Internal Audit of Contracting and Procurement

Report Summary

The objective of this audit was to assess whether contracting and procurement activities and processes are being administered with due diligence and are compliant with PPP Canada's delegated authorities as approved by PPP Canada and pertinent government-wide and PPP Canada policies and procedures. Overall, our review indicated that PPP Canada has implemented a variety of informal measures to ensure contracting and procurement activities are appropriately applied and monitored.  There are several improvements required to add structure and to formalize the contracting and procurement process.

Recommendations

Management Responses

We recommend that the contracting policy be completed and that the new policy provide direction with respect to when a competitive process is required, procedures on how to conduct the process, as well as the level of documentation required for contracting and procurement decisions.

We agree with the recommendation. Corporate Services are currently developing the Contracting Policy that will provide direction with respect to the competitive process, procedures on how to conduct the process, as well as prescribing the level of documentation required to monitor the process. Management plans on approving a Policy by December 31, 2010.

We recommend that a centralized filing system be implemented for procurement and contracting documents.

We also recommend that critical documents be retained for audit trail purposes.

Management has already responded and all signed contracts are centralized in the Corporate Services to allow for increased monitoring of contracts in various stages of negotiations through to signing of final agreements.

Additionally, Management is in the early stages of developing an Information Management plan and will develop a framework prior to March 31, 2011. Implementation of the plan will occur in fiscal 2011-2012.

We recommend that all contracts be executed by both parties prior to initiating work.

We also recommend that critical documents be retained for audit trail purposes.

Management agrees with the observation and recommendation. A manual routing form has been developed to track all contracts from inception to sign off by all parties. Corporate Services track all contracts. This is an interim measure until an automated information management system is in place as will be part of the Information Management plan. In addition all signed contracts are centralized in the Corporate Services Division to allow for increased monitoring of contracts in various stages of negotiations through to signing of final agreements.

We recommend that steps be taken to obtain cancelled cheques in order to monitor compliance with the delegated authorities and appropriate segregation of duties.

Management Agrees.  The Bank of Montreal discontinued returning cancelled cheques in 2009-2010. View access of the Corporate bank account is limited to the previous 125 days of transactions.  Steps have been taken to receive a DVD of all processed cheques on a monthly basis beginning October 2010. This will provide audit evidence that the cheques are signed by authorized delegates and provide the audit trail required to substantiate that payments made are accurate and properly authorized in line with Board approved Delegation of Authority.

We recommend that the Delegation of Financial Authorities be revised to clarify who should exercise transaction authority and that segregation of duties is clearly described.

Management is of the opinion that the current approved delegation of authorities’ matrix is appropriate for the size of our organization and is clear that the delegated position has authority to confirm services have been rendered and approve payment of an invoice. Additionally, compensating controls include segregation of duties for cheque signing and the preparation and review of monthly financial information by VPs and Corporate Services. 

Management also recognizes that it is best practice to segregate transaction (contracting) authority from expenditure initiation and certification authority.  It is our intention, as part of the service agreement, to delegate the contracting authority to the Canadian Commercial Corporation in due course and to revise the delegated authorities as part of the annual review in December 2010.  The responsible Vice President will retain expenditure initiation authority.