Audit Of Real Property

Project Number 6B212
Audit Of Real Property
June 24, 2011

Table of Contents

1.0 Executive Summary

Fisheries and Oceans Canada has the largest number of real properties of any department or agency with a total of 8,189 as of December 2010. The Department's real property portfolio is divided amongst three custodians: Small Craft Harbours, Canadian Coast Guard, and the Real Property, Safety and Security Branch within the Human Resources and Corporate Services Sector.

The audit examined the adequacy of the management of real property in supporting timely, informed real property management decisions and focussed on properties that are managed by the Real Property, Safety and Security Branch.

Based on our audit work, our opinion is that the management of real property is generally adequate; however, some areas for improvement were identified. The following summarizes the audit findings and areas for improvement with respect to the real property function.

Governance - The audit found that some elements of the governance structure have not yet been implemented and do not facilitate cost-effective decision making on a department-wide basis. Real property assets are key enablers in support of departmental programs. The regional real property functions are responsible to manage their real property holdings based on the programs' needs. Managing real property holdings based on a department-wide or portfolio basis rather than on an asset-by-asset basis allows a department to maximize the level of utilization, minimize the need for new assets, share associated costs, and enable risk management by reallocating funds where they are most needed. Adopting a portfolio-based approach also implies that real property decisions are made as part of the overall departmental decision-making framework and are considered as a key enabler within departmental strategic planning. Instead, the current structure is such that programs make decisions that have direct implications on real property holdings, of which the costs are borne by Human Resources and Corporate Services.

Life Cycle Management - The audit found that, while properties were being managed using a life cycle approach, some deficiencies were noted in the use and occupancy element of life cycle management. Specifically, the overall performance of real property assets was not being assessed on a regular basis in terms of their functionality, utilization and physical performance. In addition, the audit noted a trend in the annual shortfall in major capital, minor capital and operation and maintenance funding. With respect to the shortfall in operations and maintenance funds there is a systemic conversion of the minor capital budget to help cover the operations and maintenance shortfall. It is important to note that according to the Real Property, Safety and Security Branch, the minor capital requirement to meet life cycle management requirements is $34M annually. Currently the minor capital budget is $9M, most of which is not used for minor capital requirements but converted to address the operations and maintenance shortfall. Hence, there is a significant difference in what is required and what is received in the minor capital budget. Because of the shortfall in minor capital, it is critical that the Department examine ways of reducing the number of properties it manages with a view to reducing costs. Programs are reluctant to declare properties surplus to their requirements in case they are needed in the future, particularly major facilities, for which operations and maintenance expenses are paid for by the Real Property, Safety and Security Branch. Consequently, there is no incentive for programs to reduce their real property holdings, and the Department must bear unnecessary costs.

Real Property Information - The current Real Property Information System provides a basis to record relevant information for the management of real property; however, the audit team noted that the system is used primarily for reporting to the Directory of Federal Real Property and is not used as a management tool to support decision making. This practice will persist unless necessary changes are made so that users enter information into the system that is relevant, accurate, timely and complete and it can be used as a valuable tool for the management of real property. The existing Real Property Information System will be replaced by a new Real Property Information Management System which is expected to be implemented in 2012.

Client services - Performance measures are not in place to assess the overall performance of the real property function, nor are there any formal client feedback mechanisms that could be used as a basis for ongoing service improvement.

2.0 Introduction

2.1 Background

The Internal Audit Directorate conducted an audit of Real Property within Fisheries and Oceans Canada in accordance with its Multi-year Risk-based Audit Plan 2010-2011 to 2012-2013.

Background on the Activity

Based on the Directory of Federal Real Property, the central record and only complete listing of real property holdings of the Government of Canada, Fisheries and Oceans Canada has the largest number of real properties of any department or agency, with a total of 8,189 as of December 2010.

The Federal Real Property and Federal Immovables Act sets out legal requirements relating to the acquisition, administration and disposition of real property and immovables by the Government of Canada. The Act provides authorities with respect to real property transactions and administration to the Minister who, in turn, may delegate these powers to various positions within the Department. While the Act does not elaborate on the requirements of real property administration, these requirements are further defined in the Treasury Board's Policy on Management of Real Property and other instruments referenced therein [1] .

The real property portfolio is divided amongst three departmental custodians: Small Craft Harbours, Canadian Coast Guard, and the Real Property, Safety and Security Branch within the Human Resources and Corporate Services Sector. The Department has defined seven categories of real properties which are allocated to the custodians as follows:

Custodian

Real Property Category and Description

Real Property, Safety and Security Branch

Category 1 - Major Facilities

Category 2 - Minor Facilities

Category 3 - Vacant Land

Category 4 - Land-Based Infrastructure (hatcheries only)

Category 6 - Marine-Based Infrastructure

Small Craft Harbours

Category 7 - Small Craft Harbours

Canadian Coast Guard

Category 4 - Land-Based Infrastructure (except hatcheries)

Category 5 - Marine Navigation Sites


The Department's real property asset base includes a combination of custodial and leased facilities. The asset base is geographically dispersed, varied and complex. The properties range from major facilities such as laboratories, Coast Guard bases and other special purpose facilities, to minor facilities as search and rescue stations, light stations and other structures including breakwaters and fish ladders.

The Real Property, Safety and Security Branch supports the delivery of departmental programs in the area of real property management. The Branch includes four directorates: Real Property Planning and Operations; Long-Term Capital Management; Safety and Security; and the Office of Environmental Coordination. The focus of the audit was on the Real Property Planning and Operations and the Long-Term Capital Management directorates as they are responsible for the management of real property on behalf of the Real Property, Safety and Security Branch.

The Real Property, Safety and Security Branch is led by the Director General who has horizontal real property responsibilities for the Department as a whole, as well as custodial responsibility for the categories of assets that are assigned to it. For the real property function, the National Real Property Management Committee acts as the primary consultation and decision-making forum together with its sub-committees (e.g. Real Property Operations). Chaired by the Director General of the Real Property, Safety and Security Branch, the National Real Property Management Committee's membership includes the Branch Directors from National Headquarters as well as the Regional Directors of Real Property, Safety and Security.

The Director of Long-Term Capital Management is responsible for directing the capital investment and divestiture programs nationally. The Director of Real Property Planning and Operations is responsible for reporting on real property matters to central agencies on all departmental properties, developing operational policies for the Real Property, Safety and Security Branch custodial properties, and developing plans and budgets for real property accommodation and services. Both directorates serve as a centre of expertise for real property, in their respective areas.

The Real Property, Safety and Security Branch reflects the Department's matrix organization structure, with functional direction being provided from National Headquarters, and service delivery under the responsibilities of a Regional Director General in each of the regions. The Regional Directors of Real Property, Safety and Security report directly to their Associate Regional Directors General but maintain a functional relationship with the Director General of the Real Property, Safety and Security Branch as depicted in the chart below.


Real Property, Safety and Security Relationships (RPSS)
Real Property, Safety and Security Relationships

2.2 Objective and Scope

Objective

The objective of the audit is to provide assurance that management of real property is adequate and supports timely, informed real property management decisions.

Scope

The scope of the audit focussed on properties that are under the custodianship or the management of the Real Property, Safety and Security Branch. Properties that are under the custodianship of Small Craft Harbours and Canadian Coast Guard were excluded from the audit scope as they are included in other program-specific audits.

The Safety and Security Directorate as well as the Office of Environmental Coordination also operate under the Real Property, Safety and Security Branch. However, the audit only focussed on the real property management function of the Real Property, Safety and Security Branch.

The audit included National Headquarters as well as the Pacific Region and the Central and Artic Region. These regions were selected based on their different approaches in the management of real property and in consultation with Real Property, Safety and Security Branch management.

2.3 Lines of Enquiry and Criteria

Lines of enquiry are broad subject headings describing areas determined during the planning phase of the audit to be the most critical for examination. The lines of enquiry and associated audit criteria presented below provide details of specific areas for examination. They are based on a risk assessment and consultations with the Departmental Audit Committee and were vetted with the Real Property, Safety and Security Branch.

2.3.1 Effectiveness of Real Property Portfolio Management

Criterion 1.1: Adequate life cycle costing and program analysis is performed for real property assets at each phase of their life cycle.

Criterion 1.2: Financial and performance indicators are used to assess real property assets' overall performance.

Criterion 1.3: There are adequate processes in place to ensure that real property assets are maintained in a condition that does not endanger the health and safety of employees.

Criterion 1.4: The real property portfolio is managed using a risk-based approach.

2.3.2 Real Property Function Performance Monitoring

Criterion 2.1: Relevant targets and indicators are established and actively monitored for the Real Property, Safety and Security Branch and corrective actions are taken based on relevant targets and indicators.

Criterion 2.2: The real property function delivers a consistent level of real property services to departmental programs and sectors in a timely manner.

Criterion 2.3: The real property function has communicated their services and service standards to programs and sectors.

Criterion 2.4: A client feedback mechanism exists.

2.3.3 Reliability of Real Property Information and Reporting

Criterion 3.1: There are adequate processes in place to ensure that relevant real property assets information is collected.

Criterion 3.2: There are adequate processes in place to ensure the integrity of the real property assets information in the Real Property Information System.

Criterion 3.3: There are adequate processes in place to ensure that the real property assets information in the Real Property Information System is consistent with ABACUS, the departmental financial system.

Criterion 3.4: There are adequate processes in place to ensure that the real property assets information in the Real Property Information System is consistent with the Directory of Federal Real Property.

2.4 Audit Methodology

The audit team carried out its mandate in accordance with Treasury Board's Policy on Internal Audit and the Internal Audit Standards for the Government of Canada. The approach included the following activities:

Risk Assessment: a risk assessment was conducted as part of the preliminary survey in order to focus the audit on areas of greatest value to the Department.

Terms of Reference: were vetted with the Departmental Audit Committee and approved by the Assistant Deputy Minister, Human Resources and Corporate Services.

Document Review: a detailed document review was conducted in the planning and conduct phase.

Interviews: the audit team conducted interviews with departmental management and staff.

Data Analysis: analysis of data related to real property management was conducted.

File Review: the audit team reviewed 19 files in the Pacific Region and 26 files in the Central and Arctic Region to verify whether each site is being managed using the life cycle approach during acquisition, use and occupancy, and disposal of real property assets. The files selected were based on a judgmental sample with emphasis on major facilities (i.e. Category 1) and those facilities that are deemed "significant."

Field Visit: the audit team visited three sites in the Pacific Region and one site in the Central and Arctic Region to observe the conditions of buildings and how they are rated.

Consultation with Real Property clients: the audit team sent out questionnaires to Real Property clients in the National Capital, Pacific, and Central and Arctic regions requesting feedback on the quality of the accommodation services rendered.

Internal Quality Assurance and Improvement Program: the entire working paper file covering all aspects of the internal audit engagement was reviewed by the Internal Audit Directorate's quality assurance function.

3.0 Observations and Recommendations

This section provides a Statement of Assurance for the audit engagement, as well as the observations and recommendations emanating from the audit work carried out. While the audit was conducted based on the lines of enquiry and audit criteria identified in the planning phase, this report is structured along four main issues: governance, life cycle management, real property information, and client services.

3.1 Statement of Assurance

In our opinion, the auditors have examined sufficient, relevant evidence and obtained sufficient information and explanations to provide a high level of assurance on the reported opinion or conclusions.

3.2 Governance

The governance structure does not facilitate cost-effective decision making on a department-wide basis or allow for real property to be managed using a portfolio approach.

The Treasury Board Secretariat's Guide to the Management of Real Property states that effective real property management should include a management framework and utilize a portfolio-based approach. A portfolio approach incorporates a horizontal perspective when planning investments in real property. In addition, the Treasury Board's Policy on Management of Real Property identifies the implementation of a management framework as being the cornerstone of sound real property planning.

A real property management framework is intended to articulate the governing principles for managing real property and delivering the real property program. It describes the major components of a practical real property management system equipped to meet departmental requirements. A real property management framework supports the management of real property and provides a roadmap of the Department's internal processes, decision-making structures, policies and procedures used to manage the real property portfolio.

The audit team found that the framework in place for managing the Department's real property is incomplete. The Treasury Board Secretariat's Management Accountability Framework - VII assessment also indicated that the Department lacks a complete real property management framework. There is a real property accountability framework in place which sets out the roles and responsibilities of the three real property custodians; however, there is no framework that supports internal processes, decision-making structures or the development of policies and procedures. The development of the framework has been assigned to the Director General of the Real Property, Safety and Security Branch, with input and guidance on horizontal matters from the Real Property Functional Integration Executive Committee.

The audit team also found, during interviews with regional real property staff, that the regions are expecting Headquarters to issue real property directives and policies, as well as guidance for the real property function. In the absence of guidance from Headquarters, some regions have developed their own policies and directives. While this is a good initiative to fill a void, it creates inconsistencies across the regions and can cause confusion and friction with programs.

Based on the Treasury Board Secretariat's Guide to the Management of Real Property, effective management must also inherently adopt a portfolio-based approach that incorporates a horizontal and department-wide perspective when planning investments in real property. Managing real property holdings based on a portfolio approach rather than on an asset-by-asset basis allows a department to maximize the level of utilization, minimize the need for new assets and share associated costs. Adopting a portfolio-based approach also implies that real property decisions cannot be made in isolation; they have to be made as part of the overall departmental decision-making framework and be considered along with departmental strategic planning.

The demand for real property is driven by the Department's mandate. Real property assets are key enablers in support of departmental programs. Fulfilling the Department's mandate requires real property assets capable of meeting an acceptable standard to support program delivery. For example, real property facilities support scientific research, search and rescue activities, marine communication and traffic services, and provide accommodation for departmental personnel. Without the necessary facilities to support these activities, the overall delivery capacity of the departmental programs would suffer. Adopting a portfolio-based approach also implies that real property decisions are made as part of the overall departmental decision-making framework and are considered as a key enabler within departmental strategic planning. Instead, the current structure is such that programs make decisions that have direct implications on real property holdings, of which the costs are borne by Human Resources and Corporate Services.

The regional real property functions are responsible for managing their regional real property holdings based on the programs' needs. Programs are often uncertain about their future real property needs, and are reluctant to declare unused facilities surplus. Programs have no direct incentive to make cost-effective decisions on real property matters such as making the decision to divest of unused properties, as the facilities costs are not borne by them, but by the Real Property, Safety and Security Branch. Consequently, the regional real property functions could be holding more properties in their portfolios than required which may result in unnecessary expenses.

Recommendation 1

It is recommended that the Assistant Deputy Minister of Human Resources and Corporate Services develop a governance framework for the management of real property that would assign accountability to sectors for the properties allocated to them, in order to facilitate cost-effective decision making on a department-wide basis. This framework should be vetted through the Strategic Outcome Committee - Integrated Business Management, prior to the Deputy Minister's approval.

3.3 Life Cycle Management

While the processes followed for the acquisition and disposal of real properties were found to be adequate, there is room for improvement in the management of real properties during their use and occupancy and in the identification of potential surplus properties.

The objective of the Treasury Board's Policy on the Management of Real Property and its associated directives and standards "…is to ensure that real property is managed in a sustainable and financially responsible manner throughout its life cycle, to support the cost-effective and efficient delivery of government programs."

The inherent feature of a real property asset that distinguishes it from another asset type is its extended lifespan. Real property assets need to be managed throughout their life cycle. This fundamental notion forms the basis for the management of real property in the federal government and applies to every stage of real property life cycle management. The life cycle of real property is divided into four distinct phases:

  • Planning for the acquisition, use and subsequent disposal of real properties;
  • Acquiring real property only if it is required to support the achievement of departmental objectives;
  • Utilizing and occupying real property in a way that supports the achievement of departmental objectives and delivery of programs and services; and
  • Disposing of surplus real property that no longer fulfils program objectives.

Life cycle management of real property can optimize its value and increase its lifespan while maximizing its effectiveness and efficiency.

3.3.1 Planning

The Treasury Board's Policy on Long-Term Capital Plans [2] requires "…that capital assets be:

  • acquired, improved, and retained;

  • in support of program goals consistent with broader government objectives;

  • based on long-term plans that outline a responsible investment program within available resources and takes into account managing the asset base on a life cycle basis; and

  • disposed of, as being surplus, when they are no longer required."

To respect the Policy on Long-Term Capital Plans, it is essential to have a long-term plan in place to ensure that the acquisition of real property will support the delivery of programs, their outcomes and government priorities. The Department achieves this through its Real Property Long-Term Capital Management Directorate.

To align its investments with the priorities of departmental programs and as one of the Departmental Centres of Expertise for capital investment, the Real Property, Safety and Security Branch follows the departmental capital planning process resulting in the implementation of a five-year long-term capital plan, which includes all major capital projects valued at greater than $1M.

The Real Property, Safety and Security Branch conducts a project selection process to allocate their annual major capital fund of $41M. This process involves the regions using defined criteria to assess their projects prior to presenting them during a peer-review meeting, where all regional Real Property representatives and the Manager, Real Estate Investment rank the projects for inclusion in the five-year Major Capital Plan.

The regions have noted that a number of projects cannot be carried out due to a lack of funding caused by a constant structural deficit. The five-year long-term capital plan for 2009-2010 to 2013-2014 anticipates a cumulative major and minor capital deficit of $371M by 2014, which could affect the ability to maintain the Department's current real property portfolio. The Department received an additional $38.2M in major capital funding as part of Canada's Economic Action Plan during the 2009-2010 and 2010-2011 fiscal years, and used it to address some deferred maintenance costs at science laboratories and hatcheries.

Minor capital is primarily intended for rehabilitation, restoration and replacement of assets costing between $10K and $1M. The annual minor capital budget is currently $9M. To distribute funds among the regions, the Real Property, Safety and Security Branch has devised a process based on criteria such as the number of properties, size of properties, depreciation rate, etc. The Real Property, Safety and Security Branch has also provided the regions with a rating framework to help them prioritize their minor capital needs.

The audit team found that these two processes are well documented and, based on the interviews with the Pacific Region and the Central and Arctic Region, the planning processes regarding major and minor capital are being adhered to.

3.3.2 Acquisition

The fundamental policy principle underlying any acquisition of real property by the government is that the property is needed to support the delivery of government programs. Departmental investment planning and real property strategies will identify the need for additional real property investment when there is a new requirement or there is a gap with existing availability.

Before bringing new assets into a department's real property inventory, priority should be given to maintaining and preserving long-term assets and reducing operating expenses unless these are inconsistent with program priorities or not in the best economic interest of the Crown. Other alternatives may include increasing the utilization of existing real property or redesigning program requirements to reduce the demand for real property.

Based on file reviews conducted in the Pacific Region and the Central and Arctic Region, the audit team found that the real property function exercises due diligence in this area as sectors are consulted and all the analyses required are conducted prior to any acquisition.

3.3.3 Use and Occupancy

After acquiring real property, the Department has a duty to manage it properly and guarantee that it continues to fully, effectively and efficiently meet the requirements of the Department's programs. According to Treasury Board's Policy on Management of Real Property, the overall performance of real property must be assessed regularly and systematically in terms of its functionality, utilization, financial and physical performance.

Files reviewed in the Pacific Region and the Central and Arctic Region indicated that the overall performance of real property is not assessed regularly in terms of the functionality, utilization and physical performance of all real property assets. It is understood that some sites, such as those declared surplus and others that are no longer used, would not be considered for such an assessment.

During interviews, it was mentioned that the regions would like to carry out more assessments that review the functionality, utilization, financial and physical performance of their real property assets; however, their ability to do so is limited because of the shortfall in operating and maintenance funding. The Pacific Region plans to draw up a site inspection schedule in 2011 to assess the functionality, utilization and physical condition of real property on a regular basis. An absence of performance assessment can lead to poor decision making, underutilization of real property, and building deterioration. Insufficient monitoring can also lead to unnecessary expenditures that affect financial performance, such as the confirmation of payments in lieu of taxes. [3]

Public Works and Government Services Canada makes payments in lieu of taxes to municipalities for properties that the Federal Government owns. Departments subsequently reimburse Public Works and Government Services Canada for payments made relating to their holdings. Based on the Guide to the Management of Real Property, it is the responsibility of the custodian department to ensure that Public Works and Government Services Canada is making payments in lieu of taxes only for properties that they own. However, the audit team found that no formal process was in place to confirm that Fisheries and Oceans Canada is making payments in lieu of taxes only for the properties that it owns. The audit team observed that in 2007, the Pacific Region real property function carried out a payment in lieu of taxes confirmation exercise that identified approximately 15 disposed properties for which it was still making payments in lieu of taxes. However, the Region was not able to provide documentation to demonstrate the amount saved from this exercise.

Physical infrastructure is identified as one of the Department's corporate risks in that the Department will be unable to invest in or maintain the infrastructure necessary to achieve its objectives. The 2011 Corporate Risk Profile identified this risk as a critical area of focus which, if not addressed appropriately, is predicted to lead to higher maintenance costs as the physical infrastructure further deteriorates.

The Real Property, Safety and Security Branch has an estimated $30M operations and maintenance shortfall as mentioned in the 2011 Corporate Risk Profile. According to a deck addressing the revenue shortfall presented to the Treasury Board Secretariat in February 2011 by the Real Property, Safety and Security Branch, $7.7M, or 85.5% of the $9M minor capital budget was transferred to operations and maintenance in the 2010-2011 fiscal year. In 2009-2010, the Pacific Region diverted 65% of its minor capital to cover its operating and maintenance costs, and 50% a year earlier. At present, only two of the six regions have funding to invest in minor capital; however, the amounts are said to be not sufficient to prevent building deterioration. Operations and maintenance expenditures consist mainly of payments in lieu of taxes and non-discretionary items such as utilities, fuel, mandatory inspections, janitorial services, snow clearing and ice control. Though these operations and maintenance costs are continuously increasing due to inflation, the budget dedicated for the Real Property, Safety and Security Branch is not indexed to account for inflation. This puts pressure on the Branch as there are little funds left for repairs or preventive maintenance, which are necessary for adequate life cycle management.

The Treasury Board Secretariat's Guide to the Management of Real Property suggests that a minimum of 2% of the replacement value of a real property asset should annually be invested in maintenance and repair. Because of the unavailability of current data nationally, the audit team was only able to calculate the percentage dedicated to maintenance and repair for the Pacific Region. For example, the Pacific Region estimated in 2009 that the replacement value of their real property assets is $1.9B. The Region's combined operations and maintenance and minor capital budgets covers 0.68% of its estimated $1.9B replacement value in the maintenance and repair of its real property–well below the 2% threshold indicated by the Treasury Board Secretariat's Guide to the Management of Real Property.

Faced with the strained financial situation in real property management, the Pacific Region's real property function took the initiative to develop an infrastructure strategy that identifies the Region's major challenges, regional profile, investment plan, governance structure, and seven key objectives for reducing operation and maintenance costs for the next five years. The audit team deemed this to be a good practice that could be shared with Headquarters and other regions.

Recommendation 2

It is recommended that the Assistant Deputy Minister of Human Resources and Corporate Services, in consultation with the Regional Directors General, ensure that each region prepares and implements a risk-based schedule to assess the overall performance and need of each real property asset in terms of their functionality, utilization and physical performance.

Recommendation 3

It is recommended that the Assistant Deputy Minister of Human Resources and Corporate Services, in consultation with the Regional Directors General, develop a strategy that would identify ways to reduce operating and maintenance costs to allow the real property function to operate more cost effectively.

Recommendation 4

It is recommended that the Assistant Deputy Minister of Human Resources and Corporate Services, in consultation with the Regional Directors General, establish a process to ensure that a confirmation of properties be carried out prior to payments in lieu of taxes being made.


3.3.4 Disposal

Based on the Treasury Board Secretariat's Guide to the Management of Real Property, departments should take a proactive planning approach, rather than a transactional approach to the disposal of real property. Departments should develop processes to identify surplus real property and, as part of broader investment planning strategies, future surplus real property. Disposal decisions should be well planned and informed by analysis of performance indicators and present or anticipated future program requirements. It is important to plan for renewal or disposal before a given real property reaches obsolescence and its ability to meet the service requirements of departmental programs is compromised. As soon as a department recognizes that a property is no longer required in support of its program or operational needs, it identifies the property as surplus. The department remains responsible for the custody and control of its surplus property, including its operating costs, until such time as the sale or transfer is complete. The department then follows the disposal process.

Based on file reviews conducted in the Pacific Region and the Central and Arctic Region, the audit team found that when a property is identified as surplus, the Real Property, Safety and Security Branch conducts the disposal of the property in accordance with the Treasury Board Directive on the Sale or Transfer of Surplus Property.

Due to the shortfall in operations and maintenance funding, it is critical that the Real Property, Safety and Security Branch, in consultation with departmental programs, examine ways of reducing the number of properties it manages with a view to reducing costs. However, based on interviews conducted by the audit team, programs are reluctant to declare properties surplus to their requirements, particularly major facilities, for which operations and maintenance expenses are paid for by the Real Property, Safety and Security Branch. There is, under the current structure, no incentive for programs to reduce their real property holdings.

This situation is further complicated by the fact that the audit team found no evidence of any mechanism that would allow sectors to consult each other and seek out ways to increase efficiencies from a real property management standpoint. Consequently, the regional real property functions could be holding more properties in their portfolio than required which may result in excessive expenses. As a way of addressing this issue, one region has established a committee involving real property management and all sectors in real property decisions. While this is a good initiative, oftentimes real property decisions affecting sectors have to be taken at the national level and there is no current mechanism for this to take place when more than one sector may be implicated.

The October 2010 discussion paper Real Property Management - Way Forward, prepared for the Fisheries and Oceans Canada Real Property Task Force, states that the Real Property, Safety and Security Branch will need to work in collaboration with sectors and the Canadian Coast Guard to deliver programs in a way that requires less infrastructure and focus on those properties where significant operations and maintenance expenditures are incurred. It also suggests that an Assistant Deputy Minister-level committee should play a role in identifying properties that could be disposed of and that a consultation process with the programs be set up.


Recommendation 5

It is recommended that the Assistant Deputy Minister of Human Resources and Corporate Services establish and implement a process whereby sector heads examine their holdings with a view to identifying those surplus to their requirements. This process could include the use of the Strategic Outcome Committee - Integrated Business Management, to accelerate the identification of surplus properties.

3.4 Real Property Information

Fisheries and Oceans Canada could benefit from more complete, relevant and reliable information to support real property decision making.

Based on the Treasury Board Secretariat's Guide to the Management of Real Property, an effective information system is a key element of management control by enabling the integration of real property and financial information as well as linkages to program objectives. Hence, a department that has adequate information system and information management processes in place is able to collect relevant and reliable asset, financial, and program information to make informed decisions and to report on the usage, maintenance, and overall performance of the real property it uses.

The Real Property, Safety and Security Branch currently uses the Real Property Information System to manage the complete inventory of the real property assets required to support departmental programs and operations as well as to fulfil Treasury Board's reporting requirements pertaining to the Directory of Federal Real Property. The Real Property Information System is populated by the regional real property functions and is used to generate information to support annual central agency reporting and policy requirements, particularly for the Directory of Federal Real Property. Our interviews have shown that the system was not viewed as a management tool to support decision making.

The audit team observed that there is adequate information captured in the Real Property Information System to fulfil central agency reporting requirements for updating the Directory of Federal Real Property. However, it was found that information such as building utilization or performance is not captured to allow the system to be used as a management tool to support departmental real property management decisions. Consequently, without complete, timely and relevant information, senior management cannot ensure that the decisions made represent the best value for the Crown.

The existing Real Property Information System will be replaced by a new Real Property Information Management System which is expected to be implemented in 2012. While waiting for the new system to be in place, the Real Property, Safety and Security Branch plans to maintain the status quo with respect to the current information management processes in place.

The current situation will persist unless necessary changes are made so that users enter information into the system that is relevant, accurate, timely and complete and it can be used as a valuable tool for the management of real property. Without major impetus for change in what information is fed into the system, then only basic information, as required by central agencies, will continue to be recorded.

The Project Charter for the new Real Property Information Management System sets out timelines for its implementation, including a provision for staff training. In the interim, however, there is still a requirement to have reliable information for real property decision making. To address this need, and in the event of delays in implementing the new system, more immediate measures are required to address the deficiencies in information.

Recommendation 6

It is recommended that the Assistant Deputy Minister of Human Resources and Corporate Services ensure that the department has and maintains real property information that is relevant, accurate, timely and complete and which can be used as a valuable tool for the management of real property.

3.5 Client Services

Performance measures are not in place to assess the performance of the real property function nor are there any formal client feedback mechanisms that could be used as a basis for ongoing service improvement.

One of the main roles of the Real Property, Safety and Security Branch is to provide and maintain real property in support of the achievement of departmental strategic outcomes. To that end, the Real Property, Safety and Security Branch must be able to assess whether or not it is achieving its objectives in delivering real property services.

The Real Property, Safety and Security Branch had developed a performance measurement and risk management framework in 2008, but this framework has not yet been implemented. The Department is currently going through an exercise to develop performance measurement strategies for all departmental programs and internal services, including the real property function.

The Real Property, Safety and Security Branch has developed a performance measurement strategy for its long-term capital planning activities; however, there has not been a strategy prepared for the entire real property function. Through the preparation of a performance measurement strategy, the Real Property, Safety and Security Branch will be able to identify the results it expects to achieve, as well as the indicators it can use to measure the achievement of these results.

To maintain good client relations and to be able to assess its delivery of services, it is important for the Real Property, Safety and Security Branch to develop standards for the services it provides. The real property function currently has no service standards for the services it provides.

The real property function currently obtains feedback from clients through a variety of informal channels, such as e-mails and telephone conversations. The audit team observed that neither Headquarters nor the regions visited had any formal feedback mechanisms, such as a client satisfaction survey.

In addition, some services are also provided by Public Works and Government Services Canada through the Real Property, Safety and Security Branch. For services provided by Public Works and Government Services Canada, the Department's real property clients make their requests to the real property function at Headquarters or in the regions. As in the case for services provided by the real property function, standards do not exist for those services provided by Public Works and Government Services Canada. Clients should have an indication of when they can expect to receive the services they request. Standards for services provided by Public Works and Government Services Canada could be included in the Memorandum of Understanding currently being negotiated between the Department and Public Works and Government Services Canada.

Ongoing performance measurement of the real property function can help determine how it is progressing at any point in time. The information collected to measure performance can be used to manage the function, to make decisions, and to monitor and report on the achievement of expected results.

Recommendation 7

It is recommended that the Assistant Deputy Minister of Human Resources and Corporate Services ensure that performance measurement strategies are prepared and implemented for real property accommodations and facilities services, and that standards be developed to assist in assessing the delivery of the services provided by the Real Property, Safety and Security Branch as well as those provided by Public Works and Government Services Canada.


4.0 Conclusion

The audit found that the management of real property is generally adequate; however, a number of areas were noted where improvement could enhance the real property function. Some elements of a real property management framework have not yet been implemented and the preparation of internal operating policies has been limited. Areas for improvement were also noted in the area of life cycle management, particularly in the assessments of the performance of real property assets and the identification of surplus properties for disposal. Finally, improvements could be made in the capture of information for decision making and the implementation of performance measures and service standards for real property management activities.

The report makes recommendations to improve and enhance Fisheries and Oceans Canada's ability to manage the real property function more efficiently and effectively.


5.0 Management Action Plan

dddd

Recommendations

Management Action Plan

Status Report Update

Actions Completed

Actions Outstanding

Target Date

Recommendation 1

It is recommended that the Assistant Deputy Minister of Human Resources and Corporate Services develop a governance framework for the management of real property that would assign accountability to sectors for the properties allocated to them, in order to facilitate cost-effective decision making on a department-wide basis. This framework should be vetted through the Strategic Outcome Committee - Integrated Business Management, prior to the Deputy Minister's approval.

1.1- In the context of recent changes to the Departmental governance structure and further to the work of the Real Property Task Force, Human Resources and Corporate Services will review existing governance models to identify the most appropriate approach to ensure cost-effective decision making on a department-wide basis.

   

January 2012

1.2- Building on the existing departmental governance, Human Resources and Corporate Services will implement enhancements to the governance structure to ensure effective and horizontal decision making inclusive of Sector and Canadian Coast Guard representation. This will include the consideration of ways to effectively assign accountabilities, when feasible and appropriate.

   

July 2012

Recommendation 2

It is recommended that the Assistant Deputy Minister of Human Resources and Corporate Services, in consultation with the Regional Directors General, ensure that each region prepares and implements a risk-based schedule to assess the overall performance and need of each real property asset in terms of their functionality, utilization and physical performance.

2.1- Human Resources and Corporate Services will develop, in partnership with the regions, a risk-based schedule to assess the overall performance of each real property asset in terms of their functionality, utilization and physical performance. These are asset condition and building condition reports ranging in cost from approximately $25K to $175K per report.

   

July 2012

Recommendation 3

It is recommended that the Assistant Deputy Minister of Human Resources and Corporate Services, in consultation with the Regional Directors General, develop a strategy that would identify ways to reduce operating and maintenance costs to allow the real property function to operate more cost effectively.

3.1- In partnership with the regions, sectors and the Canadian Coast Guard, Human Resources and Corporate Services will develop a national infrastructure strategy, supported by an action plan, which will include deliverables aiming at reducing operating and maintenance costs and increased portfolio efficiency.

   

July 2012

Recommendation 4

It is recommended that the Assistant Deputy Minister of Human Resources and Corporate Services, in consultation with the Regional Directors General, establish a process to ensure that a confirmation of properties be carried out prior to payments in lieu of taxes being made.

4.1- In partnership with the regions, the Director General, Real Property, Safety and Security will develop national guidance related to payments in lieu of taxes in order to ensure that proper due diligence is conducted prior to payments being authorized by the Department via Public Works and Government Services Canada.

   

July 2012

Recommendation 5

It is recommended that the Assistant Deputy Minister of Human Resources and Corporate Services establish and implement a process whereby sector heads examine their holdings with a view to identifying those surplus to their requirements. This process could include the use of the Strategic Outcome Committee - Integrated Business Management, to accelerate the identification of surplus properties.

5.1- In partnership with the regions, sectors and the Canadian Coast Guard, Human Resources and Corporate Services will develop and implement the methodology that will be used to help the regions, sectors and the Canadian Coast Guard examine their holdings and update the divestiture plan. This will include an examination of ways to increase the regions, sectors and Canadian Coast Guard representation within the existing governance structure.

   

January 2013

Recommendation 6

It is recommended that the Assistant Deputy Minister of Human Resources and Corporate Services ensure that the department has and maintains real property information that is relevant, accurate, timely and complete and which can be used as a valuable tool for the management of real property.

6.1- Human Resources and Corporate Services will implement necessary corrective measures both relative to data integrity and the existing central agency reporting process in the current Real Property Information System that will allow the Department to meet central agency reporting requirements required for certification.

   

March 2012

6.2- While adjustments to the current system are being assessed and implemented where feasible, Human Resources and Corporate Services will develop and implement the new Real Property Information Management System. This system will provide relevant, accurate, timely information for the management of real property.

   

March 2013

Recommendation 7

It is recommended that the Assistant Deputy Minister of Human Resources and Corporate Services ensure that performance measurement strategies are prepared and implemented for real property accommodations and facilities services, and that standards be developed to assist in assessing the delivery of the services provided by the Real Property, Safety and Security Branch as well as those provided by Public Works and Government Services Canada.

7.1- Human Resources and Corporate Services will develop and implement remaining real property performance measurement strategies.

   

July 2012

7.2- Human Resources and Corporate Services will develop service standards for real property accommodations and facilities services.

   

May 2013

7.3- Human Resources and Corporate Services will explore the feasibility of formalizing specific service standards for real property accommodations and facilities services provided by Public Works and Government Services Canada to Fisheries and Oceans Canada into the Departmental Service Agreement.

   

March 2012



[1] Other requirements for the management of real property are set out in section 3.6 of Treasury Board's Policy on Management of Real Property.

[2] It is important to note that the Policy on Long-Term Capital Plans is no longer applicable and was replaced in 2011 by the Policy on Investment Planning - Assets and Acquired Services.

[3] As the Government of Canada is exempt from taxation as a property owner, Payments In Lieu of Taxes are made by the Government of Canada to local governments where its properties are situated to share the cost equitably with other property owners in the community.