Introduction

Background

• Western Economic Diversification Canada (WD) conducts its procurement activities to support the Department in achieving its strategic outcomes, which are:
  
  
  • Policies and programs that support the development of Western Canada;
    
    
  • Economically viable communities in Western Canada with a high quality of life; and
    
    
  • A competitive and expanded business sector in Western Canada and a strengthened western Canadian innovation system and Innovation.
    
    
• The Department’s procurement objectives are to acquire goods and services in a manner that enhances access, fairness and competition. While focusing on fair value and planning for operational requirements, the department supports aboriginal businesses and promotes green procurement. In fiscal year 2007-2008, WD awarded 646 goods and services contracts totalling approximately $7.6 million. These expenditures represent 50 percent of the non-salary expenditures of approximately $15.2 million for 2007-2008.
  
  
• Procurement is an issue of high significance in Government. As a result, increased attention is being given to this area across the federal public service. The potential negative impacts of non-compliance with regulations are significant. Operational requirements for timely delivery of goods and services and the need to comply with government contracting regulations can be competing objectives. The objective of government procurement is to acquire goods and services in a manner that enhances access, competition and fairness and results in best value or, if appropriate, the optimal balance of overall benefits to the Crown and Canadians.
  
  
• WD’s last audit of contracting was completed in January 2004. Both the federal government and departmental standards and practices have changed considerably since 2004. As a result, this audit includes criteria based on the new standards. The Audit of Contracting was included in WD’s approved 2008-2011 Risk-Based Audit Plan.

Objectives

• The overall objective of the audit was to provide assurance that WD’s contracting function is operating efficiently, economically and effectively, and in accordance with Treasury Board and departmental policies and directives. The specific objectives of the audit were:
  
  
  • To assess the extent to which a management control framework is in place, meets Treasury Board and departmental expectations, and is functioning as intended; and
    
    
  • To determine the extent to which departmental contracting activities and practices comply with Treasury Board and departmental standards.
    
    
• The audit focused on the following key risk areas to the procurement function:
  
  
  • TB and WD policies, guidelines and procedures were not followed;
    
    
  • An acquisition that should have been submitted to the Contract Review Committee for their review and approval, was not forwarded to them;
    
    
  • The contracting process did not provide value for money, was unfair, inaccessible and not transparent;
    
    
  • Communication of policies or training provided to those who are doing contracting was inadequate and inefficient; and
    
  • A standing offer or supply arrangement was not used for procurement of the ten groups of commodities on the mandatory standing offer list.

Scope and Methodology

• The audit was conducted in accordance with the Internal Auditing Standards for the Government of Canada. The auditors examined the management framework, procurement and contracting policies, guidelines, procedures, processes and practices in place. The auditors conducted interviews with selected Contract Review Committee members, Managers, Regional Finance Managers, Contracting Officers, and other key staff. Detailed testing of 184 transactions processed from April 1, 2007 to March 31, 2008 (see Table 1 below) was conducted to determine if policies and procedures were followed. The contracts, call-ups against standing offers and supply arrangements were selected based on professional judgment and representation.

Type	Sample Size
Competitive contract	36
Non-competitive (sole-source) contract	30
Call-up against Standing Offer	12
Supply Arrangement	7
Purchase Order	30
Acquisition Card	69
Total	184