Follow-Up Audit of Communications and Marketing Branch Contracting Activities

Industry Canada

Description

Follow- Up Audit of Communications and Marketing Branch Contracting Activities March 30, 2007 Recommended for Approval to the Deputy Minister By the DAC on December 5, 2007 Approved by the Deputy Minister on December 12, 2007 FINAL Follow- Up Audit Communications and Marketing Branch Contracting Activities March 30, 2007 This publication is available upon request in accessible formats. Contact: Multimedia Services Section Communications and Marketing Branch Industry Canada Room 264D, West Tower 235 Queen Street Ottawa ON K1A 0H5 Tel.: [phone] Fax: [phone] Email: [e-mail] Permission to Reproduce Except as otherwise specifically noted, the information in this publication may be reproduced, in part or in whole and by any means, without charge or further permission from Industry Canada, provided that due diligence is exercised in ensuring the accuracy of the information reproduced; that Industry Canada is identified as the source institution; and that the reproduction is not represented as an official version of the information reproduced, nor as having been made in affiliation with, or with the endorsement of, Industry Canada. For permission to reproduce the information in this publication for commercial redistribution, please email: [e-mail] Cat. No. Iu4-122/2007E-PDF ISBN 978-0-662-47485-2 ...

Sujets

• management
• managers

Informations

• Publié par: Nuching
• Nombre de lectures: 20
• Langue: English

Extrait

Follow- Up Audit of

Communications and Marketing

Branch Contracting Activities

March 30, 2007

Recommended for Approval to the Deputy Minister

By the DAC on December 5, 2007

Approved by the Deputy Minister on December 12, 2007

FINAL

Follow- Up Audit Communications and Marketing Branch Contracting Activities

March 30, 2007

Audit and Evaluation Branch

This publication is available upon request in accessible formats. Contact:

Multimedia Services Section

Communications and Marketing Branch

Industry Canada

Room 264D, West Tower

235 Queen Street

Ottawa ON

K1A 0H5

Tel.: [phone]

Fax: [phone]

Email: [e-mail]

Permission to Reproduce

Except as otherwise specifically noted, the information in this publication may be reproduced, in part or

in whole and by any means, without charge or further permission from Industry Canada, provided that

due diligence is exercised in ensuring the accuracy of the information reproduced; that Industry Canada

is identified as the source institution; and that the reproduction is not represented as an official version

of the information reproduced, nor as having been made in affiliation with, or with the endorsement of,

Industry Canada.

For permission to reproduce the information in this publication for commercial redistribution, please

email: [e-mail]

Cat. No. Iu4-122/2007E-PDF

ISBN 978-0-662-47485-2

60400

Aussi offert en français sous le titre

Vérification de suivi des activités de passation de marchés de la

Direction générale des communications et du marketing

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Follow- Up Audit Communications and Marketing Branch Contracting Activities

March 30, 2007

Audit and Evaluation Branch

Page ii

Table of Contents

Page

EXECUTIVE SUMMARY.........................................................................................................................................1

1.

BACKGROUND..................................................................................................................................................3

2.

OBJECTIVE OF THE FOLLOW-UP AUDIT.................................................................................................3

3.

SCOPE OF THE FOLLOW-UP AUDIT...........................................................................................................4

4.

APPROACH AND METHODOLOGY.............................................................................................................4

5.

CMB ACTIONS AND DETAILED FOLLOW-UP AUDIT FINDINGS........................................................5

APPENDIX A...............................................................................................................................................................8

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Follow- Up Audit Communications and Marketing Branch Contracting Activities

March 30, 2007

Audit and Evaluation Branch

Page 1

Executive Summary

A follow-up audit of the 2005 Audit Report on Contracting Activities within the

Communications and Marketing Branch (CMB) of Industry Canada was conducted during the

period of February and March 2007.

This follow-up was carried out in accordance with the

2006-07 Audit Plan as approved by the Departmental Audit and Evaluation Committee.

The audit acknowledged that CMB’s contracting practices were generally compliant with the

Government Contracting Regulations and Treasury Board and Industry Canada’s contracting

policies. At issue, however, was the adequacy of documentation contained in the contracting files

to demonstrate that contracts were awarded and managed in relation to best-value, open access,

fairness and transparency. The 2005 Audit Report contained three recommendations, including

eight different components, to improve the situation.

Our current findings indicate that CMB has responded positively to the recommendations

contained in the 2005 Audit Report. All but one recommendation identified in the 2005 Audit

Report has been implemented. One recommendation that called for establishing a Department-

wide Standing Offer Agreement (SOA) for translation services, which is the responsibility of the

Department’s Contract and Materiel Management Group (CMM), has yet to be established.

CMB has held several discussions with CMM on the subject and CMB is optimistic that the SOA

will be in place shortly.

CMB has 75 Full-Time Equivalents (FTEs) but it is fairly active when it comes to contracting.

During the initial eleven months of current fiscal year, 2006-07, CMB issued 145 contracts

valued at $3,184,031. CMB has taken the findings of the 2005 Audit Report very seriously and

has responded with corrective action. The Director General, CMB, regarded the Audit Report as

an opportunity to introduce an integrated approach to contracting and procurement and

personally oversaw the development of an administrative action plan for the Branch.

One of the first steps taken by the Director General was to hire a permanent Manager for the

Administrative and Financial Services Unit, a position that had experienced significant turnover

previously. This was followed by the hiring of three experienced Administrative Officers within

the Unit. Contracting processes were re-engineered to ensure all contracts were seen by the Unit,

contracting forms were introduced and training became mandatory for all CMB staff involved in

contracting. Moreover, the Administrative and Financial Services Unit began functioning as a

meaningful challenge mechanism to ensure that there was integrity in the contracting process and

compliance with government contracting policies.

The follow-up audit included review of a random sample of 20 contracting files of various types

totalling $221,077.

This sample represented 14% of the total number of contracts issued in

2006-07 and 7% of the total dollar value. This review indicated that all steps in the contracting

process are being followed, that the files are properly documented and that individuals involved

in the contracting process possess the necessary delegated authority. The initial audit report

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Follow- Up Audit Communications and Marketing Branch Contracting Activities

March 30, 2007

Audit and Evaluation Branch

Page 2

indicated concerns with the quality of the statements of work found in contracts, the lack of

justification for sole-sourced contracts, missing evaluations of the contractors’ performance, and

a lack of supporting evidence on amended contracts. The introduction of the “Request for

Contract” form and the “Request to Amend Contract” form, which now must be fully completed

before any contract is processed by the Administrative and Financial Services Unit, offers

assurance that steps in the contracting process are properly being followed. Also, final payment

on any contract will not proceed unless the “Contractor Performance and Evaluation Report” is

completed. Files are also periodically reviewed by the Manager, Administrative and Financial

Services Unit.

CMB works closely with CMM, the Department’s contracting specialists. The Manager,

Administrative and Financial Services Unit, is currently examining the feasibility of developing

a web-based (Intranet) version of the contract forms that have been developed internally. CMM

is interested in this development which could have application throughout the Department.

In summary, CMB management has responded positively to the recommendations contained in

the 2005 Audit Report. Efforts are ongoing to ensure that staff remains current with policy and

procedural changes, that contracting processes are updated regularly to reflect changing

conditions and that a high level of compliance is maintained.

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Follow- Up Audit Communications and Marketing Branch Contracting Activities

March 30, 2007

Audit and Evaluation Branch

Page 3

1.

Background

A previous audit of contracting within the Communications and Marketing Branch (CMB) was

conducted by the Department’s Audit and Evaluation Branch (AEB) in November and December

2004. A Final Audit Report was issued in January 2005. The 2004 audit had been carried out in

response to a commitment made by the AEB to conduct contracting audits annually of two

Branches of Industry Canada as a result of the Comptroller’s Branch having initiated a

contracting framework in 2000.

The objectives of the 2004 audit were to provide management with assurance that the contracting

processes in CMB met with the principles of best value and open access, contracting policies and

regulations, fairness and transparency, and operational requirements. The review period included

contracts with start dates between April 1, 2003 and September 30, 2004.

The audit concluded that the contracting practices within CMB were generally compliant with

the Government Contract Regulations, Treasury Board Secretariat Contracting Policies and

Industry Canada policies and procedures. While it was acknowledged that management had

strived towards awarding and managing its contracts in relation to best-value, open-access,

fairness and transparency, the quality of contract file documentation had not consistently

demonstrated achievement of these objectives. The Report highlighted three areas where

improvement was required and made three recommendations (containing eight components) to

improve the contracting process. CMB management, at the time, responded positively to the

findings and indicated that action and new internal procedures had been implemented in an effort

to foster a quality approach to contracting. It also responded that procedures would be monitored

on a regular basis to ensure compliance.

2.

Objective of the Follow-Up Audit

The objective of this follow-up audit is to assess the extent to which CMB management has

progressed in implementing its intended course of action arising from the recommendations

contained in the January 2005 Contracting Audit Report.

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Follow- Up Audit Communications and Marketing Branch Contracting Activities

March 30, 2007

Audit and Evaluation Branch

Page 4

3.

Scope of the Follow-Up Audit

The follow-up audit focused on the current processes in place and a selection of contracting files

covering the period April 1, 2006 to February 28, 2007. The period for selecting contract files

was based on the fact that the current Manager of the Administrative and Financial Services was

hired in CMB in March 2006. This audit period was agreed to by the AEB. A random sample of

contracting files was selected. Appendix A outlines the various types of contracts let during the

audit period, the total number of contracts and their dollar value, and the number and dollar value

of contracts that were selected for audit. In all, 20 contracting files were randomly selected for

the follow-up review, a minimum of two from each of the seven categories of contracts. The

contracts reviewed represented seven percent (7%) of the total dollar value of contracts issued

during the follow-up audit period.

4.

Approach and Methodology

In executing the follow up audit, the audit team undertook the following actions:

•

Issued a follow-up notification letter to the Director General, CMB.

•

Developed a follow-up questionnaire aligning the CMB management response and

proposed actions.

•

Distributed a follow-up questionnaire to CMB management.

•

Obtained a listing of contracts issued from April 1, 2006 to February 28, 2007 by contract

type to analyze the CMB contract population and select, on a sample basis, supporting

documentation.

•

Obtained and reviewed key documentation to assess the degree to which the proposed

actions have been implemented.

•

Interviewed the Manager, Administrative and Financial Services, CMB.

•

Selected a random sample of 20 contracting files of various types for compliance with

Industry Canada and TB contracting policies.

•

Ensured the proposed actions in the Audit Report dated January 2005 were still relevant.

•

Communicated with CMB Management on the results of the follow-up audit.

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Follow- Up Audit Communications and Marketing Branch Contracting Activities

March 30, 2007

Audit and Evaluation Branch

Page 5

5.

CMB Actions and Detailed Follow-Up Audit

Findings

The following summarizes the actions developed by CMB management to address the

recommendations raised in the January 2005 Audit Report and the current status of their

implementation.

Recommendation #1

A) Contracting authorities in (CMB) should ensure that there is sufficient detail in the

Statement of Work clearly defining deliverables, timeliness, service and cost expectations.

B) CMB contract authorities should ensure that at least three bids are requested when the

value of a purchase order for goods is between $2,500 and $5,000.

Findings

A) This recommendation has been satisfactorily addressed.

The channelling of all contracts

through one of the three Administrative Officers in the Administrative and Financial Services

Unit, coupled with verification by the Manager, provides sufficient assurance that there is an

appropriately written Statement of Work that clearly defines the deliverables, timeliness,

service and cost expectations. The mandatory requirements for staff engaged in contracting

to now take appropriate training and make use of the “Request for Contract” form to initiate a

contract further strengthens and re-enforces the contracting process. The Manager recognizes

that there may be rare occasions when it is difficult to explicitly articulate, with precision, the

details of work to be performed. Examples cited were editing and translation projects when

there is urgency to get the work requirement launched for clients such as the Minister’s

Office or a particular program initiative. Our review of a sample of 16 service contract files

confirmed that, within each of the files examined, sufficient detail and clarity was contained

in the Statements of Work.

B) This recommendation has been satisfactorily addressed.

The mandatory training offered to

staff emphasizes the need for a minimum of three bids to be received when the value of a

Purchase Order (PO) for goods is between $2,500 and $5,000. The processing of contracts

through the Administrative and Financial Services Unit and the mandatory use of the Request

for Contract form offers the necessary controls to preclude issues of non-compliance from

happening. Moreover, recent presentations on October 25 and 30, 2006 to CMB staff

involved in contracting specifically emphasized the conditions under which three quotes are

needed. One of the conditions cited was when a goods requirement exceeds $2,500. The

sample of 20 contracting files selected for review included two where a PO was used to

purchase goods. In both cases there was evidence that three bids were received.

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Follow- Up Audit Communications and Marketing Branch Contracting Activities

March 30, 2007

Audit and Evaluation Branch

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Recommendation #2

A) CMB contracting authorities should adequately justify on the contract file the reasons for

entering into sole-source contracts with suppliers.

B) At the completion of service contracts, including POS and confirming orders, CMB

contract authorities should complete a performance evaluation on the work performed by

the contractor.

C) CMB contract authorities should ensure that all payments made to contractors are in

accordance with existing policies and guidelines for payment and comply with conditions

for payment as stipulated in the contracts.

Findings

A) This recommendation has been satisfactorily addressed.

CMB officers requesting a contract

are now required to complete the Request for Contract form and submit it to the CMB

Administrative and Financial Services Unit. All areas of the form must be completed to the

satisfaction of the reviewing Administrative Officer before proceeding. An area of the form

that must be completed (if the condition exists) is the “Justification for Sole Source

Contract”. Should there be a particular contracting issue, it is immediately brought to the

attention of the Manager of the Unit for resolution. In our sample of 20 contracting files

examined, six contracts were of a non-competitive nature. In all six cases, justification was

on file supporting the rationale for sole-sourcing with a chosen supplier.

B) This recommendation has been satisfactorily addressed.

Following the 2005 audit, a

Contractor Performance and Evaluation Report was developed by the Administrative and

Financial Services Unit. It is now a mandatory requirement for CMB employees to complete

this report following completion of any contract, including POs and confirming orders. In

fact, final payment on a service contract will not proceed if this report has not been

completed. In our sample of 20 contracting files, 10 of the 16 service contracts examined had

yet to be completed. In the 6 completed service contracts, the Performance and Evaluation

Report was properly completed and signed by the appropriate officer.

C) This recommendation has been satisfactorily addressed.

Contracting authorities in CMB

have been instructed to ensure that all payments to contractors must be made according to

existing policies and guidelines and comply with the conditions for payment as outlined in

the contracts. Contractors are notified if they do not comply with the terms of payment as

stipulated in their contracts. The CMB Administrative and Financial Unit will refuse to pay

an invoice if it does not meet the terms as set out in each contract. Copies of all invoices are

retained on the contracting file. In our sample of 20 contracting files, invoices (some progress

invoices) were found on 18 of the files. In the two exceptions, invoices had yet to be received

from the contractor. All invoices matched to the requirements of the contract and were signed

by an individual delegated appropriate authority (i.e. spending or payment).

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Follow- Up Audit Communications and Marketing Branch Contracting Activities

March 30, 2007

Audit and Evaluation Branch

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Recommendation #3

A) All contract amendments should be adequately justified by CMB contracting authorities

and included in the contract file.

B) Contracting authorities in CMB should be aware of the maximum call-up limits on SOAs

they are using and not split contracts that together would exceed the call-up limit.

C) CMB, in consultation with the Contracts and Materiel Management (CMM) group in the

Comptrollership and Administration Sector, should put a procurement tool in place such

as an SOA or a supply arrangement for translation services.

Findings

A) This recommendation has been satisfactorily addressed.

A new “Request to Amend

Contract” form has been developed following the 2005 audit to facilitate the task of

providing adequate justification when contract amendments are required. CMB staff has been

instructed that before any contract is amended this form must be appropriately completed to

clearly articulate the justification for the amendment. It must then be submitted to the

Administrative and Financial Services Unit for review and processing. All documentation is

retained on file and is reviewed periodically by the Manager, Administrative and Financial

Services Unit.

In our sample of 20 files selected for review, four included amendments.

The

Request to Amend Contract form was properly completed in the four files.

B) This recommendation has been satisfactorily addressed.

The introduction of the Request for

Contract form, which must be completed to the satisfaction of the CMB Administrative and

Financial Services Unit, addresses this particular issue. An area of the form deals specifically

with Standing Offer Agreements (SOA) and ensures the initiator/requestor has referred to the

value limits per call-ups. Unless the SOA limits are respected, the contract will not proceed.

Contracting authorities have been instructed to be aware of and respect SOA call-up limits.

The CMB Administrative and Financial Services Unit created a reference guide of frequently

used suppliers/contractors that is currently available on various SOAs. This tool assists in

ensuring CMB contracting authorities adhere to the terms of the SOA call-up limits.

C) This recommendation is in the process of being implemented.

CMB has held discussions

with the Contracts and Materiel Management Division (CMM-CAS) on the subject of the

need for a Standing Offer Agreement (SOA) with editors, proofreaders and translators. It was

anticipated that an SOA for the whole Department would be in place by the end of this fiscal

year (i.e. 2006-07). In the interim, CMB has been advised by CMM to enter into sole-source

contracts with editors and translators as needed. This is the current practice in CMB when

services of editors and translators are required.

Communications and Marketing Branch - Industry Canada

Project No.: 330-1583 05

Follow- Up Audit Report of Contracting Activities

March 8, 2007

Audit and Evaluation Branch

Page 8

Appendix A

CMB Contract Report

Period of April 1, 2006 to February 28, 2007

Document

Type

Total

#Trans.

Total

Dollar

Value

Document

Name

Percent

Trans.

Percent

Dollars

Sample

Trans.

Sample

$ Value

Sample

Tran. %

Sample

% Dollar

9200

10

$2,220,763

Contracts by

PWGSC

6.90%

69.75%

2

$32,807

20%

1%

942G

27

$44,513

Call up for

Goods

18.62%

1.40%

2

$5,554

7%

12%

942S

22

$268,660

Call up for

Services

15.17%

8.44%

4

$96,100

18%

36%

POG

15

$40,575

Purchase

Order Goods

10.34%

1.27%

2

$1,888

7%

4%

POS

22

$45,456

Purchase

Order Services

15.17%

1.43%

2

$5,638

9%

12%

SERV

40

$386,749

Service

Contracts

27.59%

12.15%

6

$51,620

15%

13%

SSA

0

$0

Supply

Arrangement

0.00%

0.00%

0

$0

0

0

TH

9

$177,316

Temporary

Help

6.21%

5.57%

2

$27,470

22%

15%

Total

145

$3,184,031

100%

100%

20

$221,077

14%

7%