Audit of Contracting for Professional Services

October 2016
Final Report

Table of contents

1. Acronyms and abbreviations
2. Executive summary
3. Management's response to the audit
4. 1. Background
5. 2. Objective, Scope, Methodology and Statement of Conformance
   • 2.1 Objective
   • 2.2 Scope
   • 2.3 Methodology
   • 2.4 Statement of conformance
6. 3. Audit findings
   • 3.1 Use and Cost of Contracts for Professional Services
   • 3.2 Compliance With Policies and Procedures
   • 3.3 Monitoring and Oversight
7. 4. Recommendations
8. 5. Conclusion
9. Appendix A – Audit objectives and criteria

Acronyms and abbreviations

CFAO

Chief Finance and Administration Officer

CQA

Contract Quality Assurance

FAA

Financial Administration Act

HRMIS

Human Resource Management Information System

IM/IT

Information Management / Information Technology

IT

Information Technology

OGD

Other (Federal) Government Departments

PCB

Procurement and Contracting Branch

PO

Purchase Order

PSPC

Public Services and Procurement Canada

PWGSC

Public Works and Government Services Canada

RCMP

Royal Canadian Mounted Police

SOA

Standing Offer Agreement

TA

Task Authorization

TB

Treasury Board of Canada

TEAM

Total Expenditure and Asset Management

Executive summary

To aid in delivering its mandate, the Royal Canadian Mounted Police (RCMP) engages individuals or organizations to provide expert assistance in areas such as legal services, information technology (IT) and management, translation, real property maintenance and management, training, health services, security, consulting and administrative services. Based on information in the RCMP Total Expenditure and Asset Management (TEAM) System, in fiscal year 2014-2015, the RCMP spent approximately $419M to obtain these types of professional services. Of this amount, $252M was paid to non-federal government vendors including self-employed individuals or independent organizations, other levels of government and partner organizations.

In July 2015, the Commissioner approved the 2015-18 Risk-Based Audit Plan, which included an Audit of Contracting for Professional Services. The objective of this audit engagement was to assess whether the RCMP's use of professional service contracted resources was cost-effective and in compliance with Treasury Board of Canada's (TB) Contracting policy, Government Contracts Regulations, and RCMP contracting policies, directives and procedures. The audit scope included contracts for professional services with external vendors, nation-wide, awarded between April 2012 and August 2015. In those cases where Public Services and Procurement Canada (PSPC) was the contracting authority, the audit did not examine activities such as contract award, supplier selection and evaluation of bids, which were the responsibility of PSPC. The audit excluded all agreements such as service level agreements or memoranda of understanding between the RCMP and either other federal government departments or other public bodies such as municipalities, provinces or foreign governments for the delivery of professional services

The audit concluded that the establishment of two oversight bodies (Quality Control Assurance Program and Contracts Review Committee) has contributed to a higher rate of compliance with the applicable legislation, policies and regulations. Notwithstanding, we found that there is room to enhance the planning, monitoring and oversight over contracting for professional services. In order to manage public funds in the most cost-effective manner, the RCMP should be aware of the extent and nature of their contracted resources; perform a documented assessment of the alternatives on a regular basis; and consider the risks, benefits and costs of contracting versus alternative methods to meet the requirement. Furthermore, a risk-based monitoring of payments made without a reference to a purchase order (PO) in TEAM System is recommended in order to obtain the best value and ensure a fair, open and transparent contracting process. Finally, by further defining management information requirements with respect to contracts for professional services and ensuring a consistent approach to collecting, updating and maintaining the information database, the RCMP would be better positioned to identify risks, perform analysis of trends and alternatives and identify potential cost savings.

The management response included in this report demonstrates the commitment from senior management to address the audit findings and recommendations. A detailed management action plan is currently being developed. Once approved, RCMP Internal Audit will monitor its implementation and undertake a follow-up audit if warranted.

Management's response to the audit

The audit of Contracting for Professional Services has highlighted opportunities to further strengthen the planning, acquisition and use of professional services as a means of meeting RCMP operational requirements.

Responsibilities related to procurement and contracting of professional services are shared between Corporate Management and Comptrollership, and the business lines that it supports. Planning and use of professional services is generally the responsibility of the individual program areas or business lines, and Corporate Management and Comptrollership is both the Policy Centre for Procurement and Contracting services, and provides contracting services to the business lines.

Corporate Management welcomes the audit findings as they will serve as a mechanism to further strengthen the delivery of procurement and contracting services and to further enhance its policy suite and risk-based Contract Quality Assurance program.

Corporate Management commits to developing a detailed action plan which will include specific timelines and milestones to which the RCMP will adhere.

Dennis Watters
Acting Chief Financial and Administrative Officer

1. Background

In July 2015, the Commissioner approved the 2015-18 Risk-Based Audit Plan, which included an Audit of Contracting for Professional Services. To aid in delivering its mandate, the RCMP engages individuals or organizations to provide expert assistance in areas such as legal services, information technology (IT) and management, translation, real property management, training, health services, security, consulting and administrative services. These services, collectively referred to as Professional Services, are obtained from other (federal) government departments (OGD's), from partner agencies including other police forces, and through contracts with individuals, firms or temporary help agencies.

In accordance with the TB Contracting Policy, contracting for services has traditionally been accepted as an effective way to meet unexpected fluctuations in workload, to acquire specialized expertise not readily available in the Public Service, or to fill in for public servants during temporary absences in certain circumstances^{Footnote 1}. The Public Service Employment Act also provides mechanisms to address short-term and specialized needs, and care must be exercised to ensure the appropriate mechanism, i.e. contracting or staffing, is used to provide optimum value for money.

There are multiple benefits to contracting for professional services: it can take less time and effort to identify and engage a knowledgeable contractor than to hire and train a new employee; it provides increased flexibility as there is no obligation to the contractor once the contract is completed; and it allows organizations to access expertise and skill sets which may not be available within the organization.

Nevertheless, there are also risks associated with contracting for professional services. These include: the potential development of an employee/employer relationship; loss of corporate knowledge through extended reliance on a contractor; continuity risk should the contractor leave without adequate attention to succession planning; decrease in the morale of employees with skill sets similar to that of a contractor; and improper contracting practices (e.g. contract splitting) leading to non-compliance with government legislation, regulations and policies. As well, contracted resources may be less economical than employees if engaged for extended periods of time. The Introduction to Procurement and Contracting in the RCMP acknowledges the existence of these risks, and indicates that contracting staff and managers should be cognizant of these issues^{Footnote 2}.

In fiscal year 2014-2015, the RCMP spent approximately $419M on professional services. Of this amount, approximately $167M was paid to OGDs for the provision of inter-departmental services, such as translation services provided by Public Services and Procurement Canada (PSPC, formerly Public Works and Government Services Canada), and legal services provided by Justice Canada. The remaining $252M was paid to non-federal government vendors (non-OGDs). In some cases, these payments were made in accordance with service agreements entered into with other levels of government (i.e. provincial and municipal) or with partner organizations. The remaining payments (and the focus of this audit) were as a result of contracts negotiated with companies and self-employed individuals. The table below provides a breakdown of the $252M paid to non-OGD vendors by the type of professional service obtained:

Description of graph in tabular format follows.

Analysis of the TEAM database of contracts for professional services with external vendors for the period April 1, 2012 to August 18, 2015 demonstrated that:

• 17.7% ($50,318,033) of the total value of professional services contracts were authorized under PSPC contracting authority, while 82.3% ($234,117,431) were authorized under the RCMP's contracting authority.
• 83.3% ($236,945,658) of the total value of professional services contracts were entered into using competitive solicitation processes and 16.7% ($47,489,805) were non-competitive.

The Introduction to Procurement and Contracting Guide in the RCMP provides an overview of the RCMP's procurement process and defines the roles and responsibilities for each organization/entity involved in the procurement of services:

• Procurement and Contracting Branch (PCB) is the Departmental Policy Centre for procurement and contracting in the RCMP. PCB is the centre of expertise responsible for developing policy, providing advice and establishing a monitoring framework for procurement and contracting. It is also responsible for training and certification of RCMP procurement specialists; development, implementation and monitoring of national acquisitions; monitoring of procurement and contracting activities in the RCMP; contracting quality assurance; and liaison with central agencies and PSPC. The PCB branch operates under the authority of the RCMP Chief Financial and Administrative Officer (CFAO).
• The Client is responsible for the identifying their service requirements, for assessing the best delivery mechanism (i.e. contracting or staffing) and for developing and submitting a requisition for the service when appropriate. If the service relates to a project, the client is also responsible for ensuring the project falls within their delegated project authority limits and that all approvals have been obtained (i.e. for IT projects – as per the requirements of the RCMP Asset Management Manual); providing and authorizing funds for the acquisition; developing the statement of work and defining the requirement; developing technical evaluation criteria and participating in project acceptance process (technical evaluation); acceptance of service and monitoring the "technical delivery" of service over the life of the contract.
• Regional or Headquarters Procurement Units manage the procurement process overall as the procurement authority, including helping clients clarify their needs; determining the appropriate procurement approach or acquisition method; developing and maintaining the required files and data, soliciting tenders; evaluating bids; awarding contracts; posting financial information on the TEAM system; resolving problems with the contractor and closing out the file. They are the primary point of contact with PSPC for procurements executed by PSPC.
• Finance Branch records financial data on TEAM system; processes accounts payable under Section 33 of the Financial Administration Act (FAA); provides funding for operations and processes any required submissions to TB.
• PSPC - for transactions above RCMP contracting authority or for which the RCMP has opted to engage their services, PSPC carries out all aspects of the procurement of services^{Footnote 3}.

2. Objective, scope, methodology and statement of conformance

2.1 Objective

The objective of this audit engagement was to assess whether the RCMP's use of professional service contracted resources was cost-effective and in compliance with TB Contracting policy, Government Contracts Regulations, and RCMP contracting policies, directives and procedures.

2.2 Scope

The audit scope included contracts for professional services with external vendors, nation-wide, awarded between April 2012 and August 2015. In some cases, historical data was examined to obtain a complete picture of expenditures relating to specific contractors whose period of engagement extended beyond this time period. In those cases where PSPC was the contracting authority, the audit did not examine activities such as contract award, supplier selection and evaluation of bids, which were the responsibility of PSPC.

The audit excluded all agreements such as service level agreements or memoranda of understanding between the RCMP and either OGD or other public bodies such as municipalities, provinces or foreign governments for the delivery of professional services.

2.3 Methodology

Planning for the audit was completed in January 2016. In this phase, the audit team conducted interviews and process walkthroughs, and examined relevant policies, directives, procedures, RCMP Bulletins and results of previously performed audit work.

Sources used to develop the audit criteria and detailed testing procedures included: RCMP Procurement Guide, RCMP Asset Management Manual, RCMP Contract Quality Assurance (CQA) Guidelines and Best Practices, TB Contracting Policy, TB Guidelines on the Proactive Disclosure of Contracts, Government of Canada Supply Manual, TB of Canada Secretariat's Guideline on Common Financial Management Business Process 3.1 - Manage Procure to Payment; and Canada Revenue Agency criteria for determining an employee-employer relationship. The audit objective and criteria are listed in Appendix A.

The examination phase of the audit concluded in May 2016. The examination employed various auditing techniques including interviews, data analysis, detailed testing and review of files and supporting documentation and process mapping, as deemed appropriate. During this phase, data was extracted from the TEAM system (i.e. contracts awarded, amendments to contracts, and payments recorded without a reference to a PO) and from the Human Resource Management Information System (HRMIS) (i.e. list of consultants engaged). Data analytics were used to identify areas of potential risks based on factors such as number of transactions carried out in a particular office; the value of each contract; type and duration of contract; type of solicitation process; number of amendments; recurring suppliers and payments with the potential to be contract splitting. Based on the results of this risk assessment, a statistical sample of 72 contracts was randomly selected from the higher-risk population. In addition, having analyzed the value and frequency of contracting for professional services per division, the highest users of contracts were interviewed to obtain additional contextual information.

In addition to the contract file review and interviews, we combined data analytics with detailed testing of the fiscal year 2015 payments made for professional services without a reference to a PO in TEAM. The data analysis focused on amounts exceeding $10,000 as well as frequent payments to the same suppliers, regardless of their individual amount. For detailed testing, we identified 5 categories of vendors which were paid without a reference to a PO: Corps of Commissionaires, provinces, municipalities, other police organizations and other external vendors. A judgemental sample of 49 payment transactions was selected from these categories.

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

2.4 Statement of conformance

This audit engagement conforms to the Internal Auditing Standards for the Government of Canada, as supported by the results of the quality assurance and improvement program.

3. Audit findings

3.1 Use and cost of contracts for professional services

Contracting for services has traditionally been accepted as an effective way to meet unexpected fluctuations in workload, to acquire specialized expertise not available in the Public Service, or to fill in for public servants during temporary absences in certain circumstances.^{Footnote 4} As part of our examination of professional services contracts and in line with the TB Contracting Policy, we expected to find that:

• The rationale for using professional service contracts was defined and documented;
• A comprehensive analysis of the alternatives, not confined solely to the procurement process, was completed during the planning phase and included in file documentation;
• The long term operational requirements of the RCMP were being considered in the resource planning phase, thus ensuring an optimal mix of internal and contracted resources;
• Decisions to hire professional service contractors were based on adequate analysis and assessment of benefits, costs and risks; and
• Procedures are in place to ensure adequate initial funding and pre-planning prior to issuing a contract or a task authorization (TA).

Rationale for using Professional Services

In fiscal year 2014-15 the RCMP spent $252M on contracts for professional services to support the delivery of programs. Given the magnitude of this recurring expenditure it is important that the decisions to enter into contracts be supported by a sound process including:

• Documented assessment of alternative methods or options of obtaining the service; and
• A process to identify internally available skillsets and competencies and to assess them against service requirements prior to contracting and as part of the succession planning process.

Based on the results of interviews with the unit managers, contracts for professional services are being used to meet the three conditions identified in the TB Contracting Policy: to acquire technical subject matter experts (IT, health services, management consulting, language training, etc.), when unexpected fluctuation in the workload exceeds the existing internal capacity (IT, laboratory services) and to fill short term absences (temporary help contracts, which in the recent years are no longer widely used within the RCMP).

Two forms have been created to document the rationale for entering into professional services contracts. One is intended for IT goods and services^{Footnote 5} and the other for temporary help services^{Footnote 6}. However, none of the files reviewed during the audit contained these forms or any other documentation identifying the rationale for contracting. Without such documentation, it is difficult to confirm that alternatives were considered, and that the TB criteria for using Professional Services Contracts has indeed been met.

Human Resource planning

In order to ensure best value is obtained, managers should conduct a comprehensive analysis of the overall cost versus benefit of all approaches to obtaining the required professional services. The analysis should consider costs, but also such things as knowledge transfer, skills development, succession planning, service continuity risks, and the criticality of the service in question. Documenting this analysis in procurement files would help to demonstrate that alternatives were considered and that using contractors is the optimal way to perform the work.

The RCMP currently uses contractors to supplement its workforce in various areas, such as security, IT, health services, and language training. A formal process has not been implemented to document that alternatives to contracting were considered and that contracting is the optimal approach. None of the files reviewed during the course of the audit contained documentation to indicate that alternatives to contracting had been considered and the relative costs, risks and benefits analyzed. With limited file documentation, it is difficult from an audit perspective to assess whether the use of contracting results in the best value for the RCMP. Assessing the benefits, costs and risk at the branch or department level is important in identifying and assessing risks that would otherwise not be visible on a contract-by-contract basis.

During audit interviews, managers indicated that there is no reliable, complete repository containing the skills and competencies of RCMP employees. Additionally, although individual project managers maintain their own manual lists of current contractors, there is no complete, up-to-date database of currently engaged consultants in the RCMP corporate systems. Such tools would enhance management's ability to identify the best approach for meeting requirements for professional services, both on a short-term and more permanent basis. Furthermore, as staffing and contracting are the responsibilities of two separate and distinct policy groups, managers may receive insufficient assistance in determining the best approach (staffing versus contracting) from a more holistic perspective. As explained by managers during interviews, they often opted to contract for professional services as it is a faster, easier way to fill a resource requirement than staffing, and offers increased flexibility where there is uncertainty over long-term funding.

Based on interviews and data analysis, $30.7M was spent on contracted resources in fiscal year 2014-15 to help deliver IT-related business objectives. Of this amount, approximately $20M was in relation to capital projects. The interviewed Information Management / Information Technology (IM/IT) Program managers stated that, for those programs which are paid through cost recovery from clients, the IM/IT Program does not have an assured source of funding (particularly when it comes to the later phases of application maintenance and support). As a result decision-making regarding professional services is adversely impacted and alternatives to contracting cannot be considered because managers need to certify that a secure source of funds exists before they begin the staffing process. They also indicated that a lot of the projects delivered by IM/IT Program are independent tasks, outside the normal course of business. In these cases use of contractors is necessary, due to the need for specialized expertise, the absence of permanent positions that can be assigned to projects, and the uncertainty of long term funding.

Notwithstanding, the IM/IT Program, through its Transformation Initiative, has taken steps to analyze the relative cost/benefit of consultants versus employees. Their analysis has considered not only the financial cost, but also the operation risk of heavy reliance on consultants. As a result of these efforts, 20 positions within the Project Development Office and Project Portfolio Management have been identified that are currently filled by consultants but could be staffed with full time employees, given an increase in A-base funding (permanent funding to the department).

Long term consultants

Extensive and long-term use of consultants can pose a significant risk to the RCMP, both financially and operationally. When the same consultants are used for extended periods of times, there are risks related to inadvertent creation of employee-employer relationships; loss of corporate knowledge at the branch or departmental level; and a potential decrease in the morale of employees with skill sets similar to that of a consultant.

Data analytics procedures performed on recurring consultants highlighted that there are three main areas where long term contracted consultants are used, including: IT, corporate management and real property. Due to limitations in the corporate systems pertaining to specific consultant information, we were not able to select a sufficiently large sample to cover all of these areas. From the available information, the contractual terms and conditions for a sample of 22 individual consultants were analyzed. These consultants were engaged for terms ranging from 2 to 27 years. In all these cases we observed consecutive contracts being issued to different suppliers to retain the services of the same consultant. The majority of the contracts under which these consultants were engaged were competitively sourced (with the exception of bridge contracts, which are sole sourced contracts issued between two competitive contracts in order to avoid disruption of services). Based on the information available in the TEAM system, 14 of the 22 consultants were engaged on several different projects throughout their contracts with the RCMP. In 13 of the 22 cases, the consultants were engaged on a full-time basis, with billings for at least 220 days per year in consecutive years.

The RCMP is required to take the necessary steps to prevent an employee-employer relationship from developing whether a consultant is engaged under one contract or across several consecutive contracts with either the same or a different supplier. Some of the factors which could indicate the existence of an employee-employer relationship include specified hours of work, supervisory relationships, and/or provision of office space^{Footnote 7}.

For 12 of the consultants in our sample, we reviewed the statements of work, timesheets, the relationship between the project authority and the consultant, and work conditions to determine whether there was a risk that an employee-employer relationship might have been created. We noted that in all of these cases there were indicators of an employee-employer relationship as identified above. The existence of an employee-employer relationship can create a potential liability for pension, health benefits, employer contributions etc. The RCMP has taken steps to reduce the risks of developing an employee-employer relationship when a professional services contract is awarded (such as clear statement of works and deliverables, competitive solicitation process, contracts are with contractor firms and not with individual consultants, consultants provide reports and time sheets to the contractor firms), however it does not formally monitor whether the same consultant has been retained through a series of consecutive contracts within branches. Officials within Procurement and Contracting Branch have noted challenges with respect to the monitoring of consultants in the context of professional services contracts being awarded to contractor firms through competitive procurement processes. Specifically, it was noted that it is the contractor firms, and not the RCMP, who propose the consultant(s) who would be engaged on the awarded contract.

Long term retention of the same consultants, particularly in areas of program operation and maintenance, has an impact on the corporate knowledge within the organization. If the knowledge and skills of long-term consultants are not transferred to employees, succession planning is impacted, and a continued reliance on contractors is created. This creates a significant risk with respect to business continuity if reliance is being placed on a small group of consultants for completion of activities which are core to the organization's operations.

Our analysis of these 22 long-term consultants also demonstrated that, in these situations, savings would have occurred through staffing rather than contracting. By analyzing the length of time the consultant was engaged, the average rates paid, the utilization, i.e. number of days billed per annum, and comparing this to the cost of a full-time employee at the same level, potential savings as a result of staffing were calculated. Of the 22 cases analyzed, three varied only marginally in annual cost from a similar level employee. The remaining 19 were between 20% and 100% more costly than an employee. For the 22 analyzed cases, annual total savings of approximately $1.4M might have been realized through staffing rather than contracting. This amount is based on a calculation using the key factors (such as salary and benefits for employees and direct costs for consultants) and may not include all related factors (such as training costs or absenteeism).

Identifying long-term contracted resources was challenging for the audit team due to data limitations. Data from various sources was requested, but the information provided was not always complete. For example, certain data fields in HRMIS, such as consultant name, start date and termination date are not updated whenever a consultant is extended or terminated. Additionally, some TAs or contracts entered in TEAM contain the name of the individual consultant in the description field. However, as this field is not mandatory, it was not consistently used. The absence of a complete information repository of consultants makes it impossible to accurately determine the total number of consultants currently contracted at the RCMP, or the duration of time they have been engaged. Such information is important to assess overall cost-benefits of contracting, to aid in avoiding employee-employer relationships, and to ensure an optimal mix of staff versus contractors for succession and business continuity purposes.

Use of Task Authorizations (TAs)

Contracts with TAs are generally used when the exact nature and timeframes of the required services is not known. Once the specific scope and timing of the work is known, the department establishes a TA in accordance with the conditions of the contract. TAs are not individual contracts, but an administrative tool enabling work to be authorized and subsequently initiated.

Most of the long term consultants in our sample were tasked using TAs. They were retained by either amending/extending the same TA multiple times throughout the year or over the years of the contract, by issuing several TAs under the same contract or by issuing TAs under subsequent contracts with different suppliers. Additional monitoring at a departmental level may be required to ensure that best value for the Crown is obtained, and the risk of developing an employee-employer relationship over time is adequately mitigated.

Our review of 72 contract files included 14 instances where TAs were amended/extended multiple times (twice or more). Rather than providing an indication of the change in business requirement, the documented justification was, for the most part, simply to add funds, or to add days. Additionally, our analysis of long term consultants identified TAs that had been amended/extended up to eight times, with similar justifications as above.

IM/IT program explained that some of these amendments are used as a risk mitigation tool (TAs issued for shorter time-frames to mitigate against project delays and stoppages; TAs issued for one fiscal year and extended annually within the time limits of the contract to match the annual budget cycle; or TAs issued on a short term basis and subsequently extended throughout the year in cases when the organization is not planning to keep the consultant for a long time period and is seeking to staff the respective position). However, we noticed that some of the TAs for the long term contractors in our sample were subject to multiple amendments within the same year. This creates an additional administrative burden on the organization and, without adequate documentation of the rationale for the amendment, may be indicative of weaknesses in the planning or oversight processes.

To ensure value for money and to mitigate the risks of engaging long term contracted resources, the RCMP managers should fully document amendments to TAs as well as any decisions to extend or rehire the same consultants past a specified period of time.

3.2 Compliance with policies and procedures

The audit examined whether RCMP professional services contracting practices comply with the TB Contracting Policy, Government Contracts Regulations, and RCMP contracting policies, directives and procedures. We expected to find that:

• Procurement files facilitate management oversight, and provide a complete audit trail containing contracting details related to relevant communications and decisions, including the identification of involved officials and contracting approval authorities^{Footnote 8}
• RCMP complies with contracting proactive disclosure requirements^{Footnote 9}
• As per RCMP requirements, a requisition document has been created in TEAM for all procurements of services in excess of $10,000 and related payments reference a TEAM purchasing document^{Footnote 10}
• An equal opportunity has been provided for all firms and individuals to compete. Repeat commissioning of a firm or individual without competition is the exception^{Footnote 11}
• The authority to enter into contract (transaction authority) is segregated from the certification authority required under section 34 of the FAA, and these tasks have not been completed by the same individual^{Footnote 12}

Contract file administration

A statistical sample of 72 contracts for professional services was reviewed. The sample included competitively and non-competitively awarded contracts, call-ups against PSPC standing offer agreements (SOAs), and contracts which required Task Authorizations (TAs) to specify and authorize each element of the work. The documentation included in the associated contract files was assessed against 27 requirements stipulated in TB policies and RCMP directives, to gauge the level of compliance. Specifically, contract files were examined to ensure:

• Requisitions for services, including all necessary approvals and required forms, along with identification of the reason for choosing to contract the requirement were on file;
• Contract planning documents, including identification of requirement, existence of required approvals and forms were completed and on file ;
• Evidence of the solicitation and evaluation process and criteria were retained;
• There was documentation regarding the contract award and the basis of payment;
• Justification and approval for any amendments was on file; and
• Appropriate contract administration and closeout and proactive disclosure had occurred.

The vast majority of contract requirements reviewed (88.5%) were found to be in compliance with the TB policies and RCMP requirements. Based on the file review, the RCMP has a strong solicitation, evaluation and contract award process. However, weaknesses and inconsistencies in file documentation were observed, mainly due to missing or insufficient documentation. Files related to contracts with TAs and call-ups against SOAs with Corps of Commissionaires contributed to 53% of the non-compliance rate.

The audit team noted that some of the TA files maintained by the IM/IT Program project authority contained timesheets to support the payment of invoices. Although it is not a requirement to keep the invoices and/or timesheets on file, it is a good practice and facilitates subsequent file review.

Proactive disclosure of contracts and amendments

The TB of Canada Secretariat's Guidelines on Proactive Disclosure of Contracts specify the public disclosure requirements for contracts valued at more than $10,000. According to the Guidelines, the rules reflect broader government commitment to transparency and strengthened accountability within the public sector.

In examining whether the RCMP is meeting these requirements, we found that while the majority of the 72 sampled contracts had been appropriately proactively disclosed, two contracts had not been disclosed and amendments associated with an additional five contracts had also not been disclosed. The non-disclosed amounts totalled $645,604.

These omissions had occurred as a result of coding errors in the TEAM system (i.e. amendments recorded and saved as 'corrections' and wrongly entered contract award date.) The omissions were partially corrected and disclosed subsequent to the audit.

Payments for Professional Services without an Established Contract

In addition to the contract file review, an analysis of the fiscal year 2015 payments made for professional services without a reference to a PO in TEAM was completed. The analysis focused on amounts exceeding $10,000 as well as frequent payments to the same suppliers, regardless of their individual amount.

Our review of 49 payment transactions included 24 transactions that were related to payments under service agreements with provinces, municipalities, other police organizations and universities. No detailed follow up was performed on these transactions, as they were excluded from the scope of this audit. The remaining 25 transactions were reviewed against supporting documents, such as invoices, approval forms or contracts. The results of this testing highlighted:

• During our review, Procurement and Contracting Branch brought to our attention that, in order to adhere to the contracting principle of fairness, the requirement for one of the service agreement transactions should have been competed instead of entering into a service agreement. Based on our review of the supporting documents, we agreed that this requirement should be competed;
• Although SOAs were in place, 10 transactions were paid with respect to three suppliers without using the appropriate call-up process. A SOA itself is not a contract, rather a separate contract is formed each time a call-up for the provision of goods and/or services is made against a SOA; the total expenditures were not always closely monitored, which resulted in exceeding the financial limit set for two of these SOAs;
• Six additional payments, not relating to SOA's, and exceeding $10,000 were paid direct to the supplier without a reference to a PO; allowing payments to bypass financial requirements;
• Two of the reviewed transactions were potentially contract splitting for services provided on the same day or in several phases as part of one project (the total amount being greater than $10,000), allowing payments to bypass financial requirements. Both cases were brought to the attention of Procurement Services for further follow up and action;
• Contrary to established accounts payable financial procedures, the sample included four instances of missing documentation for account verification of high risk transaction (pre-audit checklist and s.33 stamp for transaction exceeding $100,000) and two instances of accounting miscoding (one instance of grants coded as professional services and one instance of miscoding within the professional services category).

Data analytics procedures performed on the entire population of payments for professional services made without reference to a PO in TEAM highlighted:

• Several instances in which the RCMP repeatedly obtained professional services from the same supplier without competing the requirement. When the requirement for a service can be reasonably planned for, it should be ensured that the process is fair, open and transparent and the contract award is based on best value.
• Two instances where payments for professional services were made to suppliers that had an existing contract with the RCMP, however the contract was not referenced. This impacts transparency, and may result in contract values being exceeded or in duplicate payments.

3.3 Monitoring and oversight

In examining contracting for professional services, we expected to find that:

• The RCMP has established and effectively implemented a control framework ensuring due diligence and effective stewardship of public funds.
• Corporate information systems contain adequate, complete and reliable data to allow effective monitoring of contracting for professional service.
• There is a consistent approach in managing contracts which are used by multiple divisions and units within the RCMP (e.g. contract with Corps of Commissionaires) which ensures compliance with the TB policies and the RCMP procedures.

Contracting Quality Assessment

In 2005 the RCMP established a CQA process aimed at ensuring that procurement and contracting activities are efficient, effective and carried out in compliance with the applicable legislation and policies. The CQA process includes both preventative controls (completed prior to contract signing) and a post-review (which is conducted after a contract has been signed). The scope of the CQA process includes contracts authorized by RCMP staff but excludes contracts issued under the PSPC contracting authority. The Contract Review Committee (CRC) was established in 2007 as a preventive control designed to review high value or high risk procurements before contracts are awarded or signed.

While establishment of the CQA post-review process has improved RCMP contracting activities, it could be beneficial to increase the scope to include all procurement vehicles used by RCMP managers. With respect to contracts issued by PSPC, the CQA process should assess only those aspects of procurement that fall under the responsibility of the RCMP.

According to the CQA Guideline and best practices, the following factors are currently considered when developing a sample for the post-review process: the number of transactions being carried out in a particular office; the dollar size of the transactions in each category; previous history of the section whose transactions are being examined. This selection process could be enhanced by including additional risk factors, such as: type and duration of contract, solicitation process, number of amendments, recurrent suppliers, potential contract splitting, etc. Enhancing the current risk-based sampling approach will focus the control procedures on the high-risk areas.

Information available for Monitoring and Oversight

The audit used data from both TEAM and HRMIS in attempting to compile a profile of RCMP professional services contracting activities. Neither system collects sufficiently comprehensive information to fully assess departmental skills and competency needs and gaps, and to determine if using contractors is the most cost-effective and sustainable means to perform specific activities. Names of consultants are not always identified in the TEAM contract database, and there is no complete and accurate list of all contracted resources used. In addition, the HRMIS database of consultants is not up to date (it included consultants that are no longer at the RCMP). This makes it difficult to perform any trend or cost-benefit analysis of contracted resources.

Inconsistencies in recording and tracking contracts which use TA's were also observed. In some cases, the expenditures against individual TA's are tracked in TEAM, in other cases (seven observed situations) expenditures are simply tracked against the contract, and the TA is tracked in a comments field. In the seven observed situations, managers were manually tracking expenditures to ensure the total contract value was not exceeded. When the system is not used to track TA's, there is a higher administrative burden and a potential risk of exceeding the contract financial limits.

Accurate and complete data would allow for regular review and analysis of professional services expenses to identify trends in the types of services procured, and costs in relation to other strategies such as hiring employees. This type of analysis may help to identify potential cost savings. For example, if departments often contract project managers, it might be beneficial to develop internal expertise in this area.

In conclusion, RCMP would benefit significantly from enhancing the recording and reporting of contracting information to support a risk-based approach to monitoring and oversight.

Managing Professional Services Contracts Used by Multiple Divisions or Units

In fiscal year 2014/15, all RCMP divisions and the Headquarters had expenditures against contracts with the Corps of Commissionaires totalling $49.6M. Despite the significant expenditure amount, there is no common approach to planning and monitoring the services provided by the Commissionaires in various divisions. A number of concerns with the current approaches were identified:

• For Processing Disbursements, some payments were made without reference to a PO which hinders the ability to perform reconciliations. Of the total amount paid to Corps of Commissionaires in fiscal year 2014/15, $31.3M were paid without a reference to a PO, primarily in the D, E, F, G and T divisions. TEAM is configured to require a three-way match (PO to goods receipt to invoice) for all goods and service procurement transactions, for invoices with a PO.
• Some missing approvals related to initiating the procurement process and the form 4041 to initiate the requisition for the services;
• In some files, there is no evidence of identification of requirement for commissionaire services (such as PWGSC form 7170-1 Attachment to Call-up for Commissionaire Services, which provide details of the services required, such as the level requirements, number of guards and supervisory levels and schedule of duties; or other applicable forms).

4. Recommendations

1. The CFAO should communicate contracting documentation requirements to clients across the RCMP including: requirements identified in the CQA checklist; as well as supporting documentation requirements that can demonstrate the client has performed and documented an assessment of alternatives to contracting, and completed a cost-benefit and risk analysis prior to initiating the procurement process and prior to issuing TAs.
2. The CFAO should consider the merits and feasibility of ensuring a consistent approach to collecting, updating and maintaining information databases pertaining to professional services consultants to facilitate risk-based monitoring over the use of long-term consultants.
3. The CFAO should enhance monitoring by:
   1. expanding the scope of the CQA post-review Program to include all types of contracts for professional services used by the RCMP managers;
   2. revising and improving the risk-based approach to selecting contracts for review; and
   3. ensuring there is risk-based monitoring of payments made without a reference to a purchase order in TEAM system.
4. The CFAO should assess the need for follow-up action relating to the instances of non-compliance to contracting policies and issues with payments made without a reference to a purchase order in TEAM system identified in this audit.

5. Conclusion

Contracts for professional services are used to complement the existing staffed resources in meeting various operational needs. Because of their total dollar value, sensitivity and complexity, the RCMP must ensure an appropriate level of rigour, prudence and due care in managing this type of contract. The establishment of the CQA Program in 2005 has allowed for continuous procurement oversight to ensure that procurement activities are carried out in accordance with the applicable legislation, policy and procedures. Another primary oversight body established around the same time is the Contracts Review Committee, which provides the challenge role to uphold the values of prudence, probity and sound contract management. As supported by our file review, the establishment of these oversight bodies had a positive impact on the compliance with legislation, policies and regulation – we found an 88.5% compliance rate for the contract requirements in the 72 files audited.

Notwithstanding, we found that there is room to enhance the planning, monitoring and oversight over contracting for professional services. In order to manage public funds in the most cost-effective manner, the RCMP should be aware of the extent and nature of their contracted resources and perform a documented assessment of the alternatives on a regular basis. Cost-effectiveness can be demonstrated only after a full consideration of the risks, benefits and costs of contracting versus alternative methods to meet the requirement. In addition, although managers are aware that long-term relationships with consultants may lead to an actual or perceived employee-employer relationship, more scrutiny should be applied to existing and future long term contracted situations in order to mitigate the associated risks.

As well, enhanced monitoring and oversight would help ensure that professional services contracts are appropriately managed. Specifically, the CQA Program could include in its scope all procurement vehicles used by the RCMP managers and should exercise a challenge function for effective monitoring of the procurement process. Furthermore, in order to obtain the best value and ensure a fair, open and transparent contracting process, there could be a risk-based monitoring of payments made without a reference to a PO in TEAM system.

Appendix A – Audit objective and criteria

Date modified:

2017-06-30