Internal Audit Report

Real Property - Strategy for Strategic and Operating Review Implementation (including divestiture)

Project 2012-6B253

TABLE OF CONTENTS

1.0   EXECUTIVE SUMMARY
2.0   BACKGROUND
3.0   AUDIT OBJECTIVE
4.0   AUDIT SCOPE
5.0   AUDIT APPROACH
6.0   AUDIT FINDINGS

       6.1 GOVERNANCE AND ACCOUNTABILITY
       6.2 PLANNING
       6.3 PROJECT MANAGEMENT

7.0   AUDIT OPINION
8.0   STATEMENT OF CONFORMANCE
APPENDIX A - AUDIT CRITERIA

1.0  EXECUTIVE SUMMARY

Fisheries and Oceans Canada has the largest number of real property assets of any department or agency. With over 8,000 assets, the Department’s holdings represent 33% of the Government of Canada’s properties. The Department is challenged with the management of a diverse, aging, and under-capitalized portfolio of real property assets spread across the country. This portfolio is no longer affordable, sustainable, or fully aligned with the Department's core mandate. As a result, physical infrastructure was identified as a mission critical risk in the Department’s Corporate Risk Profile.

The Internal Audit Directorate undertook an Audit of Real Property in 2011 to assess the adequacy of the management of real property in supporting timely, informed real property management decisions. The audit found that the management of real property was generally adequate, however some elements of the governance structure were not in place and did not facilitate cost-effective decision making on a department-wide basis. In response to the audit, Real Property, Safety and Security began reviewing their governance model. In addition, the audit identified that the department did not use a portfolio-based approach to managing its real property. Real Property, Safety and Security began developing a National Portfolio Strategy to be used in developing the departmental long-term real property portfolio. Adopting a portfolio-based approach to managing real property requires that real property decisions not be made in isolation; they must be made as part of the overall Departmental decision-making framework and be considered along with departmental strategic planning.

As Real Property, Safety and Security began developing the National Portfolio Strategy, the Department was participating in the government-wide Strategic and Operating Review that will result in the Department achieving savings of $79.3 million by fiscal year 2014-15. The cost saving initiatives have been organized into Tracks, and eleven of the twenty-one Tracks have real property impacts. The Human Resources and Corporate Services Sector, as the common service provider for the Department, is responsible for implementing the real property implications stemming from the implementation of the Tracks. Given the importance to the Department of the successful implementation of Strategic and Operating Review measures, an audit of Real Property aspects related to Strategic and Operating Review was undertaken as the real property risk was considered high due to the significance of the changes and the tight timelines.

The Department has taken strides to transform the management of its real property portfolio, however, the audit found, that while an overall governance structure and related internal controls are in place, improvements are required to ensure these adequately support the implementation of the real property aspects of Strategic and Operating Review. Due to the challenges of working within a matrix organization with decentralized decision-making and a departmental real property portfolio strategy that is still under development, decisions were not always made in a timely manner which may impact the implementation of Tracks and result in Real Property decisions that are not aligned with the long term departmental real property strategy.

Real Property, Safety and Security had very limited involvement during the development of Strategic and Operating Review proposals due to aggressive timelines, the confidential nature of the proposals and the limited number of staff involved in the process.   As a result, only direct real property requirements were identified and out of eleven tracks that had real property implications, five did not identify the related costs.  Real Property, Safety and Security has since worked with Tracks to identify all real property implications and determine costs.  This has resulted in funding pressures being created at both the Track and Departmental level that will have to be addressed.  Due to delays at the Track level in confirming requirements, complete cost estimates have not been developed.  Real Property, Safety and Security has been making oversight bodies aware of these challenges and the looming funding pressures.  They are working with Track leads to finalize requirements and provide complete information for decision making.

To address these deficiencies, the following improvements are recommended:

  • Further define governance and accountability structures for real property as well as the decision-making authority and process for Real Property Management; and
  • Once program requirements are fully defined, continue working with all stakeholders to finalize the supporting real property requirements of the Strategic and Operating Review Tracks and develop comprehensive cost estimates including the identification of the source of funds.

Management Response

Management is in agreement with the audit findings, has accepted the recommendations included in this report, and has developed management action plans to address them. The management action plans have been integrated in this report.

2.0  BACKGROUND

Fisheries and Oceans Canada, including the Canadian Coast Guard participated in the government-wide Strategic and Operating Review. As outlined in Budget 2012, Fisheries and Oceans Canada will achieve savings of $79.3 million by fiscal year 2014-15 through efficiency measures and program reductions that align resources to its core mandate, scaling back where the need is reduced; transforming how it works internally; and, by consolidating and streamlining. Fisheries and Oceans Canada will restructure its operations, consolidate internal services and leverage technology to realize efficiencies and achieve savings.

Fisheries and Oceans Canada’s savings proposals have been organized into Tracks, each of which represents a distinct goal with respect to savings and workforce management. Implementation of many of the Tracks requires relocation of some personnel, programs, or services, resulting in the need for new or expanded facilities in some areas and the reduction or closure of facilities in other areas. Eleven of the twenty-one approved Strategic and Operating Review Tracks have real property impacts.

The accountability for the implementation of each Track rests with the Assistant Deputy Minister of the Sector or the Commissioner of the Canadian Coast Guard. The Assistant Deputy Minister, Transformation is responsible for the coordination, monitoring, and reporting on the overall Strategic and Operating Review implementation. Oversight for the implementation of real property aspects of Strategic and Operating Review Tracks is provided by the Departmental Management Board and the Real Property Steering Committee.

Under the accountability of the Assistant Deputy Minister, Human Resources and Corporate Services, the Real Property, Safety and Security Directorate is responsible for implementing the real property, safety and security implications stemming from Strategic and Operating Review referred to as the “Real Property Connector Track” or “Strategic and Operating Review-Real Property”. The Real Property, Safety and Security Directorate, will be involved both nationally and regionally in the delivery of real property projects to enable these organizational changes. Key to the Real Property, Safety and Security Directorate’s success will be the implementation of a strong management framework to: ensure consistent delivery of services across multiple programs and regions; identify stakeholders who impact or are impacted by Strategic and Operation Review; monitor, manage and mitigate project delivery risks; and facilitate communication to stakeholders.

3.0  AUDIT OBJECTIVE

The overall objective of the audit is to provide assurance that an adequate governance structure and internal controls are in place for real property, as it relates to Strategic and Operating Review implementation, to ensure that strategic direction and associated plans are set, real property implications are defined, monitored and reported on, and related financial impacts (costs and savings) are determined and monitored.

4.0  AUDIT SCOPE

Based on the results of the risk assessment carried out during the engagement planning phase, the audit team identified that further examination was required for the following areas:

  • Governance and Accountability;
  • Planning; and
  • Project Management.

The audit focused on the governance and accountability structure as well as the processes and controls designed by management to effectively manage, monitor and report on the real property aspects of the Strategic and Operating Review Implementation.

5.0  AUDIT APPROACH

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. These standards require that the audit be planned and performed in such a way as to obtain reasonable assurance that audit objectives are achieved. The audit included various procedures, as considered necessary, to provide such assurance. They were designed to draw conclusions on the existence and effectiveness of key controls in the scope areas examined. They were not designed to draw conclusions beyond the scope areas. These procedures employed various techniques including a risk assessment of the audit entity, interviews, as well as reviews and analysis of documentation and information.

6.0  AUDIT FINDINGS

Management processes and controls, including governance and accountability, planning processes and project management practices must be in place and functioning to enable Real Property, Safety and Security to successfully implement the real property aspects of the Strategic and Operating Review Tracks.

The audit was conducted based on the lines of enquiry and audit criteria identified in the planning phase; conclusions by audit criteria are in Appendix A. This section provides the observations and recommendations resulting from the audit work carried out. Audit findings are structured along the following main themes:

  • Governance and Accountability;
  • Planning; and
  • Project Management.

Based on the audit work performed and our professional judgment, the risks associated with each observation were rated using a three-point scale. The risk ranking (high, moderate, or low) is based on the level of potential risk exposure we feel may have an impact on the achievement of Fisheries and Oceans Canada objectives, and is indicative of the priority management should give to the recommendations associated with that observation. The following criteria were used in determining the risk exposure level:

High Controls are not in place or are inadequate.
Compliance with legislation and regulations is inadequate.
Important issues are identified that could negatively impact the achievement of program/operational objectives.
Moderate Controls are in place but are not being sufficiently complied with.
Compliance with central agency/departmental policies and established procedures is inadequate.
Issues are identified that could negatively impact the efficiency and effectiveness of operations.
Low Controls are in place but the level of compliance varies.
Compliance with central agency/departmental policies and established procedures varies.
Issues identified are less significant but opportunities that could enhance operations exist.

6.1 GOVERNANCE AND ACCOUNTABILITY

As per the Treasury Board Secretariat’s Audit Criteria related to the Management Accountability Framework: A Tool for Internal Auditors, March 2011, an appropriate organisation structure that clarifies authorities, responsibilities, and the duty to report is essential to accountability. Considered collectively, 'authority' is the right to direct and exact performance, 'responsibility' is the obligation to perform, and 'accountability' is the duty to report on performance. The clear delineation of responsibilities, delegated authorities, segregation of duties and lines of communication support the effective coordination between all parts of the organisation and ensure that all parties within the organisation are aware of, and comply with, their responsibilities.

In addition, oversight bodies should be provided with financial and operating information in order to fulfill their oversight function. The information must be sufficient, timely, complete and accurate to allow them to monitor management's objectives and strategies, the financial position and operating results and to enable effective decision-making.

Observations for section 6.1.1 Governance and Accountability
Observations
Moderate 6.1.1 Governance and Accountability

In general, a governance structure and related internal controls are in place, however, improvements are required to ensure these adequately support the implementation of the real property aspects of Strategic and Operating Review. There is an opportunity to provide additional clarification to the governance and accountability structure and to provide more complete information with respect to costs.

In response to a recommendation in the Audit of Real Property undertaken by the Internal Audit Directorate in 2011, Human Resources and Corporate Services was reviewing its governance and accountability structure for the management of real property when Budget 2012 was announced. Following the announcement, Real Property, Safety and Security had to immediately begin implementing the real property aspects of the Strategic and Operating Review Tracks and did so using their existing governance structure that was under review, supplemented by a Strategic and Operating Review Program Management Framework (the Framework) that was being developed.

The Framework describes the roles and responsibilities of oversight committees and the accountabilities and responsibilities for those involved in the implementation of the real property aspects of Tracks. Although the governance and accountability structure and the Framework were discussed at oversight committee meetings, they have not been formally approved and communicated to relevant stakeholders involved in the implementation of the real property aspects of Tracks including, Real Property project managers, Track Leads and Associate Regional Directors General.

Prior to the Strategic and Operating Review, it was identified in the Audit of Real Property that the Departmental matrix accountability structure does not always facilitate effective decision-making on a department-wide basis. This has become evident in implementing Strategic and Operating Review initiatives. Although the Assistant Deputy Minister, Human Resources and Corporate Services is accountable for the establishment of an effective management system for the provision of real property services to the Tracks, she does not have the authority to make decisions.  To clarify accountabilities and identify the source of funding for various cost elements, Operating Principles were developed as part of the Framework. Associate Regional Directors General and Regional Directors, Real Property were consulted in the development of these Principles.

Interviews and document review identified a number of deficiencies with the Operating Principles that are creating issues related to the implementation of the real property aspects of Tracks. Although the Principles outline accountabilities, they did not sufficiently address issues related to roles, responsibilities and authorities for Tracks that involve multiple regions and/or sectors which originate from the Departmental matrix accountability structure. Regions also expressed concerns that issues related to the funding of indirect costs have not been addressed. Examples of indirect costs include the cost of providing internal services in Regions where new office space has been added to their portfolio. In addition, the Principles were not finalised until the end of August 2012, although work commenced on the development of Track implementation plans immediately after the announcement of Budget 2012.

There has been confusion over who has the authority to make decisions related to the implementation of Tracks that involve multiple regions and/or sectors. In addition, responsibility for addressing the indirect real property implications resulting from the implementation of Tracks has not been clearly defined. This has resulted in delays in finalising requirements and developing full cost estimates. In addition, there is a risk that the indirect real property implications resulting from the implementation of Tracks are not implemented in a nationally consistent manner, or in alignment with the departmental long-term real property portfolio which is being developed.

The provision of complete, accurate and timely information for decision-making is a key component of a governance and accountability structure. Oversight for the Strategic and Operating Review real property is provided by two oversight bodies, the Departmental Management Board and the Real Property Steering Committee.

The Framework states that the Assistant Deputy Minister, Transformation Sector, is responsible for the coordination, monitoring and reporting on the overall progress of Strategic and Operating Review implementation. However, Real Property, Safety and Security felt that monthly reports submitted to the Departmental Management Board were not providing sufficient information on real property.

To address this information gap, in September 2012, Real Property, Safety and Security developed a reporting framework to inform oversight bodies on the progress in implementing real property requirements of the Tracks. Information on real property aspects at the Track level are compiled by the project managers in consultation with Track Leads and submitted to Real Property, Safety and Security Headquarters for review and consolidation. A consolidated report, the Performance Dashboard, is then compiled which is tabled monthly at the Departmental Management Board.

Interviews with members of oversight bodies indicated that the information received is sufficient and timely to fulfill their mandate. However, oversight bodies are not receiving complete information as the full costs of implementing real property aspects of Strategic and Operating Review Tracks have not yet been compiled. There have been delays in finalising and approving Track requirements which have resulted in the inability to develop complete cost estimates. The lack of complete costing information creates the risk that the savings identified for Strategic and Operating Review may not be realized and funding pressures created at both the Track and Departmental level.

Recommendations and Action Plan for section 6.1.1 Governance and Accountability
Recommendation Management Action Plan
R-1.    The Assistant Deputy Minister, Human Resources and Corporate Services should further define governance and accountability structures for real property as well as the decision-making authority and process for Real Property Management.
  1. Seek approval of the Strategic and Operating Review Real Property Program Management Framework following initial consultation with the Real Property Steering Committee (May 2013).
  2. Presentation and request for endorsement of the Strategic and Operating Review Real Property Program Management Framework at the Departmental Management Board (June 2013) and communication of approved document to key stakeholder (including the Departmental Transformation Team and Program Track Leads).
  3. Governance and accountability structures, as well as decision-making authority and processes for strategic portfolio planning and program management to be included in the Enhanced Real Property Management Framework and Portfolio Strategy.  Principles to be ratified by the Departmental Management Board (June 2013).
Office of Primary Interest: Assistant Deputy Minister, Human Resources and Corporate Services
Due Date:
  1. May 2013
  2. June 2013
  3. June 2013

6.2 PLANNING

As per, Treasury Board Secretariat’s Guide to the Management of Real Property real property decisions should be an integral part of the overall departmental decision-making framework and be considered along with strategic planning for other physical assets, as well as for human and financial resources that support program and service delivery. While supporting efficient and effective program and service delivery, real property management must embrace a portfolio approach to achieve efficiencies from a program and management perspective.

In addition, a good master plan should provide a comprehensive, coherent, and cohesive departmental approach to the stewardship of real property. In addition, the full cost of providing, operating, maintaining, and disposing of real property has to be reflected in departmental budgets.

Observations for section 6.2.1 Planning
Observations
Moderate 6.2.1 Planning

A National Portfolio Strategy is currently being developed by Real Property, Safety and Security. Without a National Portfolio Strategy, Real Property, Safety and Security is not able to ensure that Strategic and Operating Review real property decisions are aligned with the Department’s long term real property strategy. In addition, there have been delays in finalising Track requirements resulting in full costs not yet being identified.

Real Property, Safety and Security was in the process of developing a National Portfolio Strategy when they had to commence delivering the real property aspects of Strategic and Operating Review Tracks. The National Portfolio Strategy, aimed at reducing the Department’s footprint had to be developed in the context of the organisational changes stemming from the Strategic and Operating Review.

Real Property, Safety and Security had very limited involvement during the development of proposals due to the aggressive timelines, the confidential nature of the proposals and limited number of staff involved in the process. Strategic and Operating Review proposals were developed without comprehensive real property strategic information and advice and only addressed the direct real property implications and costs, as known at the time of development.  In the Performance Dashboard submitted to the Departmental Management Board, Real Property, Safety and Security has identified that in many instances the real property costs have been underestimated or not identified.  As Tracks are being implemented, Sectors/ Canadian Coast Guard are facing additional financial pressures as they are accountable to cover direct implementation costs and carry incremental real property costs for three years, as outlined in the Operating Principles. Funds will have to be reallocated from other areas within the Sectors/Canadian Coast Guard in order to achieve the identified Strategic and Operating Review savings.

Indirect real property implications and the source of funds were not identified in the development of the Tracks.  Real Property, Safety and Security has had to work with Tracks to identify these indirect real property implications and determine the costs.  Due to the delay of Tracks in finalizing requirements, Real Property, Safety and Security has been delayed in compiling a complete list of requirements and associated costs.  Although the total funding pressure has not been estimated, Real Property, Safety and Security has been identifying this risk to the Departmental Management Board in its Performance Dashboard and a decision will have to be made on how to address this funding pressure.

To deliver the real property aspects of the Tracks, a Real Property project manager was assigned to each of the eleven Tracks that have real property implications. Project managers worked with Track leads to finalise real property requirements which are documented in a Project Approval Document signed by the Assistant Deputy Minister/Commissioner of the Canadian Coast Guard responsible for the Track and the Assistant Deputy Minister, Human Resources and Corporate Services. However, there were no formal procedures in place for the development and approval of project approval documents. Tracks have experienced delays in formalising their real property requirements as they are awaiting decisions on the future direction of programs. As of March 27th, 2013, only one project approval document had been approved.

Delays in signing project approval documents to formalise requirements have impacted Real Property, Safety and Security’s ability to develop comprehensive work plans and cost estimates for the implementation of both the direct and indirect real property aspects resulting from the Tracks. Real Property, Safety and Security has undertaken work without the project approval documents being approved; this poses a risk that work undertaken may not meet program requirements or result in added costs and additional time and resources. In addition, there is a risk that delays in signing project approval documents may negatively impact implementation timelines, costs and the realisation of savings. Complete and accurate information for oversight bodies is also impacted by the delays in finalising requirements. Until project approval documents are signed, all real property cost implications arising from Strategic and Operating Review cannot be captured and reported to oversight bodies. The inability to generate complete cost estimates could lead to unanticipated funding pressures and no identified source of funds.

The Department has taken strides to transform the management of its real property portfolio. Like many departments, Fisheries and Oceans Canada is challenged with the management of a diverse, aging, and under-capitalized portfolio of real property assets spread across the country. This portfolio is no longer affordable, sustainable, or fully aligned with the Department's core mandate. As recommended in the 2011 Audit of Real Property, Real Property, Safety and Security has begun to develop and implement a National Portfolio Strategy to ensure that the real property portfolio supports current and future program needs, that investments are tied to strategic assets, and that all opportunities for consolidation and a reduced facilities footprint are considered.

As part of the implementation of the National Portfolio Strategy, Real Property, Safety and Security plans to seek Departmental Management Board endorsement of their portfolio strategy and area planning approach.  Following the approval of the area planning approach, an area plan per region as well as two asset class strategies will be delivered.   

The National Portfolio Strategy will capture the cumulative real property impacts of the Strategic and Operating Review, therefore real property requirements of Tracks must be finalised.  Otherwise there is a risk that Real Property, Safety and Security will be unable to fully identify portfolio/rationalisation opportunities and the Department’s environmental footprint and infrastructure costs will not be strategically managed and reduced.

The importance to the Department of implementing Strategic and Operating Review, including the real property aspects has increased the awareness and attention paid to the state of real property within the Department.

As a lesson learned, any future projects similar to Strategic and Operating Review should involve Real Property, Safety and Security at the onset to ensure a comprehensive assessment of potential Real Property implications (including indirect impacts), alignment with portfolio priorities and development of more complete cost estimates.

Recommendations and Action Plan for section 6.2.1 Planning
Recommendation Management Action Plan
R-2.    The Assistant Deputy Minister, Human Resources and Corporate Services should once program requirements are fully defined, continue working with all stakeholders to finalise, the supporting real property requirements of the Strategic and Operating Review Tracks and develop comprehensive cost estimates including the identification of the source of funds. 2.  Seek endorsement of Project Approval Documents developed for each of the eleven real property projects underway in support of Strategic and Operating Review and identify total funding requirements, pressures and a source of funds in collaboration with the Chief Financial Officer for each of these projects.  (June 2013)
Office of Primary Interest: Assistant Deputy Minister, Human Resources and Corporate Services
Due Date: 2.  June 2013

6.3 PROJECT MANAGEMENT

“Project management is the application of knowledge, skills, tools, and techniques to project activities to meet project requirements. Project management is accomplished through the use of processes such as: initiating, planning, executing, controlling, and closing.” (Project Management Body of Knowledge Guide 2000, introduction)

As per the Project Management Body of Knowledge Guide 2000, a project management framework must include formal risk management processes to identify, assess, manage, monitor and report on risks. Resource planning is also a vital part of the project to ensure the resources required will be available to meet project requirements. Resources needed to achieve objectives should be built into the project plan.

The Committee of Sponsoring Organisation – Internal Control Integrated Framework- December 2011 requires that information sharing processes be in place to provide timely information to all stakeholders. These should facilitate effective internal communication (i.e. up, down and across the entity) and help recognise any problem and take necessary actions.

Observations for section 6.3.1 Project Management
Observations
Moderate 6.3.1 Project Management
Real Property, Safety and Security generally has adequate project management processes and practices in place for the delivery of real property aspects of Strategic and Operating Review Tracks. Informal processes are being used to identify risks which are then reported to oversight bodies for monitoring. However, due to the limitations of the Departmental matrix accountability structure, information-sharing processes were not always effective in situations where a Track involved multiple regions and/or sectors. In addition, there is a need to develop a clear and effective strategy to identify and acquire required capacity once all requirements have been finalised.

As part of the development of the Framework, Real Property, Safety and Security undertook a risk assessment and developed a Risk Profile for Real Property Strategic and Operating Review. Although there was not wide consultation in the development of the Risk Profile, interviews indicated risks identified were accurate. In addition, risks are being assessed throughout the implementation phase.

At the Track level, project managers are primarily responsible for assessing risks. Although formal risk management processes have not been put in place, risks are being identified through informal discussions between project managers and Track leads. These risks are being monitored and reported on in the monthly Project Managers’ Reports which are submitted to Real Property, Safety and Security management. These Project Managers’ Reports are summarised and reported to Track leads and oversight bodies.

The Risk Profile identified capacity as one of the critical risks associated with the delivery of the real property implications of the Strategic and Operating Review. Capacity was identified by Real Property, Safety and Security as an area of concern prior to the Budget 2012 announcement. The increased workload resulting from the implementation of real property aspects of the Strategic and Operating Review may compromise Real Property, Safety and Security’s ability to properly plan and deliver timely and cost effective real property solutions to meet Track requirements.

Although capacity has been identified as a risk, there have been impediments to quantifying what type of capacity is required (skillsets) and how much capacity is required. As stated previously, the Department is in the process of developing a National Portfolio Strategy that will be used to develop a long-term portfolio plan. This Strategy will be used in developing capacity requirements. At the Track level, there have been delays in finalising real property requirements and signing project approval documents. Until these requirements are finalised, long-term capacity requirements cannot be finalised and oversight bodies do not have complete information needed to make resource allocation decisions.

An additional challenge in addressing capacity is the time required for staffing processes and the difficulty in hiring people with the necessary skillsets. Real Property, Safety and Security also has different operational structures in the regions; some regions rely on Public Works and Government Services Canada to undertake work, while in other regions the work is undertaken in-house. However, interviews indicated Real Property, Safety and Security is making the best use of existing capacity and thus far, capacity has not been an issue in providing Real Property services to the individual Tracks.

Sound project management practices require that an effective information-sharing process be in place. Real Property, Safety and Security used existing processes and practices to exchange information with relevant stakeholders including regular teleconferences and informal meetings. Project managers prepare monthly progress reports that are used to monitor budget, scope, schedule, risks and the overall health of the Tracks. The information prepared by project managers is then used by Real Property, Safety and Security management to prepare performance dashboards to update Track leads and oversight bodies.

As identified in the Audit of Real Property, the Departmental matrix accountability structure does not always facilitate effective decision-making on a department-wide basis.  Interviews indicated that information-sharing processes in place have not always worked as intended, particularly when Tracks involve multiple regions and/or sectors. As a result, there has been confusion over who has the responsibility to make decisions and delays in identifying and finalising requirements of some Tracks. This has impeded the development of complete cost information and capacity requirements. In addition, there may be regional inconsistencies in how indirect real property implications stemming from the Strategic and Operating Review Tracks are addressed.

As per recommendation 2, in order to effectively estimate Real Property, Safety and Security’s capacity requirements, project approval documents must be finalised. The National Portfolio Strategy, which is the first step in the development of a long-term portfolio plan, should be finalised so that its policies and principles can be used in identifying and acquiring capacity requirements. Furthermore, as per recommendation 1, governance and accountability structures to address Tracks with real property requirements involving multiple regions and/or sectors need to be defined.

Recommendations and Action Plan for section 6.3.1 Project Management
Recommendation Management Action Plan
See Recommendation for LOE 1 and LOE 2  
Office of Primary Interest: Assistant Deputy Minister, Human Resources and Corporate Services
Due Date:  

7.0  AUDIT OPINION

Based on the audit findings, our opinion is that, while a governance structure and internal controls are in place to support the implementation of the real property aspects of Strategic and Operating Review, due to limitations of the governance structure, timely decisions were not always made, which impacted the ability of Real Property, Safety and Security to develop comprehensive plans, including resource requirements and ensure alignment of decisions with the departmental real property portfolio (under development). Delays in identifying all real property aspects resulting from the implementation of Tracks along with delays to implementing real property requirements may result in the Department not realizing the savings identified as part of Strategic and Operating Review and create additional funding pressures for Sectors/Canadian Coast Guard and the Department. Real Property, Safety and Security has been making oversight bodies aware of these challenges and is working with Tracks to finalize requirements and provide complete information for decision making.

The audit identified improvements that should be made as the department continues its implementation of Strategic and Operating Review measures. The recommended improvements are as follows:

  • Further define governance and accountability structures for real property as well as the decision-making authority and process for Real Property Management; and
  • Once program requirements are fully defined, continue working with all stakeholders to finalize the supporting real property requirements of the Strategic and Operating Review Tracks and develop comprehensive cost estimates including the identification of the source of funds.

As a lesson learned, any future projects similar to Strategic and Operating Review should involve Real Property, Safety and Security at the onset of the project to ensure comprehensive assessment of potential Real Property implications (including indirect impacts), alignment with portfolio priorities and development of more complete costs estimates.

8.0  STATEMENT OF CONFORMANCE

In my professional judgment as Chief Audit Executive, sufficient and appropriate audit procedures have been conducted and evidence gathered to support the accuracy of the opinion provided and contained in this report. The extent of the examination was planned to provide a reasonable level of assurance with respect to the audit criteria. The opinion is based on a comparison of the conditions, as they existed at the time, against pre-established audit criteria that were agreed on with management. The opinion is applicable only to the entity examined and within the scope described herein. The evidence was gathered in compliance with the Treasury Board Policy and Directive on Internal Audit. The audit conforms to the Internal Auditing Standards for the Government of Canada, as supported by the results of the Quality Assurance and Improvement Program. The procedures used meet the professional standards of the Institute of Internal Auditors. The evidence gathered was sufficient to provide senior management with proof of the opinion derived from the internal audit.

APPENDIX A – AUDIT CRITERIA

Based on a combination of the evidence gathered through documentation examination, analysis and interviews, each of the audit criteria listed below was assessed and a conclusion for the audit criteria was determined using the following definitions:

appendix a - audit criteria
  Conclusion on Audit Criteria Definition of Opinion
1 Criteria Met – Well Controlled Well managed or no material weaknesses noted, controls are effective.
2 Criteria Met with Exceptions – Controlled Requires minor improvements.
3 Criteria Met with Exceptions – Moderate Issues Requires improvements in the areas of material financial adjustments, some risk exposure.
4 Criteria Not Met – High Impact – Significant Improvements Requires significant improvements in the area of material financial adjustments, serious risk exposure.

The following are the audit criteria and examples of key evidence and/or observations noted which were analyzed and against which conclusions were drawn. In cases where significant improvements and/or moderate issues were observed, these were reported in the audit report.

audit criteria examples of key evidence
Audit Criteria Conclusion on Audit Criteria Examples of Key Evidence/ Observations
Line of Enquiry 1 – Governance and Accountability:
To provide assurance that an appropriate and functioning governance structure is in place to support the implementation of collaborative initiatives.
Criterion 1.1: The organization’s accountabilities in support of collaborative initiatives are formally defined, communicated and understood. 3 6.1
Criterion 1.2: Oversight bodies request and receive sufficient, complete, timely and accurate information. 3 6.1
Line of Enquiry 2 – Planning:
To provide assurance that there is a process in place to ensure that Strategic and Operating Review real property decisions are aligned with the Long-term departmental real property portfolio.
Criterion 2.1: SOR RP planning decisions are integrated into the departmental strategic RP planning process and embrace a portfolio approach. 3 6.2
Criterion 2.2: A departmental master plan has been developed for the implementation of the SOR RP and future requirements of the programs are factored into plans. 3 6.2
Criterion 2.3: The full cost of providing real property services to the tracks has been estimated and source of funds have been identified, approved and committed. 3 6.2
Line of Enquiry 3 – Project Management:
To provide assurance project management processes and practices in place are affective to deliver timely real property services to the SOR Tracks in a cost effective and efficient manner and due diligence is exercised
Criterion 3.1: Risks management processes and practices are in place to ensure risks to the implementation of the SOR RP are identified assessed, mitigated, documented, monitored and reported on. 2 6.3
Criterion 3.2: DFO has the required capacity (internal, external (PWGSC), funding,) to deliver timely and cost effective RP solutions in agreement with legislative, regulatory and policies requirements. 3 6.3
Criterion 3.3: Formal processes have been developed and implemented to facilitate the exchange of information between RPSS and the Tracks. 2 6.3