouped by reporting period and contract date. The format used by the Department for posting contract information is in accordance with the Treasury Board Secretariat’s Common Look and Feel Standards.

For each contract reported, the Department is required to identify the following elements: legal vendor name; reference number (assigned by the departmental financial system); contract date; description of work; contract period date for services; contract delivery date for goods; and contract value. The analysis of a random selection of 37 contracts

Environment Canada 7 Audit of the Proactive Disclosure of Contracts over $10,000 posted in the proactive disclosure report on the departmental website indicated that all these elements were appropriately reported during the 2005–2006 fiscal year.

3. CONCLUSION

In our opinion, the Department has set up the necessary controls, procedures and systems to comply with the Treasury Board Secretariat guidelines on the proactive disclosure of contracts worth over $10,000. The tools developed by the Department help to provide consistency of data entry, enable the Department to more readily see contracting trends, permit proactive responses to contract-related issues and allow the identification of unmatched invoices. These controls have resulted in the refinement of processes that ensure the early identification of issues and assist in the implementation of measures to addresses any issues arising.

In our professional judgement, sufficient and appropriate audit procedures have been conducted and sufficient evidence gathered to support the accuracy of the conclusions reached and contained in this report. The conclusions were based on an examination of the situation as it existed at the time.

Annex 1 - Illustration of the disclosure process

End of quarter

CIOB loads data Designated Regional from Departmental departmental contracting offices Financial System procurement conduct a into the Proactive officers review preliminary review Disclosure System information to ensure integrity

List: · Duplicates · Amendments · Improved Deletes information Corrects mistakes in descriptions that should not be the solicitation method · Categories reported in the Proactive not reported (see List) Disclosure System under TB policy

Package with final report sent National Coordinator sends Return to National through Deputy Minister‘s Assistant Deputy Ministers reports to Coordinator by specified Assistant Deputy Minister , Office forwards to review and sign off Assistant Deputy Ministers date Finance and Corporate Minister’s Office Branch

Posting of report

Note: This process must be complete within30 days

Environment Canada 9