Audit of RCMP Memoranda of Understanding

Final

February 2019

Table of contents

• Acronyms and abbreviations
• Executive summary
• Management's response to the audit
• Background
• Objectives, scope and methodology
  • Objective
  • Scope
  • Methodology
  • Statement of conformance
• Audit findings
  • Governance
  • MOU review process
  • Policy Compliance
  • Oversight and monitoring
• Conclusion
• Recommendations
• Appendix A – Audit objective and criteria
• Appendix B – Management action plan

Acronyms/definitions

CFAO

Chief Financial Administrative Officer

CHRO

Chief Human Resources Officer

CM&C

Corporate Management and Comptrollership

CO

Commanding Officer

CROPS

Criminal Operations Support

DFSA

Delegation of Financial Signing Authority

DG

Director General

DOJ

Department of Justice

MOU

Memoranda of Understanding

NAS

National Accounting Services

NHQ

National Headquarters

OSB

Operations Strategy Branch

RCMP

Royal Canadian Mounted Police

RBAEP

Risk-based Audit and Evaluation Plan

TB

Treasury Board

TEAM

Total Expenditures and Asset Management System

Executive summary

In the course of carrying out its mandate, the RCMP regularly enters into arrangements with other police forces, levels of government or participants, to share information, cooperate on joint projects, provide or receive services, and share equipment, personnel or property. Memoranda of Understanding (MOUs) are non-legally binding arrangements used to describe the terms under which the RCMP cooperates with partners. If an MOU is with another level of government and involves the acquisition of goods, services or construction in exchange for a monetary payment, it may qualify as a contractual arrangement.

The RCMP Administration Manual contains requirements for MOUs through the Policy on RCMP Agreements and the Ministerial Directive on RCMP Agreements. The Policy and Directive specify the mandatory clauses that should be included in RCMP MOUs, the review and consultation requirements, as well as the approval authority for MOUs.

The objective of the audit was to assess whether the use of MOUs is consistent with applicable policy requirements within the RCMP. The scope of the audit included RCMP MOUs in place as of September 2018 within business lines and divisions, with a particular focus on those considered to be contractual arrangements.

The audit found that a majority of MOUs were missing key mandatory clauses required by Policy and contained limited financial information. Testing indicated that reviews of MOUs were not conducted systematically and approvals were not always performed at the required level. In addition, there was no central oversight function in place to ensure that MOUs were respecting core elements of the Policy and were aligned with RCMP priorities.

The audit also found that there was a general lack of knowledge surrounding contractual arrangements and the approval authorities that applied to them, which increased the risk of exceeding the authorities.

Overall the audit concluded that the MOU process should be strengthened to address gaps; that employees drafting MOUs have the proper tools and guidance they need; that reviewers follow a standardized process and document their review; and that the MOU Coordination Unit is involved in monitoring and oversight to ensure compliance with policies.

Opportunities also exist to update policy instruments to clarify roles, responsibilities and authorities, especially as it relates to contractual arrangements; to review potential contractual arrangements to ensure that limits and authorities conform to Treasury Board Guidelines; and to improve the MOU Registry to ensure that a complete MOU population exists and that relevant and sufficient information can be retrieved for decision making.

The management response and action plan developed in response to this report demonstrate the commitment from senior management to address the audit findings and recommendations. The RCMP Internal Audit will monitor the implementation of the management action plan and undertake a follow-up audit if warranted.

Management's response to the audit

Corporate Management agrees with the findings and recommendations in the audit report. The audit has highlighted areas for improved governance and management of Memoranda of Understanding, particularly related to the use of Contractual Arrangements. Corporate Management has already taken steps to improve the governance of Memoranda of Understanding and will continue to strengthen the governance, training and monitoring of Memoranda of Understanding.

Corporate Management will implement a detailed management action plan to address the recommendations in the audit. The plan will include revised policy and governance, tools, training, guidance and risk-based reviews.

Although not forming part of the management action plan, Corporate Management will consider whether the tracking and approval processes for Memoranda of Understanding could be improved through a business transformation initiative. An initiative will be proposed to the Corporate Management Business Transformation team and assessed against the prioritization criteria and ranked against other initiatives within Corporate Management. If the initiative is selected, there is the possibility that efficiencies in the review and approval process could be found through automation of the process.

Dennis Watters
Chief Financial Administrative Officer

Background

In the course of carrying out its mandate, the RCMP regularly enters into arrangements with other police forces, levels of government or participants, to share information, cooperate on joint projects, provide or receive services, as well as share equipment, personnel and property. Memoranda of Understanding (MOUs) are an important part of policing given that they document the work done jointly with partners, which contributes to the achievement of RCMP objectives.

Several administrative instruments can be used to enter into arrangements with partners depending on the nature of goods or services provided and the type of relationship with the other entity. An MOU is a type of arrangement used to describe the terms under which the RCMP provides or receives services, information, assets, assistance, or engages in cost-shared projects with partners. MOUs may also be described as letters of intent, memoranda of agreement, collaborative arrangements or other similar terms. MOUs are non-legally binding and can be terminated at any given time by one of the participants.

MOUs can have a cost-recovery component or may involve no exchange of funds depending on the purpose of the agreement. If an MOU is with another level of government and involves the acquisition of goods, services or construction in exchange for a monetary payment, it may qualify as a contractual arrangement. In this case, the MOU is subject to different obligations and must respect core contracting policy principles as well as financial delegated authorities for sole-source contracts as stated in Treasury Board (TB) policies.

The RCMP Administration Manual contains requirements for MOUs through the Policy on RCMP Agreements and the Ministerial Directive on RCMP Agreements. The Policy defines MOUs as either major or local and describes the review process required for each type.

Major MOUs are defined as written arrangements or understandings which have an international, national, or interdivisional impact on the delivery of law enforcement services, or contain provisions for the sharing personal information. Local MOUs are defined as written arrangements or understandings that are routine in nature, which facilitate the effectiveness of day-to-day RCMP administrative or operational activities, and are not major.^{Footnote 1}

The Policy also defines the roles and responsibilities of MOU originators, the national MOU Coordination Unit, Corporate Management and Comptrollership (CM&C), Legal Services as well as Commanding Officers (COs) and Director Generals (DGs):

• MOU Originators are responsible for drafting and arranging for the signing of MOUs;
• The MOU Coordination Unit located in the Procurement and Contracting Branch is the policy centre for MOUs. They are responsible for reviewing MOUs for compliance to the Policy, coordinating the review of all major MOUs, providing advice and guidance to drafting units and maintaining a national MOU registry;
• CM&C is responsible for providing advice on resources, assets, property, procurement and financial aspects including cost recovery mechanisms pertaining to all MOUs;
• Legal Services is responsible for reviewing MOUs to ensure they conform to legal principles; and
• COs and DGs are responsible to ensure that MOUs conform to policies and directives.

Divisional MOU Units located in the Operations Strategy Branch (OSB) or Criminal Operational Support (CROPS) offices determine if MOUs are major or local, coordinate the review process for local MOUs, and facilitate the MOU approval process by the CO on behalf of the MOU originator.

The 2018-2023 Risk-based Audit, Evaluation and Data Analytics Plan (RBAEDAP) approved by the Commissioner included an audit of MOUs. Specifically, the RBAEP identified an increased need to ensure that originators of MOUs followed established review and approval processes given the variety and quantity of MOUs in place across the RCMP. Furthermore, the Treasury Board Secretariat issued guidelines in 2014 on the use of contractual arrangements for the acquisition of goods and services from / to other levels of government. The audit will assess the extent of compliance of RCMP MOUs to policy requirements.

Objective, scope and methodology

Objective

The objective of the audit was to assess whether the use of MOUs is consistent with applicable policy requirements within the RCMP. Appendix A presents the audit objective and criteria.

Scope

The scope of the audit included all RCMP MOUs, with a particular focus on those considered to be contractual arrangements. The scope of the examination included MOUs that were in place and valid as of September 2018 within business lines and divisions.

Methodology

Planning for the audit was completed in August 2018. In this phase, the audit team conducted interviews, process walkthroughs and examined relevant policies, procedures and results of previous audit work performed.

The examination phase, which concluded in November 2018, employed various auditing techniques including interviews, documentation reviews and data analysis. Site visits took place at three divisional headquarters to review files and assess practices.

A file review was conducted on MOUs in place as of September 2018 to assess compliance against the requirements of the RCMP Policy on Agreements and TB Guidelines on Contractual Arrangements. In order to capture a wide variety of MOUs across the Force, the audit team selected a total of 205 MOUs consisting of two samples for file testing as follows:

• A random sample from the national MOU Registry for divisions (excluding E, K and O) and National Headquarters (NHQ) business lines (65 files from divisions and 20 from NHQ business lines for a total of 85 MOUs); and
• A random sample of 40 MOUs maintained at the divisional level (by MOU Units and Records Offices) in each site visited (40 in E, K and O Divisions for a total of 120 MOUs).

The audit intended to select a random sample of MOUs with financial expenditures from the Total Expenditures and Asset Management System (TEAM) to identify contractual arrangements. However, the Internal Audit, Evaluation and Review's Data Analytics Section could not identify a population of MOUs in TEAM because MOU payments did not have an identifier code.

As a result, a key word search was used to identify transactions in TEAM that could potentially be MOUs. Of these transactions, the audit team selected 15 transactions based on judgment and assessed whether they qualified as contractual arrangements. The audit team also conducted a key word search of the national MOU Registry to identify potential contractual arrangements.

Upon completion of the examination phase, the audit team held meetings to validate findings with personnel and debriefed senior management on the relevant findings.

Statement of conformance

The audit engagement conforms to the Institute of Internal Auditor's International Professional Practices Framework and the Treasury Board of Canada Directive on Internal Audit, as supported by the results of the quality assurance and improvement program.

Audit findings

A sound governance structure, including up-to-date policies, detailed processes, clear accountabilities and effective oversight, must be in place to ensure that risks associated with MOUs are assessed and mitigated prior to being signed. This would support the RCMP entering into agreements that are in its best interest.

Accordingly, in regards to the MOU process, we expected to find:

• Clear and up-to-date MOU policies and delegation of authorities communicated across the Force;
• Guidance and tools clarifying the MOU review and approval process available to employees involved in the MOU process;
• A review process documenting sign-off or certification by Financial Management, Procurement and Contracting, Legal Services and other relevant stakeholders depending on the nature of the MOU; and
• An accurate and complete inventory of RCMP MOUs that is monitored regularly.

Governance

Policy and procedures

The RCMP has a governance framework in place that defines the MOU process within the Force. The framework includes the Ministerial Directive on RCMP Agreements, the RCMP Policy on Agreements, the Delegated Financial Signing Authority (DFSA) Matrix and supplementary divisional policies on agreements. In addition to RCMP documents, the TB Guidelines on Contractual Arrangements released in 2014, define contractual arrangements and establish the requirements and delegated authorities for this type of agreement.

The Ministerial Directive on RCMP Agreements provides guidance regarding the accountability and consultation requirements for RCMP agreements. The Directive states that RCMP agreements shall be signed by the Commissioner or delegates; shall be supported by advice from Legal Services and Global Affairs Canada; and shall be maintained along with pertinent documents in a record system allowing for easy access.

The RCMP Policy on Agreements identifies the roles and responsibilities of relevant stakeholders in the MOU process; the structure and content of MOUs; and the review and consultation requirements as well as the approval authority for local and major MOUs.

Some divisions developed supplementary policies to further establish and clarify the divisional review, consultation and approval processes for local MOUs. C, D, E, F, L and V Divisions had divisional policies on agreements. Other divisions did not have supplemental policies and relied on national policy for guidance.

In 2014, Treasury Board released the TB Guidelines on Contractual Arrangements to provide advice and interpretation on contractual arrangements. The guidelines define contractual arrangements as MOUs between the federal government and a public sector organization (other than federal government departments) that involves the acquisition of goods, services, construction services or the leasing of real property in exchange for a monetary payment. The guidelines state that contractual arrangements are subject to sole-sourcing contracting limits (i.e. $40k for goods and construction and $100k for services) and should respect core contracting policy principles.

The audit found that while the RCMP policy instruments provided valuable information to employees involved in the MOU process, they had not been updated recently and did not reflect the latest information on MOUs. For example, the Ministerial Directive on RCMP Agreements (updated in 2002) and RCMP Policy (updated in 2010) did not address contractual arrangements and information contained in the 2014 TB Guidelines. The DFSA Matrix approved in 2017 established the signing authorities for MOUs. However, it did not include financial signing authority limits for contractual arrangements, which are equivalent to non-competitive contracting limits. Divisional supplementary policies were also in need of updating. For example, in C Division, the divisional policy had not been updated since 1995 and was in the process of being removed from the divisional manual. In E Division, the divisional policy was in the process of being updated to reflect changes in the divisional process.

Policy instruments also contained inconsistencies and unclear definitions. For example, the Ministerial Directive and Policy on Agreements were inconsistent on the requirement for legal review. While the Ministerial Directive required all agreements to be supported by legal advice, the Policy required Legal Services to review only major MOUs and local MOUs that are not structured in accordance with MOU templates. In addition, the MOU signing authorities in the DFSA and the Policy on Agreements were inconsistent. The Policy authorized the approvals of MOUs by COs in the divisions and DGs and above at NHQ. However, the DFSA allowed for the approval of MOUs by procurement officers and managers, directors and regional Corporate Management Officers (depending on the amount payable). The authority level of these positions were below the CO/DG level, and as such were inconsistent with the RCMP Policy on Agreements.

Finally, the definitions of major and local MOUs contained in the Policy on Agreements were unclear to users and left room for interpretation. The audit team found that 70 out of 205 MOUs tested were considered local and routine in nature by the divisions, however, they had an information sharing component which is a characteristic of major MOUs according to Policy. The divisions defined MOUs as routine in nature based on the type of partner and collaborative arrangement instead of labeling them as major based on their information sharing component. The unclear definitions between local and major MOUs had an impact on the review process and level of risk associated to MOUs.

As part of CM&C's 2018-2019 Annual Performance Plan, the Procurement and Contracting Branch has committed to implement MOU governance enhancement initiatives in fiscal year 2018-2019 which includes updating the RCMP Policy on Agreements and DFSA to reflect the latest information on contractual arrangements. There is an opportunity to also review the definitions of major and local MOUs to provide greater clarity to employees involved in the MOU process.

Roles and responsibilities

The RCMP Policy on Agreements defines the roles and responsibilities of MOU originators, the national MOU Coordination Unit, CM&C, Legal Services as well as COs and DGs, especially as they relate to the MOU review and approval process.

Interviews with employees involved in the MOU process indicated that they had a clear understanding of their roles. However, the audit found that due to limited resources in the national MOU Coordination Unit (which consists of one AS-02 and one AS-04 position), the Unit had not been able to fulfill its role as a policy centre in accordance with its policy mandate which included providing direction, supporting employees and coordinating the MOU process. This impacted the effectiveness and timeliness of the MOU review process for major MOUs as well as the provision of advice for local MOUs.

Furthermore, the level of service provided by Legal Services varied amongst divisions. While some divisions such as E Division had access to a Department of Justice (DoJ) lawyer onsite who reviewed the majority of MOUs, most divisions had to request advice from NHQ Legal Services. In the past, NHQ Legal Services indicated that they did not have the capacity to review all MOUs originating from across the Force. In order to mitigate the risks of not providing Legal advice on all MOUs, they developed MOU templates to be used across the Force in coordination with the national MOU Coordination Unit.

The audit found that the RCMP Policy on Agreements did not document the roles of divisional MOU Units located in OSB or CROPS offices. Employees working in those units informed the audit team that they were responsible for determining if MOUs were major or local, coordinating the review process for local MOUs, and facilitating CO approval of the MOUs on behalf of the MOU originator.

When reviewing the RCMP Policy on Agreements, there is an opportunity to update the roles and responsibilities of different units involved in the MOU process and to clarify the involvement of the MOU Coordination Unit and Legal Services to ensure that it aligns with capacity and priorities.

Guidelines, training and tools

MOUs are written by operational and administrative units across the Force as needed to facilitate operations. As the drafting of MOUs is an infrequent duty for most employees, it was expected that employees involved in the MOU process would have access to training, tools and guidance necessary to successfully carry out their roles and responsibilities with respect to the MOU process.

The audit found no evidence of national tools or training available to all employees drafting MOUs with the exception of national templates available on the Infoweb. Procurement and Contracting Branch has issued written communication and has delivered limited training on MOUs in the past but clear guidance and step-by-step procedures have not been consolidated in a complete and accessible document.

For example, Procurement and Contracting Branch included some information on MOUs in presentations offered to CM&C employees in 2016 but this information was not available to all RCMP employees. Similarly, in September 2018 a Force-wide message on MOUs was sent to all employees with information on contractual arrangements and the MOU review process but the information was placed on GCpedia.^{Footnote 2} While this is a positive initiative, information placed on GCpedia does not have the same authority as the information in the RCMP administrative manuals nor is it found as easily by employees. Policies found in the manual should contain the most up-to-date information.

The MOU templates developed by the national MOU Coordination Unit and Legal Services were available on the Infoweb and were generally used across the Force. They included templates for generic MOUs, information sharing MOUs, and joint-force operation MOUs. While the templates were deemed useful by employees drafting MOUs, employees informed the audit team that the templates should provide specific examples of language that can be used in MOU clauses. MOU drafting units indicated that it would be helpful to have access to previously approved MOUs or generic MOUs to reduce time spent on drafting and editing.

In the absence of national guidelines and tools, most divisions have developed local training and resources to assist employees drafting and reviewing MOUs (with the exception of C and M Division). For example, in O Division, the MOU Unit located in the CROPS Office had developed a training presentation on MOUs to be distributed across the division. In F, H, J, K, and O Divisions, MOU Units had developed process maps and process narratives to clarify the review process and assist employees drafting MOUs. Although divisional tools are helpful, not having national training and guidance may result in duplication of efforts and inconsistencies. Divisional tools and guides may also be incomplete and out of date as they rely on information currently available in national policies.

As part of CM&C's 2018-2019 Annual Performance Plan, the Procurement and Contracting Branch is in the process of developing training material to address gaps surrounding contractual arrangements. In the process of developing national tools, there is an opportunity to review and leverage existing tools and training developed by divisions. The development of national tools and training would ensure that all employees have a common understanding of the process and requirements.

MOU review process

Review process

According to the RCMP Policy on Agreements, major MOUs should be sent to the MOU Coordination Unit at NHQ which would coordinate reviews by CM&C (Financial Management and Procurement and Contracting) as well as Legal Services. As per Policy, local MOUs are not required to be sent to the MOU Coordination Unit but are required to be reviewed at the divisional level.

The Ministerial Directive on RCMP Agreements stipulates that the RCMP is to keep an inventory of all RCMP agreements, amendments, audit reports and any other correspondence relating to these agreements in a records system to ensure that they can easily be reviewed. Accordingly, the audit expected to find evidence of review in MOU files.

Testing indicated that reviews of MOUs were not conducted systematically and documented on file. There were no mandatory requirements to indicate what reviews should consist of to mitigate financial, legal and other risks associated with MOUs. No national review checklist existed for employees to document the review process and the results of consultations held were not always documented on file. The audit found evidence of a review in 35% of the files tested (71/205 files). Evidence of the review for major and local MOUs are provided in Table 1.

Testing indicated that only 40% (21/53) of major MOU files contained evidence that MOUs had been reviewed and only 33% (50/152) of local MOU files contained evidence of review. However, Table 2 depicts that of the 21 major MOUs reviewed, the national MOU Coordination Unit reviewed 8 major MOUs, resulting in only 15% (8/53) of major MOUs being reviewed in accordance with policy requirements. The remaining 13 major MOUs were reviewed by divisional MOU units but should have been sent to the national MOU Coordination Unit for review. In addition, testing indicated that 8 local MOUs were sent to the national MOU Coordination Unit for review.

The audit team was informed by interviewees in the divisions that MOUs submitted for review to the national MOU Coordination Unit did not receive a timely response. The review of major MOUs by the MOU Coordination Unit, CM&C, Legal Services and other applicable operational directorates at NHQ could take several months. In the absence of a timely response from NHQ, divisions informed the audit team that they had been reviewing MOUs locally and making decisions on MOUs to address operational needs in order to meet timelines. Given that the MOU Coordination Unit was not tracking response times, the audit team was unable to assess service standards and confirm whether divisions received timely responses to their requests.

As per table 3, results from testing showed that Procurement and Contracting rarely assessed MOUs as part of the MOU review process. Interviews with divisions indicated that Procurement and Contracting was consulted informally at the regional level if necessary. Testing and interviews also showed that other relevant stakeholders such as Real Property and Movable Assets were not included in the review process even if MOUs were related to vehicles and accommodations. In addition, there was no evidence that Legal Services was systematically assessing all major MOUs as part of the review process with the exception of E Division, where a DoJ lawyer located on site reviewed the majority of major and local MOUs prior to approval. Testing showed that 36 of the 39 MOU files reviewed by Legal Services, as indicated in table 3, originated in E Division.

Note that some MOUs had a review by more than one function.

The MOU Coordination Unit confirmed that no national review guidelines and checklist had been provided to the divisions to clarify and document the review process. The audit found that some divisions had developed local checklists to document their review process, while others did not document their review process. Table 4 depicts the use of checklists across the divisions.

Divisional review processes included different stakeholders such as Finance, Procurement and Contracting, Legal Services and Departmental Security Branch. However, there were no commonalities in terms of format or minimum requirements. Testing also showed that divisional checklists and tracking lists were not consistently used and did not serve as a control mechanism to ensure that all stakeholders identified as reviewers were involved in the review process.

Given that drafting MOUs is a secondary duty for many employees and there is a frequent rotation of operational staff, there is a need for a standardized review process with mandatory review requirements to ensure that controls are in place. The MOU process would benefit from having a standardized checklist used across the Force to document the review process. A mandatory review by Procurement and Contracting should be included to ensure that contractual arrangements are identified and financial authorities are verified. There is an opportunity to draw upon existing divisional review checklists to create a single national checklist that incorporates the required review guidance and sign-off.

Policy compliance

The RCMP Policy on Agreements and national templates define the mandatory sections that should be in all MOUs.^{Footnote 3} These include:

• Purpose and objective clause
• Obligations and committed resources clause
• Departmental representative responsible for the MOU
• Provision for amendments
• Provision for termination
• Effective and expiry dates
• Dispute resolution clause
• Review and monitoring clause
• Security classification
• Financial arrangements section
• Name and level of signatories

The results of compliance testing in relation to mandatory sections indicated that a majority of MOUs were missing key mandatory elements required in the Policy. As indicated in the Table 5, with the exception of identifying the MOU purpose, obligations and committed resources, the results of testing indicated that a high percentage of MOUs were not in compliance with key mandatory elements.

The level of compliance was affected by the lack of process standardization across the Force. The audit found that each division had developed a review process of its own, some being more systematically used and aligned with Policy than others. Interviewees also explained that some MOUs originated from partners who used different templates. Not all drafting units ensured that RCMP mandatory sections were included in the MOU prior to approval. In the absence of a strong and systematic review process, some MOUs were signed even if they were non-compliant with policy requirements.

The level of compliance was also affected by the date the MOUs were drafted. During testing, MOUs dating back to 1989 were found in the sample. The older MOUs often did not have an expiry date and did not include all mandatory sections required by Policy. As per table 6, 29% had been drafted more than 15 years ago.

The absence of an expiry date on 63% of MOUs (129/205) in the sample can be explained by the fact that the RCMP Policy on Agreements does not require MOUs to have an expiry date but rather mentions the need for a "termination date, expiry date or a mechanism for termination". Accordingly, MOUs that have a clause stating that "parties can terminate the agreement at any given time" could be considered in conformance with the Policy.

While including an expiry date is not required by Policy currently, it is a key control to ensure that MOUs are reviewed regularly and remain current and in the best interest of the RCMP. Older MOUs are at risk of not reflecting updated Force practices, new partner structural or organizational changes and modifications in legislation such as privacy of information requirements.

Procurement and Contracting Branch should consider adding a requirement in the Policy stipulating that MOUs need to include an expiry date and cannot be deemed indefinite. This would ensure that MOUs are reviewed periodically and amended if necessary.

Approval process

According to the RCMP Policy on Agreements, COs and DGs are responsible for signing MOUs. If an MOU qualifies as a contractual arrangement, approval authorities for sole-source contracting apply.

Testing showed that 20% of MOUs (5/25) reviewed had been signed below the DG level at NHQ. In the divisions, 25% of MOUs (45/180) were signed by a signatory other than the CO. Local MOU Units confirmed that they did not have a mechanism to identify MOUs that would have been signed without undergoing the proper review and approval process at the divisional level. However, interviewees explained that divisional MOU Units had increased the amount of communication surrounding MOUs in recent years in order to reduce instances when detachment or unit commanders would sign MOUs and bypass the local MOU review process.

Contractual arrangements

TB Guidelines on Contractual Arrangements state that MOUs qualifying as contractual arrangements are subject to sole-sourcing contracting limits of $40k for goods and construction and $100k for services. If the amount payable exceeds RCMP authorities, Public Service and Procurement Canada can be asked to sign the MOU under their delegated authority or a TB Submission may be required.

Interviews and testing highlighted 22 MOUs that could qualify as contractual arrangements. They related to vehicle / building maintenance and repair, radio communication services, guard services and research and development. Some of these MOUs were expired or not yet signed. Information on costing was limited, details of the arrangement were not provided nor was a business rationale on file. This did not allow the audit team to confirm with certainty that they met the thresholds provided by the TB Guidelines on Contractual Arrangements. These MOUs were brought to the attention of Procurement and Contracting's senior management for further review and should be the subject of greater scrutiny to determine whether they meet TB requirements for contractual arrangements.

Overall, interviews with business lines and divisions demonstrated that there was a general lack of knowledge surrounding contractual arrangements and the approval authorities that applied to them. The operational environment, joint police work and use of police service agreements increased the ambiguity surrounding contractual arrangements. Employees in divisions did not always understand that MOUs in place to use or purchase partners' goods, services or infrastructure could qualify as contractual arrangements if there were other options available in the private sector.

There is also ambiguity surrounding contractual arrangements due to the absence of specific signing authorities for contractual arrangements in the Policy and DFSA. For example, contractual arrangements above the RCMP's contracting authority were signed by COs in the past because general MOU signing authorities were applied.

Most interviewees confirmed that Procurement and Contracting would be best qualified to identify contractual arrangements and provide advice on signing authorities and the approval process. However, given that Procurement and Contracting is not systematically part of the MOU review process, there is a risk that a contractual arrangement could be signed without being identified as such and that contracting authorities could be exceeded.

Contractual arrangements can have a significant impact on RCMP operations given that they may have to go through a TB submission process to be approved if they exceed RCMP's sole-source contracting authorities. The TB submission process can take 6 to 8 months. Divisional employees stated that they did not have the resources or expertise to develop TB submissions.

Overall, there is a need to develop guidance on contractual arrangements, as well as identify the types of MOUs within the RCMP that may constitute contractual arrangements. This should be included as part of the tools and training to be developed as previously mentioned to increase awareness within the Force. There is also an opportunity for the national policy centre to determine the most efficient approach to developing TB submissions for contractual arrangements, particularly if they relate to goods or services used Force-wide.

Costing and invoicing

The RCMP Policy on Commitment requires units to record commitments over $5,000 in TEAM through a funds commitment. As per the Financial Administration Act, an officer is required to certify and sign section 32 to ensure that commitments entered into are within their delegated authority. A section 34 certification is required to ensure that goods / services have been received prior to payment. These requirements apply to MOUs with financial implications.

Audit testing identified a number of MOUs with financial implications and assessed whether MOU files included estimated costs, invoicing information and evidence that fund commitments had been created.

Testing indicated that 152/205 MOUs (74%) had financial implications. Of those 152 MOUs, 79 MOUs (52%) did not identify associated costs or have an estimate of the financial commitment to the RCMP in the MOU or on file. Also, 98/152 MOUs (64%) did not have invoicing or cost recovery information in the MOU or on file. In addition, there was no evidence in any of the MOU files to show that fund commitments had been created when the MOUs were signed. Interviewees confirmed that fund commitments were not always created for MOUs and if they were, there could be a delay between the signing of the MOU and the creation of the commitment.

Overall, MOU files included limited financial information which made it difficult to assess compliance with policy requirements. Identifying the estimated total value of the MOU, the amount and frequency of invoicing, the approval levels required and the need for fund commitment for MOUs in the sample was not possible based on the information available.

Interviewees confirmed that monitoring compliance with financial policies for payment associated with MOUs is difficult. Unlike contracts (which are identified as purchase orders in TEAM), MOU transactions do not have a single identifier in TEAM and cannot be subject to internal controls specific to MOUs. Payments associated with MOUs are subject to the Internal Control Account Verification process, where National Accounting Services (NAS) employees request a funds commitment number or a copy of the MOU in order to pay invoices over $10K. However, interviews with NAS employees indicated that in some cases invoices could be paid before MOUs had been drafted and fund commitments created with the understanding that MOUs would be signed in the future. To assess the risk associated with this, the audit tested 54 of 205 MOUs that had an associated payment and found one instance of invoices having been paid prior to the MOU being signed.

Not having detailed financial information in MOUs may result in the RCMP incurring payments that were not included in the unit's budget or for costs that were not intended when the MOU was signed. This is particularly significant for MOUs that do not have an expiry date as agreements may evolve over time. There is an opportunity to strengthen controls in place especially as it relates to mandatory sections included in MOUs, approval authorities as well as financial controls for budgeting and invoicing.

Oversight and monitoring

Information systems

According to the RCMP Policy on Agreements, the MOU Coordination Unit is responsible for maintaining a national MOU Registry. Policy requires that all original MOUs along with supporting documentation be included in the national Registry.

As a result, we expected all RCMP agreements to be housed in a national MOU registry that would allow for the retrieval of information required to monitor and oversee compliance with RCMP policies and directives.

Representatives from the MOU Coordination Unit confirmed that they maintained a national Registry in the Records Document Information Management System. They explained that MOUs sent to the Unit were forwarded to the Records Office for filing and inclusion in the Registry.

Based on analysis, the audit found the following limitations associated with the national MOU Registry:

• The fields in the Registry contained information about the IM record rather than the MOU (i.e. prefixes, file number, file title, file status, file date, and file type). This information only allows the IM records office to manage files;
• The Registry did not provide sufficient details to track and report on MOUs. For example, fields to record MOU type, expiry date, originating division, and partners were not included in the Registry;
• Given that the majority of information related to the MOU were contained in the file title, search capabilities were limited to key word searches. The system did not allow for reports to be generated or for MOU files to be retrieved easily; and
• Access to the Registry was limited to the MOU Coordination Unit employees, which did not allow other employees to search and access MOUs.

Of the 120 MOU files tested during site visits, only 4 files contained evidence that the original signed MOU had been sent to the MOU Coordination Unit for inclusion in the national Registry. Interviewees from divisional MOU units indicated that they did not always send MOUs to the national MOU Coordination Unit for inclusion in the Registry, confirming the Registry's incompleteness. The audit team could not cross reference divisional tracking lists against the national MOU Registry to validate if there was duplication or to what extent it was complete because the naming convention used for MOUs in the division was different than the one used in the national Registry for the same MOUs.

The audit also found that 13 out of 15 divisions had developed independent systems to track and file MOUs. However, interviewees indicated that there was no assurance they were capturing all MOUs originating in their respective division. Site visits confirmed that divisions did not have accurate MOU holdings. Divisional tracking lists contained expired MOUs, MOUs drafted by other divisions or business lines, and documents such as occupancy agreements, secondment agreements and contracts. As a result, the audit team concluded that no complete inventory of MOUs existed in the various RCMP systems.

Current limitations associated with the national Registry have a direct impact on reporting capabilities and how the Registry can be used to provide relevant and accurate information for decision making. There is a need to improve upon the current national MOU Registry to ensure that it is representative of all RCMP MOUs. Information captured should be complete, relevant and accurate and allow for the monitoring and oversight of MOUs.

Monitoring and oversight

According to the RCMP Policy on Agreements, the national MOU Coordination Unit is responsible for reviewing MOUs to ensure that they comply with directives and policies. It was expected that a monitoring and oversight function would be in place to ensure that MOUs complied with policy requirements and that deficiencies in the MOU process would be communicated to management and addressed in a timely manner.

Interviewees from the MOU Coordination Unit confirmed that they did not ensure that all major MOUs were forwarded for review and all original MOUs were sent for inclusion in the national Registry. A Force-wide call-out had not been performed since 2004 to confirm that the Registry contained a complete inventory of MOUs. The MOU Coordination Unit also indicated that they did not monitor MOUs to ensure that they were renewed or terminated upon expiry dates.

Most divisional MOU units stated they were tracking MOU expiry dates and review dates. For example, in E Division, the audit team observed that renewal and review dates were tracked using a system that allowed them to set diary dates and upload the MOU document for reference. However, testing showed that tracking was performed inconsistently and the depth of the review was scarce. Given that testing identified 63% of the MOUs did not have an expiry date, there is a need for more systematic monitoring.

In terms of monitoring compliance with MOU obligations, the RCMP Policy on Agreements states that COs (divisionally) and DGs (nationally) are responsible for ensuring that a process is in place to monitor MOUs for compliance. Furthermore, the Policy states that MOU originators are responsible for monitoring MOUs for performance measurement.^{Footnote 4}

Unit managers and representatives from divisional MOU units indicated that the monitoring of MOUs was primarily conducted informally during day-to-day operations and regular meetings with partners. They confirmed that formal monitoring and reporting did not occur as stated in the MOUs monitoring and reporting clauses. While a Unit Level Quality Assurance (ULQA) guide was in place to monitor compliance with both RCMP Policy and the Ministerial Directive on RCMP Agreements, it was last updated in 2007 and interviewees could not confirm that it was being used actively.^{Footnote 5}

The absence of a formal monitoring and oversight function increases the risk that the MOU process is not respected, that the RCMP engages in activities that are not compliant with government policies, and that MOUs are signed even if they do not align with the RCMP's priorities and mandate.

Conclusion

MOUs are an important part of policing given that they document the work done jointly with other police forces and levels of government, which contributes to the achievement of RCMP objectives. In order to mitigate the financial and legal risks associated with MOUs, strong controls need to be in place to ensure that MOUs are written according to approved templates, are reviewed and signed by appropriate stakeholders and are monitored closely.

The audit concluded that the MOU process could be strengthened to increase compliance; that employees drafting MOUs have the proper training, tools and guidance they need; that reviewers follow a standardized process and document their advice; and that the MOU Coordination Unit is involved in monitoring and oversight to ensure compliance with the Policy, approval authorities and financial controls.

Opportunities also exist to update policy instruments to clarify roles, responsibilities and authorities, especially as it relates to contractual arrangements; review potential contractual arrangements to ensure that limits and authorities conform to TB Guidelines; and improve the MOU Registry to ensure that a single MOU population exists and that evidence-based information can be retrieved for decision making.

Recommendations

1. The Chief Financial Administrative Officer should ensure that policy instruments are updated to clarify roles, responsibilities and authorities, especially as it relates to contractual arrangements.
2. The Chief Financial Administrative Officer should establish a Force-wide standard review process that includes Financial Management, Procurement and Contracting, Real Property, Moveable Assets and Legal Services and is supported by national guidelines and checklists.
3. The Chief Financial Administrative Officer should develop tools, training and guidance to assist employees developing MOUs, and clarify the requirements and approval process for contractual arrangements. The types of RCMP MOUs that could qualify as contractual arrangements should be identified and assessed to ensure that expenditure limits and authorities conform to Treasury Board Guidelines.
4. The Chief Financial Administrative Officer should update the RCMP MOU inventory to ensure it is complete and modernize the system used to maintain MOUs to ensure that it can generate accurate data to support decision making, monitoring and oversight.

Appendix A – Audit objective and criteria

Appendix B – Management action plan

Date modified:

2019-03-21