Audit of Contracting

2.0 Introduction

Authority for Audit

2.1 The mission of the Internal Audit function of Audit and Evaluation Services is to provide independent and objective assurance services designed to add value and improve the Canadian Grain Commission’s operations. Internal Audit helps the Canadian Grain Commission accomplish its objectives by bringing a systematic, disciplined approach to assess and improve the effectiveness of risk management, control and governance processes.

2.2 The 2014-2017 Risk-Based Audit Plan approved by the Chief Commissioner in May, 2014 included “core control audits” to be performed at times over the three-year period. The Office of the Comptroller General at the Treasury Board of Canada Secretariat has published audit criteria for several core management controls that are common across the government, one of these being the Contracting Policy. This audit provided the opportunity to assess the purchase contract processes and ensure that they are in conformance with the Contracting Policy, the Financial Administration Act, and other related instruments.

Background

2.3 The purchasing for the Canadian Grain Commission is centralized in head office in Winnipeg. The Procurement, Contracting and Materiel Management unit within the Finance and Administration division is responsible for all asset management in addition to managing all purchasing of goods and services for the Canadian Grain Commission. It is also responsible for providing support and advice to internal clients relating to procurement.

2.4 Within the Administration unit of the Finance and Administration division, the Facilities Management Officer is responsible for managing construction contracts and leases for all of the locations the Canadian Grain Commission occupies.

2.5 Public Works and Government Services Canada provides its services to federal departments and agencies, including the Canadian Grain Commission. Public Works and Government Services Canada provides procurement services such as issuing standing offers and supply arrangements as well as acting as the central purchasing agency when goods or services exceed a department’s threshold. Public Works and Government Services Canada’s Real Property Branch offers its vast portfolio of real estate expertise to the government and clients. The majority the Canadian Grain Commission’s large contracts, leases, and construction projects are executed by Public Works and Government Services Canada, with input from the Canadian Grain Commission.

Audit Objectives

2.6 The objective of the audit was to assess compliance with the applicable Treasury Board of Canada Secretariat’s policies as outlined in the Office of the Comptroller General’s Core Controls Audit Criteria (Appendix A). The areas that were assessed for each contract (as applicable) included:

  • Non-competitive procurement
  • Procurement strategy
  • Competitive procurement
  • Expenditure initiation
  • Contract management
  • Account verification
  • Contract payment
  • Proactive disclosure
  • Payable at year end.

2.7 Audit and Evaluation Services also assessed the quality of controls related to the compliance areas listed in the audit criteria. Effective controls can help ensure continued compliance with the various policies and related instruments.

Audit Scope

2.8 The scope of the audit included review and assessment of purchase contracts made by the Canadian Grain Commission for goods, services, and leases for compliance to various policies. Construction contracts were also in scope for this audit; however, the Canadian Grain Commission did not enter into any construction contracts within the audit time period.

2.9 A sample of contracts was selected from the period of July 1, 2013 to June 30, 2014, inclusive. Two contracts from the first quarter of 2013-14 (April – June 2013) were also included in the sample because they were listed in the Canadian Grain Commission’s Quarter 2, 2013-14 proactive disclosure.

2.10 Transactions made on Procurement purchase cards were excluded from the scope of this audit because there are relatively few contract-related purchases on the cards and the dollar values are low.

Approach and Methodology

2.11 The audit methodologyused by Audit and Evaluation Services is based on guidance provided by the Institute of Internal Auditors and the Office of the Comptroller General of Canada. The standards for internal audit are articulated in the Institute of Internal Auditors’ International Professional Practices Framework and the Treasury Board Secretariat’s Policy on Internal Audit.

2.12 The audit focused mainly on compliance in the contracting activities of the procurement process at the Canadian Grain Commission. The audit was conducted from October to December, 2014. Procedures performed during the examination phase included:

  • Generating a population of contracts and selecting a sample.
  • Interviewing various staff from the following teams:
    • Procurement, Contracting, and Materiel Management to obtain an understanding of the processes and procedures in place for initiating and managing a contract.
    • Accounting Operations to learn how the payment portion of the contract is handled after the goods or services have been received.
    • Facilities Management to review the process of arranging a lease and a construction contract.
  • Testing each sample against the Office of the Comptroller General’s Core Control Audit Criteria (Appendix A) for compliance.

2.13 At the conclusion of the examination phase, recommendations for management were developed in areas where opportunities for control improvements were identified. Recommendations in this report have been categorized to reflect their potential impact. The criteria established for determining the impact is outlined in Appendix B. The impact is indicated following the text of each recommendation.