Follow-Up Audit of Communications and Marketing Branch Contracting Activities
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Follow-Up Audit of Communications and Marketing Branch Contracting Activities

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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.: 613-948-1554 Fax: 613-947-7155 Email: multimedia.production@ic.gc.ca 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: copyright.droitdauteur@pwgsc.gc.ca Cat. No. Iu4-122/2007E-PDF ISBN 978-0-662-47485-2 ...

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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.: 613-948-1554
Fax: 613-947-7155
Email: multimedia.production@ic.gc.ca
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: copyright.droitdauteur@pwgsc.gc.ca
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
Page 6
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
Page 7
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%