Audit of the Delivery of Corporate Services at DFAIT Headquarters

January 2011

Personal and sensitive information has been edited from this report (shown in the report as "*****") in accordance with the provisions of the Privacy and Access to Information Acts .

Executive Summary

In accordance with its Risk-Based Audit Plan, the Office of the Chief Audit Executive conducted an internal audit of the Delivery of Corporate Services at the Department of Foreign Affairs and International Trade's (DFAIT) Headquarters (HQ).

The objective of the audit was to assess the extent to which the delivery of selected corporate services at HQ is effective and efficient in supporting the department.

Ensuring that administrative resources are used effectively is a key priority for government as noted in the spring 2010 government Speech from the Throne and Budget. In addition, the development and implementation of the New Business Model highlights the need to clarify accountabilities, strengthen financial management, eliminate duplication of effort and ensure alignment of resources to priorities with a view to ensuring sustainability of operations.

Corporate Services is a broad and complex aggregation of areas of responsibilities providing services, advice and control for functions such as: Human Resources (HR), Finance, Information Management/Information Technology (IM/IT), Material and Asset Management, Facility and Accommodation services, Security, and Communication, etc.

This audit addressed Corporate Services delivered at DFAIT Headquarters in the following three functions: Procurement and Contracting, Human Resources, and Domestic Accommodation. It assessed the effectiveness and efficiency of key aspects of the management control framework including: authority and accountability; roles and responsibilities; planning; performance measurement, monitoring and reporting; and capacity building. This audit was not designed to test actual transactions for compliance. An internal audit is planned next year that would examine the department's contracting processes and their compliance.

Details of the audit, including criteria, are listed and linked to the Management Accountability Framework and the applicable Core Management Controls in Appendix A -About the Audit.

Procurement and Contracting

Procurement and contracting authority is presently split between the CFO, the Assistant Deputy Minister of the International Platform Branch, the Assistant Deputy Minister of the International Security Branch (IFM) and all other Assistant Deputy Ministers with an Area Management Office. These different groups operate autonomously.

Consequently, Procurement and Contracting activities are dispersed within the department. Table 1 page 7 illustrates the level of dispersion. Improvements are required to:

• define roles and responsibilities and the reporting structure;
• integrate strategic and operational plans, services standards and common information systems;
• monitor activities throughout the department;
• ensure that staff have the appropriate knowledge and skills;
• expand the implementation and management of a development program for Procurement and Contracting Specialists (PGs) across the department; and,
• gather information to measure performance (effectiveness and efficiency).

The department relies on contracting to fulfill its mandate. DFAIT expended $405,352,647 on contracting in calendar year 2009. These contracts range in risk and complexity from call-ups for Temporary Help Services based upon pre-established Supply Arrangements and Standing Offers to large, complex contracts established through a competitive process.

Recommendation

The department should strengthen the control framework supporting the delivery of procurement and contracting including clear roles and responsibilities for all key players but specifically for the Chief Financial Officer, currently identified as the senior executive accountable for this function. The department will also need to address the key areas of improvement listed above.

Human Resources

The management framework for human resources was found to be sound and generally working well. Accountabilities, roles and responsibilities are clearly defined for human resource management. Service delivery is generally effective with the Human Resources Branch maintaining control over key functions. Authority with regard to staffing and labour relations has been formally sub-delegated to managers with appropriate training in accordance with the delegation instrument. Areas for improvement included:

• strategic and operational planning;
• development, implementation and monitoring of performance standards;
• information in support of performance measurement;
• capacity building; and
• addressing roles and responsibilities exercised by those groups at Headquarters outside of the HR Branch in the HR process to ensure that HR actions are conducted within the established HR framework.

Recommendations

The audit was informed that some of the points above are already being addressed by the Assistant Deputy Minister of Human Resources. The ADM should consider the following:

• address roles and responsibilities exercised by those outside of the HR Branch to ensure that HR actions are conducted within the established HR framework;
• implement the Staffing certification program for the specialists and create generalist training to develop broader and more strategic multi-disciplinary skills across the HR Branch; and,
• ensure that proper mechanisms exist to gather information on efficiency, analysis of information and reporting against performance.

Accommodation

Significant work has been undertaken recently by the National Accommodation and Domestic Security Bureau towards developing a national accommodation plan including operational objectives and plans for accommodation at HQ. This work is not yet complete, however, leaving the bureau unable to exercise its authority within the department. Weaknesses were observed in:

• communicating and exercising authority for managing Accommodation Services at HQ;
• completing the National Accommodation Plan, operational objectives and plans for accommodation services; and;
• defining information requirements on delivery costs associated with various accommodation services.

Recommendations

The Assistant Deputy Minister of HR should communicate the authority of the National Accommodation and Domestic Security Bureau.

The National Accommodation and Domestic Security Bureau should develop and implement:

• operational objectives and plans for accommodation services, including an accommodation strategy that reflects departmental plans for the short and medium term;
• an automated accommodation management information system to ensure effective and efficient control over space utilisation;
• service standards for delivery of accommodation services; and,
• mechanisms to gather information on accommodation, analyze information for cost-effectiveness and report against performance.

Overall Corporate Services Delivery at Headquarters

With respect to the delivery of key corporate services at HQ, improvements are required in:

• clarifying and strengthening accountability and ensuring that authorities are appropriately aligned;
  • Procurement and Contracting is dispersed. Functional authority and oversight should be strengthened to ensure consistent, effective, efficient and compliant operations.
  • Human Resources Branch exercises functional authority appropriately and has established the involvement of HR specialists in key areas such as staffing, classification and labour relations
  • Domestic Accommodation has not effectively established its authority over the function and a framework for managing this important portfolio is not in place
• developing effective strategic and operational planning; and
• gathering information for performance measurement, reporting and decision-making purposes including cost-analysis and service standards.

It is noteworthy that the Offices of Primary Interest for this audit, the Assistant Deputy Ministers of Corporate Finance and Operations, Human Resources and the International Platform Branch have been recently appointed to their respective positions. It is hoped that this internal audit report will be helpful to them as they move forward in achieving their respective mandates.

Statement of Assurance

In my professional judgment as Chief Audit Executive, sufficient and appropriate audit procedures have been conducted and evidence gathered to support a high level of assurance on the accuracy of the information in this report. The results are based on a comparison of the conditions, as they existed at the time, against pre-established audit criteria that were agreed upon with management. The results are applicable only to the processes examined. The evidence was gathered in compliance with Treasury Board Policy, Directives, and Standards on internal audit for the Government of Canada.

This was confirmed through an external quality assurance review which determined that: the audit approach and execution were appropriate for this engagement; the audit report meets professional requirements and is appropriate in the circumstances; and, the engagement was completed in accordance with Treasury Board and IIA policies and standards.

Original signed by:

Yves Vaillancourt, Chief Audit Executive January 31, 2011

1.0 Background

In accordance with its Risk-Based Audit Plan, the Office of the Chief Audit Executive conducted an audit of the Delivery of Corporate Services at Headquarters. This audit's field work was carried out from April to July 2010.

Ensuring that administrative resources are used effectively is a key priority for government as noted in the spring 2010 Speech from the Throne and Budget. The development and implementation of the New Business Model for DFAIT highlights the need to clarify accountabilities, strengthen financial management, eliminate duplication of effort and ensure alignment of resources to priorities with a view to ensuring sustainability of operations.

The audit's objective was to assess the extent to which the delivery of selected corporate services at DFAIT headquarters is effective and efficient in supporting the achievement of the department's mandate. This audit addressed Corporate Services delivered at DFAIT Headquarters in the following three functions: Procurement and Contracting, Human Resources, and Domestic Accommodation. It assessed the effectiveness and efficiency of key aspects of the management control framework including: authority and accountability; roles and responsibilities; planning; performance measurement, monitoring and reporting; and capacity building. This audit was not designed to test actual transactions for compliance.

Corporate Services is a broad and complex aggregation of areas of responsibilities providing services, advice and control for functions such as: Human Resources, Finance, Information Management/Information Technology , Material and Asset Management, Facility and Accommodation Services, Security, Communications, etc. Based upon consultation with senior management undertaken during the planning phase of this audit and giving consideration to other audit work planned throughout the year, the scope of this audit was limited to the following functions: Procurement and Contracting, Human Resources, and Accommodation within Canada.

Corporate Services vary in scope and capacity from one organization to another. Government departments and agencies use different models to ensure adequate delivery of services along corporate functional areas of accountability. It is unlikely that a single delivery or organizational model could be applied across government departments. Government organizations deliver corporate services through a range of administrative models that can be centralized, decentralized and mixed structure (see appendix D for explanation of models and their characteristics). Dependent on the service delivery model in place, there are three key roles related to the delivery of corporate services - transactional, functional and advisory.

Transactional

Mainly procedural work, forms and process-driven tasks. A key element of transactional services is the notion of a product.

Functional

Provision of guidance, direction and assurance of conformity including such activities as planning and monitoring (see appendix C for an overview of the elements and advantages of an effective functional authority).

Advisory

Providing advice and subject-matter expertise.

The central issue facing corporate service organizations is to reach the right balance between efficiently providing a given service to users while ensuring accountability through sound management practices. The notion of the right model would be a model that managed to optimize the following attributes:

• Responsiveness
• Business awareness
• Economies of scale
• Competencies and quality assurance
• Integrity/conformity to policies
• Support of best practices
• Conformity
• Clear accountability
• Costs/value for money

Attributes of Effective and Efficient Corporate Service Delivery

Effective corporate service delivery structures are reliant upon:

• clear direction, leadership and communications;
• roles and responsibilities which are well defined, communicated and up to date;
• documented responsibilities which are reflective of actual work assigned and performed;
• accountability which is well defined with related lines of reporting well understood throughout the organization;
• effective planning to guide effective and efficient operations;
• well-defined services supported by performance measures aligned with sound management practices and policy requirements;
• competent staff guided in their work by expert advice, guidance and tools;
• established service standards that meet user expectations;
• monitoring capacity in order to demonstrate effectiveness and efficiency in the delivery of these services, identify risk areas and raise issues that require corrective action;
• reporting based upon relevant, reliable and timely financial and non-financial information to measure performance and demonstrate accountability; and,
• achieving an adequate balance between service affordability and effectiveness.

These elements guided the audit work in addressing the areas of accountability, effectiveness and efficiency.

Drivers of the Current Service Delivery Model at DFAIT

As can be expected, the Department's international mandate influenced the delivery of corporate services over the years.

The creation of the International Platform in 2007, to better manage missions around the world, has shaped, in part, the DFAIT Corporate Services delivery model. The International Platform Branch has a legitimate role to play in the delivery of DFAIT corporate services. Many services formerly part of HQ Corporate Services, were transferred to the International Platform so that the Branch could create a centre of expertise and consolidate the delivery of common services - including human, financial, physical and technological resources - to the Mission network, including to partner departments using the network. The International Platform Branch is responsible for: the management of mission property; information management; technology infrastructure; finance; procurement and contracting; locally engaged staff; administration of Foreign Service Directives; and mission security. As a consequence, DFAIT operates in a domestic/international model, with the International Platform Branch generally responsible for international transactions and other branches responsible for domestic ones.

There are two notable exceptions, however, to this division of responsibilities. Specifically;

• the International Platform Branch is responsible for the procurement and contracting of all Information Technology (IT) goods and services, both at headquarters and Missions abroad; and
• the International Security Branch is responsible for the acquisition of security related items both at headquarters and Missions

The creation of the Chief Financial Officer (CFO) Branch at DFAIT in 2008-2009 to reflect the Treasury Board Policy on Financial Management Governance also had a significant influence on the DFAIT Corporate Services delivery model. Authorities and accountabilities may not have been clearly defined and communicated at that time to fully support the integral role of the CFO Branch as part of a comprehensive financial management regime.

Area Management Offices and Advisors at DFAIT Headquarters have also shaped the delivery of corporate services. Their primary role is to support branch management in meeting their responsibilities and their work focuses on providing management advice and administrative services in the areas of human resources and financial management. In addition to this management support role, Area Management Advisors have been delegated authority for contracting services under $25K for the branches and bureaus they serve. They also process contracts for Temporary Help Services. They are an integral part of DFAIT organisational structure and play a significant role in responding to the department's requirement to offer administrative positions to rotational employees when serving at HQ.

In summary, the creation of the International Platform Branch and the Chief Financial Officer Branch as well as the evolving role of Area Management Offices are contributing factors to the corporate services delivery model within DFAIT.

2.0 Observations and Recommendations

2.1 Procurement and Contracting

2.1.1 Accountability, Roles and Responsibilities

Procurement and contracting operational roles and responsibilities are clearly defined and communicated. The current delivery structure, however, is not aligned with accountability. This makes the exercise of functional authority difficult.

The Chief Financial Officer (CFO) is ultimately accountable for procurement and contracting; however, he does not have full authority over operations. As presented in Table 1, the procurement function operates in a de-facto decentralized model and has established 'centres of expertise' across the department to provide purchasing and contracting services. As a consequence, procurement and contracting authority is presently split between the CFO, the Assistant Deputy Minister of the International Platform Branch, the Assistant Deputy Minister of the International Security Branch (IFM) and all other Assistant Deputy Ministers with an Area Management Office. These different groups operate autonomously.

Unlike the other centres of expertise, the Corporate Operations Bureau under the CFO has functional authority as well as transactional duties related to procurement and contracting. The current delivery model for contracting and procurement does not support the exercise of appropriate functional authority. Table 1 outlines responsibilities for procurement and contracting shared, at the time of the audit, between five centres of expertise and 15 Area Management Offices as follows:

Under this delivery structure and given the degree of autonomy of the units involved, the audit team found that the Corporate Operations Bureau under the CFO is not well positioned to carry out its responsibilities. The CFO cannot fully exercise his accountability in situations where sub-delegated authorities operate independently and without clear strategic direction and reporting relationships. Although the audit's scope limited the review of procurement and contracting to HQ, auditors found that authority and accountability cut across the department as a whole.

This delivery structure poses risks related to effectiveness, efficiency and compliance. Without a strong accountability structure, fully enforced, there is a risk that procurement and contracting information will not be managed properly across all contracting authorities and that the department will not have the right information for decision making.

In addition, opportunities for economies of scale are reduced and there is a potential for duplication of effort among the various service delivery points.

Effective and efficient delivery models can be either “centralized” or “decentralized. However, they must possess the attributes described in recommendation 1 to function properly.

Recommendation:

1. The department should:

1. Confirm to whom the authority for Procurement and Contracting is delegated, ensure it is aligned with the accountability for same and clearly communicate throughout the organization;
2. Mandate the delegated authority to review and strengthen the control framework over the management of procurement and contracting; and,
3. Clearly communicate roles and responsibilities of all parties involved in procurement and contracting.

2.1.2 Effectiveness

Effectiveness of Procurement and Contracting is measured through adequacy of its planning, provision of advice, guidance and tools, performance measurement including service standards, monitoring, capacity building, and reporting.

Planning

In January 2009, the Corporate Operations Bureau launched a process that was intended to produce an integrated procurement plan for the department. The objective was to strengthen the ability to meet management's needs through identification of contracting services required and alignment of resources with those identified requirements. As well, the information gathered would allow the Corporate Operations Bureau to identify opportunities to develop more cost effective tools. This would form the basis for operational plans by groups delivering procurement and contracting services.

Consultations took place with Assistant Deputy Ministers to discuss the process and a procurement planning questionnaire was sent to gather data on each branch's specific contracting needs. Only two branches responded to the questionnaire. Consequently, the Corporate Operations Bureau was not able to develop an annual procurement plan for the Department.

The alternative was to use information contained in the procurement and contracting section of the Integrated Corporate Business Plan (ICBP) submitted by each branch to the Strategic Policy and Planning Branch in February 2010. However, the auditor's review of the Branch plans contained in the ICBP showed inconsistency in the amount of detail and useful information provided in this section.

While an overall procurement plan does not exist for the department, some individual groups involved in delivering services have produced plans for their areas. The Procurement, Contracting, Asset Management Section, under the International Platform Branch has developed a work plan which sets priorities, outputs, and timelines for 2010-2013. This work plan is integrated into the Platform Integrated Business Planning Framework. The Corporate Operations Bureau also has an operational plan (2009/2010) linking strategic priorities and goals to specific deliverables. On the other hand the Procurement Section under the International Security Branch does not have an operational plan. Furthermore, no departmental mechanism is in place to centrally review and control the consistency of plans throughout the units delivering procurement and contracting services.

Recommendation:

2. DFAIT should develop and implement an annual departmental procurement and contracting plan in support of the Department's priorities that would allow for the appropriate alignment of resources to those priorities.

Provision of Advice, Guidance and Tools

It is important to equip procurement practitioners with the advice, guidelines and tools required to undertake their contracting and procurement duties. This includes providing appropriate policy interpretation, guidelines, procedures and tools that are in accordance with good management practices and industry best practices. These elements form the foundation for consistent, cost-effective and compliant operations.

The provision of guidance is under the responsibility of the Contracting Policy, Monitoring & Operations Division within the CFO organisation. In order to help practitioners to better understand the procurement process and what is required, the division has provided guides and references (i.e. a comprehensive guide on procurement), forms and templates. These tools are readily available on the division intranet website. However, many areas administering contracting services have also developed their own tools contributing to the dispersion and weakening effectiveness and control.

Performance Measurement Including Service Standards

The auditors found no mechanism to ensure consistent development and implementation of contracting service standards throughout contracting units. Although most of the contracting units have developed their own service standards, these were not readily accessible by their clients. Moreover, the contracting units indicated that their performance in relation to their established service standards was not measured and reported against. Program managers rely on external resources to fulfill their mandate. They need to know how long it will take to access those external resources. In the absence of departmental service standards, DFAIT's ability to improve effectiveness is reduced.

Recommendation:

3. The CFO, in collaboration with the International Platform Branch should develop and implement a performance measurement framework which balances appropriate controls with acceptable levels of service.

Monitoring

Monitoring of DFAIT contracting activities is the responsibility of the Contracting Policy, Monitoring & Operations division under the CFO organisation. Monitoring activities serve to inform the department about the effectiveness of the controls in place. The importance of this function was recognized by the responsible division; the Corporate Operations Bureau (SPD) annual work plan 2009-10 included corporate contracting oversight and compliance as one priority. However, auditors noted that monitoring is limited and there is minimal capacity to identify trends, opportunities for improvement or compliance issues.

Treasury Board's Contracting Policy recommends that contracting authorities establish a formal mechanism for reviewing higher value and higher risk contracts prior to approval. DFAIT has established Contract Review Boards to address this requirement.

DFAIT has two levels of contracting review boards. Terms of reference for these are clear and well communicated and decisions are documented. The Departmental Contract Review Board (DCRB) is responsible for the review and approval of contracts over $200K as well as all transactions under $200K considered sensitive or critical to the department. It is chaired by the CFO or his representative.

Various Contract Review Boards (CRBs) also exist within departmental branches to review proposed contracts of less than $25K, including sole source contracts. They are chaired by Area Management Advisors who are the contracting authority for the contracts being reviewed. Terms of Reference indicate that finance or contracting staff will be members of the Contract Review Boards. The audit found that the effectiveness of CRBs at the branch level would be improved by applying a risk-based approach, increasing oversight, and reporting results to the functional authority.

Recommendation:

4. The CFO should review departmental monitoring of procurement and contracting to ensure that it informs him about the effectiveness of the controls in place. This review should include the Contract Review Boards to ensure that they are focussed on higher risk contracts and that they are incorporated into the overall monitoring regime.

Capacity Building

Recruiting and retaining skilled procurement staff is very difficult due to the acute shortage of qualified personnel in this occupational group. In addition, the rotational nature of Foreign Service positions can also result in an acceleration of turnover in these positions.

Table 2 below indicates that 55 contracting specialists were working in DFAIT at the time of this audit and 22 more were planned to be hired in 2010.

Procurement specialists (PGs) are spread across the department and this constitutes a challenge in terms of training and competency development. The procurement specialist community development, training co-ordination, and career development programs are not centrally managed, making retention within DFAIT procurement a risk. Further, there was no assessment available to auditors to determine how many PGs are needed in the Department.

The auditors found that each Centre of Expertise is presently responsible for co-ordinating training and career development of their staff. General training on procurement and contracting that was developed by the Corporate Operations Bureau is currently offered to staff and managers. However, this training is not mandatory for all staff involved in procurement and contracting activities. For example, Area Management Advisors performing procurement and contracting tasks are not subject to formal training. They are provided training when requested. This is an important issue because the audit estimated that Area Management Offices had contracted for about $50M in fiscal 2009-2010.

As a mitigation strategy, Corporate Operations Bureau management has put in place a development program that will provide functional specialists with the opportunity to be recognized as professionals through a certification program. Auditors noted, however, that this certification program had not yet extended beyond the Corporate Operations Bureau.

This is a component of the Treasury Board Secretariat's Professional Development and Certification Program (PDCP) for the Procurement, Materiel Management and Real Property community and is perceived as a best practice within the government.

Recommendation:

5. Consistent with the recommendation to improve the control framework, the CFO should ensure that procurement specialist development, training coordination, and career development programs are adequately managed and that training is mandatory for all staff with delegated authority engaged in the procurement and contracting process.

Reporting and Information Requirements

DFAIT is required by Treasury Board to report on departmental contracting activity. These external reports include an annual report to the Treasury Board Secretariat as well as quarterly proactive public disclosure of all contracts over $10,000. To fulfill these accountabilities, the Deputy Minister and the CFO require accurate and timely information on contracts to ensure that external reports appropriately reflect departmental contracting activity.

The Contracting Policy, Monitoring & Operations division is responsible for collecting information related to reporting and proactive disclosure on contracts for the department. An annual contracting activity report and quarterly reports on proactive disclosure as required under Treasury Board policy were issued for fiscal year 2009-2010.

The audit team encountered difficulty extracting comprehensive departmental contracting information from IMS. Ensuring the completeness of information reported to Treasury Board required a number of manual processes to be completed by the Corporate Operations Bureau in order to reflect the true amount of contracting activity within DFAIT. As a result, reporting consumed more time and effort than would be expected with a fully utilized material management system.

Comprehensive and reliable information about procurement and contracting is also important to the department's planning function, given the activity's important role in supporting the department in fulfilling its mandate.

The Chief Financial Officer and the Assistant Deputy Minister of the International Platform Branch have jointly sponsored a Material Management Renewal Project. While the focus of this initiative appears to be on control, tracking and inventory of goods, it may present an opportunity to improve data integrity of the Material Management module in terms of contracting information as well. This would provide a higher level of assurance on departmental contracting activities, better support planning and facilitate the reporting process.

Recommendation:

6. In the implementation of the renewed Materiel Management module, the CFO should address information requirements for procurement and contracting by making compulsory, across the department the use of this module to effect any transaction. This systems control would reduce the need for expensive, manual verification and reporting.

2.1.3 Efficiency

Operational efficiency is attained when the right combination of people, processes and technology come together to enhance the productivity and value of any business operation while driving down the cost of routine operations to a desired level.

The result is that resources previously needed to manage operational tasks can be redirected to new, higher value initiatives that bring additional capabilities to the organization. Process improvements are a key factor in improving delivery and in driving down costs for any activities that are repeatable. The auditors found that the current delivery model is not positioned to support efficiency improvements. The fragmented nature of the current model may contribute to resources being used inefficiently and service providers offering different levels of service.

The result is that resources previously needed to manage operational tasks can be redirected to new, higher value initiatives that bring additional capabilities to the organization. Process improvements are a key factor in improving delivery and in driving down costs for any activities that are repeatable. The auditors found that the current delivery model is not positioned to support efficiency improvements. The fragmented nature of the current model may contribute to resources being used inefficiently and service providers offering different levels of service.

Recommendation:

7. The CFO, in cooperation with other service providers, should implement mechanisms that would allow cost analysis for contracting and procurement operations in the department.

In summary, the Procurement and Contracting function is highly dispersed within the department. In addition, strengthened oversight would better inform the department about the effectiveness of the controls in place.

As mentioned earlier, a follow-up audit of contracting is proposed in the Risk-Based Audit Plan for fiscal year 2011-2012. The findings from this audit will be helpful in guiding future audit work.

2.2 Human Resources

2.2.1 Accountability, Roles and Responsibilities

The management framework for human resources was found to be sound and generally working well. Human Resources Accountabilities, Roles and Responsibilities are clearly defined; they are documented in the Instrument of Sub-Delegation of Staffing Authorities, effective April 4, 2007, and the Human Resources Service Delivery Standards, dated March 2009. Both documents reflect the stipulations of the Public Service Employment Act (PSEA). It is a PSEA requirement to delegate staffing authority to as low a level as possible so as to afford managers the flexibility necessary to staff, manage and lead their branches. Human resources authority with regard to staffing and labour relations in DFAIT has been formally sub-delegated to managers with appropriate training.

Human Resource (HR) Advisors advise, assist and support departmental managers in their HR activities. Managers perform staffing activities, such as: preparing an HR plan; selecting an appropriate staffing option; establishing the area of selection; developing supporting tools (i.e. statements of merit criteria and assessment tools); identifying and selecting board members; and, reporting situations of potential conflict of interest and other values and ethics concerns. Managers must exercise their authority in a manner that respects the Public Service Staffing requirement and the Public Service Code of Values and Ethics.

However, instances were reported where managers initiated staffing actions outside the formal HR roles and responsibilities framework. For example, posters were issued as "Administrative Notices" on the Department Intranet instead of the HR Portal and staffing actions were conducted without the professional assistance and concurrence of an HR advisor. As a result, there is a risk of inappropriate decisions and actions which are not aligned with departmental priorities and may not comply with staffing rules.

As already indicated, Area Management Advisors at DFAIT are an integral part of the organizational structure. They support managers in fulfilling their responsibilities. However, their activities sometimes extend beyond administrative functions to providing advice to managers on HR matters. Without proper definition of roles and responsibilities of AMAs in the HR service delivery process, managers risk being provided with advice by staff that is not fully qualified.

In most federal government departments, the Office for Values and Ethics is located within the Human Resource Branch. In DFAIT, this function is part of the Office of the Inspector General. As well, the Values and Ethics group deals with harassment policy and investigations. This is traditionally part of the Labour Relations function under the authority of the ADM, Human Resources.

Recommendation:

8. The Assistant Deputy Minister (ADM) of HR, as the functional authority, should address roles and responsibilities exercised by those outside of the HR Branch to ensure that HR actions are conducted within the established HR framework.

2.2.2 Effectiveness

To ensure the delivery of effective human resources services at DFAIT headquarters, the audit has noted that improvements are needed in the following areas: planning, performance measurement and capacity building.

Planning

HR planning includes:

• developing a long-term strategic plan that supports the department's objectives and defines the requirements for a workforce of the future;
• preparing an annual operating plan that determines resource levels required to achieve planned objectives and identifies planned staffing and recruitment needs in order to develop a staffing strategy as required under the Public Service Modernization Act and the Public Service Employment Act;
• identifying performance measures including service standards; and,
• monitoring achievements.

An Integrated HR Plan has been prepared for the Department. Long-term strategic and annual operating plans specific to the HR Branch operations, however, are missing. The absence of strategic and operational planning leaves management in a situation where HR activity levels, resources and funding lack sound justification. For example, in 2007-2008 and in 2008-2009, HR operating expenditures exceeded reference levels by $1.5M each year. Although a rationale was provided to explain the additional resource requirements, justifications based on sound strategic and operational planning could not be found.

Performance Measurement

In March 2009, Human Resources Service Delivery Standards for staffing, classification and compensation operations were published. They specify activities and the average timeframe (working days) that should be expected by clients. Performance against those standards, however, is not measured and reported. There is no systematic means, therefore, to identify improvements for more effective operations.

Some relevant performance information does exist which is useful in managing the various key functions. For example, at the time of the audit, information identified a backlog of 400 classification actions. The backlog for staffing actions, however, could not be determined due to the absence of consolidated data. Without this type of information, the department is not able to report quickly and effectively to address operational issues.

Capacity Building

In November 2008, the National Staffing Council introduced a revised Staffing Certification Program following the implementation of the new Public Service Employment Act (PSEA). The Staffing Certification Program set a standard of competence for staffing advisors (PE) throughout the public service, while ensuring client service orientation of the highest calibre. At the time of the audit, DFAIT had developed its Certification Program which was on the verge of being implemented. Once implemented, the DFAIT Staffing Certification Program will be aligned with the department's PE Development Program (PEDP) and PE Competencies as well as other government HR initiatives such as HR Capacity Building. Implementing this Staffing Certification Program will assist in recruiting and retaining good HR advisors as professionalization and career progression will align competencies to the department's agenda and priorities.

Recommendation:

9. The ADM of HR should ensure that:

• strategic and operational planning are implemented within the HR branch
• performance against standards are measured and results reported; and
• the Staffing certification program is implemented.

2.2.3 Efficiency

While effectiveness is critical, it is equally important that organizations also focus on increasing their operational efficiency. In order to achieve efficiency, it is necessary to know the costs of operations.

The audit found that HR management information necessary to determine costs of HR functions is not gathered. Neither the financial nor the HR systems allow easy and complete access to operational data. The situation is primarily due to the organisation of the Bureaus' financial structures. Some Bureaus have their operations segregated and identified by individual fund centres making the costs of the individual functions easy to gather and analyse for staffing and classification. In other instances, entire Bureau costs and resources are amalgamated under a global fund centre, making any kind of analysis an arduous exercise. Data from the HR system does not yet reflect current organizations even though tremendous efforts have been expended to improve data over the last year.

Statistics on HR activities are collected to respond to central agency requirements in terms of accomplishments and staffing/appointment data. Systems, however, do not provide management with information on achievement of standards, timeliness of operations, or level of resource utilisation - these measures would provide an assessment of both effectiveness and efficiency.

Recommendation:

10. The ADM of HR should ensure that proper mechanisms are implemented to gather information on efficiency, conduct analysis and report on performance of HR service operations.

Overall, while HR specialists are deployed in various groups throughout the department, the vast majority are housed within the HR branch. Accountabilities, roles and responsibilities are clearly defined for human resource management. Service delivery is generally effective with the Human Resources Branch maintaining control over key functions.

2.3 Accommodation

2.3.1 Accountability, Roles and Responsibilities

More than 4,000 Headquarters' DFAIT employees are accommodated in nine sites across the National Capital Region (NCR) where a total space of 102,031 m2 is occupied. DFAIT is currently working on a domestic accommodation plan which would outline objectives and priorities for the domestic accommodations services; however, this is not yet complete.

The National Accommodation and Domestic Security Bureau has the responsibility and the authority to manage the accommodation portfolio within Canada. The Director General, National Accommodation is accountable to the ADM, Human Resources Branch for:

• creating national policy and planning frameworks, programs, standards and systems;
• providing strategic leadership, managerial and functional direction with respect to domestic physical security, long-term accommodation planning, and facilities management in HQ and regional locations in Canada; and,
• overall accountability for facilities management and accommodation services for buildings in the National Capital Region and in 11 regions across Canada.

Despite the clarity of accountabilities, roles and responsibilities, the Bureau's authority has never been adequately recognized. In this regard, the Core Services Board (CSB) made the following decisions in April 2010:

• National Accommodation and Domestic Security was entrusted with the centralized management and control of domestic accommodation acquisition and given sole authority to allocate domestic space;
• all branches were directed to establish their organizational requirements for space at the smallest organizational unit level possible in accordance with a common methodology to be established for short-to-medium term;
• all branches were directed to ascertain their organizational interdependencies to help plan and prioritize space allocation; and,
• National Accommodation and Domestic Security determined to proceed with developing and implementing a departmental domestic accommodation strategy and plan.

Accommodation was previously under the Corporate Services Branch. When accommodation was moved into the Human Resources Branch, the mandate, roles and responsibilities were not formally confirmed and communicated. All of the above suggest that roles and responsibilities and, more importantly, the authority for domestic accommodations needs to be adequately resourced and fully established through clear policy, well communicated and well understood by all stakeholders.

Diffused management and control over accommodation resources will lead to inefficient use of space which may result in extra accommodation costs for the Department (discussed in section 2.3.3 below) or non compliance with Treasury Board space allocation regulations.

The audit found that the newly established Committee of HQ Operations had, as part of its mandate, to provide oversight over growth of office space. It was noted that this increased control would contribute to strengthening this service's authority.

Recommendations:

11. The ADM of HR should develop a communications strategy that informs and confirms the authority of the National Accommodation and Domestic Security Bureau's authority and mandate.

12. The National Accommodation and Domestic Security Bureau should pursue on a priority basis the completion of its national accommodation plan and strategy and position it as a foundation piece for the provision of future accommodation services.

2.3.2 Effectiveness

As noted above, operational objectives and plans for accommodation services are not in place and the Bureau's authority has never been adequately communicated and exercised. It was also noted that an accommodation strategy lacks organizational plans that reflect HR plans for the short and medium term.

In a decision made on April 6, 2010, Core Services Board members stated that "the two most significant challenges in managing the domestic accommodation portfolio at Headquarters and in developing an Accommodation Strategy/Plan are the lack of:

• centralized management and control over accommodations resulting in ad hoc, reactive, individual focussed (i.e. Branch/Bureau specific) initiatives as opposed to planned, proactive, collectively focussed (i.e. , departmental) initiatives; and
• approved organisational plans that detail the total departmental workforce at Headquarters irrespective of the nature of the workforce (i.e., departmental FTEs, contractors, temp help personnel, students, and OGD partners in DFAIT space)."

Service standards do not exist. National Accommodation management team confirmed that due to lack of operational objectives and plans, service delivery is client driven, as opposed to a top-down departmental approach. Accommodation staff stated that they address ad hoc requests reactively.

The current situation exists because space at DFAIT is not considered and treated as a corporate asset. Accommodation is focussed on individual rather than corporate needs. Consequently, the department may be paying for more space than what is needed.

In terms of space management, it is important to note that National Accommodation has made efforts. In fact, all floor plans in each DFAIT-occupied building exist to assist in overall space management activities. But, while these floor plans exist, the Bureau does not possess an automated accommodation management information system. Such a system would certainly improve effectiveness in management of accommodations services and allow DFAIT to monitor its effective and efficient utilization of space.

Recommendation:

13. National Accommodation and Domestic Security Bureau should:

• develop operational objectives and plans for accommodation services;
• develop performance measures including service standards for delivery of accommodation services; and,
• develop a business case to determine whether the acquisition of an automated management system is justified.

2.3.3 Efficiency

Accommodation service inefficiencies were noted in the following areas:

• DFAIT organizational entities at HQ are fractured and dispersed throughout the current portfolio;
• vacant space is also dispersed throughout the portfolio and cannot adequately be exploited; and,
• space utilisation over standard offices does not comply with governmental standards and results in additional costs.

National Accommodation has not gathered information regarding the costs of the various accommodation services they deliver. Such information would help in assessing accommodation service delivery efficiencies.

Senior management is aware of some of these inefficiencies. This was illustrated by a recent decision by the Core Services Board that asked National Accommodation to develop a long-term accommodation plan that will seek:

• increased operational efficiencies in space consumption/utilisation; and,
• cost savings through the consolidation of current space occupancies which now involve a total of nine separate buildings.

As Table 5 below indicates, the Department will pay an additional $6.5M in accommodations to PWGSC in 2010-2011.

Source: Presentation to Core Services Board by National Accommodation Bureau on April 6, 2010.

Recommendation

14. National Accommodation should gather information regarding the costs of the various accommodation services they deliver to ensure effective and efficient control over space utilisation.

3. Conclusion

There are weaknesses in the Corporate Services Model currently in place at DFAIT that warrant senior management's attention. The drivers that have shaped the current delivery model of corporate services are linked to its international mandate, the creation of the International Platform in 2007, the creation of the Chief Financial Officer Branch, and the evolving roles of Area Management Offices. What may not have followed is a review or re-alignment of the HQ portion of Corporate Services after the creation of the International Platform Branch.

Accountability in all areas of services reviewed appeared to be clear, however, authorities are not always properly aligned with those accountabilities. Cost implications of the current delivery model are not known.

Improvements are required in:

• defining strategic roles and responsibilities and the reporting structure;
• providing direction and integration of the functions within the department;
• developing strategic and operational plans, performance measures including services standards and common information systems; implementing and monitoring activities across the department to ensure more efficient and effective ways to deliver corporate services at HQ; and,
• developing and implementing mechanisms to measure efficiency and effectiveness.
• gathering of information for performance measurement, reporting and decision-making purposes.

Appendix A – About the Audit

Objective

The main objective of the audit was to assess the extent to which the delivery of selected corporate services at DFAIT Headquarters is effective and efficient in supporting the achievement of DFAIT mandate.

The objective was to answer the following key questions:

• What are the drivers that have shaped the current delivery model of corporate services at DFAIT HQ?
• What accountability and controls are evident in the current corporate services delivery model?
• What are the cost implications of current delivery?
• What are the pertinent trends and innovations in other large organizations, and are there helpful lessons and insights?
• Are there more efficient and effective ways to deliver corporate services at HQ?

Criteria

The selected criteria for the examination phase have been derived, with some adjustments, as per the elements of the draft document "Core Management Controls." These controls have been developed by the Office of the Comptroller General (OCG). They relate to the Management Accountability Framework (MAF) and aim to fully respond to the engagement objectives and scope. They address effectiveness, efficiency and economy of corporate services operations.

Scope

The planning and examination phases of the audit were conducted from February 2009 to June 2010. The audit was limited to Corporate Services at Headquarters delivered by:

• Human Resources Branch including:
  • Human Resources (Staffing, Classification, Labour Relation, Compensation)
  • National Accommodation (HAD)
• Corporate Operations (SPD)
  • Contracting and procurement services
• International Platform Branch (ACM)
  • Contracting and procurement services
• Area Management Offices
  • Services provided by the Area Management Advisors (AMAs)

This audit did not include:

• Financial Management services delivery
• Information Technology services delivery
• Other corporate services delivered at HQ

Methodology

The audit was conducted in accordance with the International Standards for the Profession of Internal Auditing and the Treasury Board Standards for Internal Audit.

The methodology consisted of:

• Review of legislative policy and guide that were obtained from DFAIT and Treasury Board websites;
• Interviews conducted with numerous stakeholders;
• Review of information relating to HR, Procurement and Contracting, and Accommodation available on the DFAIT and Treasury Board websites;
• Review of AMA Council Minutes from September 2008 to April 2009;
• Review and analysis of headcount data at March 31, 2010 and related average salary;
• Review of relevant HR, Procurement and Contracting and Accommodation transactions for fiscal year 2009-2010; and,
• Review of other relevant documentation.

Appendix B – Management Action Plan

Appendix C – Elements and Advantages of Effective Functional Authority

Function Authority Element: Planning

Advantages: Ensuring a comprehensive and integrated plan would allow the department to document management needs and allow for prioritization of projects leading to effective utilization of resources.

Function Authority Element: Provision of Policies, Direction, Guidance and Tools

Advantages: Ensuring that all employees delivering services are aware of the best process to be followed and their obligations with respect to their delegated authority leads to consistent delivery, streamlined operations and provides the foundation for monitoring effectiveness.

Function Authority Element: Performance Measures, including Service Standards

Advantages: A performance measures (effectiveness as well as service standards) allow an organisation to stay focussed on key objectives and course correct as situation changes.

Function Authority Element: Monitoring

Advantages: Effective monitoring allows for timely information related o planned and actual results.

Function Authority Element: Reporting

Advantages: Ensuring that Senior Management has appropriate and reliable information available on a timely basis for decision-making and external reporting requirements.

Function Authority Element: Professional Development

Advantages: Developing a knowledge framework and training program for all staff involved in service delivery, including establishing professional standards and accreditation framework. This would assist in recruiting and retaining competent resources.

Function Authority Element: Ensuring Compliance

Advantages: Monitoring compliance with policies allows the department to identify issues in a timely manner and implement corrective actions where necessary.

Appendix D – Characteristics of Corporate Services Organizational Models