Audit of Shared Accountability in Interdepartmental Service Arrangements for Internal Support Services (AU1504)

TABLE OF CONTENTS

EXECUTIVE SUMMARY

INTRODUCTION

In recent years, the federal government has encouraged departments to work together using interdepartmental service arrangements. The Nineteenth and Twentieth Annual Report to the Prime Minister on the Public Service of Canada as well as Destination 2020 initiative include the federal government’s commitment to increase collaboration and streamlining across departments.
                                                                    
An interdepartmental service arrangement is a type of service relationship that occurs when one department provides a service to another. Typically, the arrangements can be on a fee-for-service basis (client-provider relationship) or can involve two or more departments pooling resources to jointly create and/or deliver a service or project (collaborative relationship). While interdepartmental service arrangements offer benefits in terms of economies of scale and efficiency, they also create unique risks related to the number of departments involved and the complexity of the collaborative arrangements.

The Office of the Comptroller General (OCG) Audit of Shared Accountability in Interdepartmental Service Arrangements was approved by the Deputy Minister as part of the Risk-Based Audit Plan for 2014-2015. The OCG had identified a horizontal audit as part of its multi-year audit plan for which NRCan was one of nine large departments selected to participate. NRCan Audit Branch is responsible for carrying out the conduct phase of this audit and communicating the results back to the OCG for their horizontal audit. In the meantime, NRCan Audit Branch has also taken this opportunity to expand the scope further to look into potential NRCan specific needs and challenges and report to NRCan Departmental Audit Committee via its own internal audit report.

The purpose of this audit was to assess whether NRCan implemented a control framework for establishing and managing interdepartmental service arrangements for the provision of internal services. It is also intended to provide reasonable assurance on the effectiveness of its management control framework for establishing and managing interdepartmental service arrangements for the provision of internal services.

STRENGTHS

The Department has established governance structures which serve to ensure that service arrangements are developed and managed with due diligence and are consistent with the Department’s objectives. Management and operational committees are in place with respective roles and responsibilities and authorities clearly defined for the development, implementation and management of the significant agreements.

All agreements examined met the requirements of the Directive on Internal Support Services.

Monitoring and reporting is conducted at the departmental-level with direct participation from the most senior levels of the department. The level of effort is proportionate to the nature and level of risk, and the complexity of the service arrangements.

AREAS FOR IMPROVEMENT

The audit identified two opportunities for improvement.

Firstly, the audit has found that there is no complete listing of all interdepartmental service agreements. A full listing of all these agreements would enable the Department to monitor more effectively. The audit also noted that there are existing reporting capabilities that are not fully utilized. If the Department were to leverage these capabilities, creation and periodic monitoring of all service agreements could be achieved without significant time and resource commitments.

Secondly, the audit noted that there is an opportunity for the Department to communicate the requirements of the Directive on Internal Support Services and related guidance to managers with responsibilities related to interdepartmental service arrangements in order to ensure awareness and continued compliance.

AUDIT CONCLUSION AND OPINION

Overall, the Audit Branch can provide reasonable assurance that NRCan has implemented effective governance and control structures for establishing and managing interdepartmental service arrangements. However, opportunities were identified with respect to the development of procedures to ensure departmental level monitoring and reporting to support departmental and Treasury Board of Canada Secretariat (TBS) oversight.

STATEMENT OF CONFORMANCE

In my professional judgement as Chief Audit Executive, the audit conforms with the Internal Auditing Standards for the Government of Canada, as supported by the results of the Quality Assurance and Improvement Program.

Christian Asselin, CPA, CA, CMA, CFE
Chief Audit Executive

ACKNOWLEDGEMENTS

The audit team would like to thank those individuals who contributed to this project and, particularly employees who provided insights and comments as part of this audit.

INTRODUCTION

In recent years the Government of Canada has focused on consolidating efforts across the federal government as a method of increasing operational efficiencies. Both the Nineteenth and Twentieth Annual Report to the Prime Minister on the Public Service as well as Blueprint 2020 and Destination 2020 initiatives include the federal government’s commitment on innovative, collaborative and streamline operations. This new approach involves departments pooling their resources and modernizing the way they work while lowering their costs.

Both the Blueprint 2020, and its continuation, Destination 2020 initiatives lay out the Clerk of the Privy Council vision for the future of the public service. One of the four guiding principles included in Blueprint 2020 is implementing a whole-of-government approach to enhance service delivery and value for money by consolidating business processes and systems. We find a similar principle articulated as “Innovative practices and networking” in Destination 2020. The Corporate Administrative Shared Services initiative was established by TBS to explore the feasibility of adopting a shared services approach to deliver internal corporate and administrative functions across the federal government. Shared services are the consolidations of common systems and functions in order to enhance efficiency, reduce duplication and standardize the information produced.

The federal government’s recent initiative of collaboration has encouraged departments to streamline, consolidate, and increase efficiency. Departments have done so, in part, through interdepartmental service arrangements for the delivery of internal services. These arrangements allow for the pooling of efforts and resources across departments to standardize processes and gain better value for money.

An interdepartmental service arrangement is a type of service relationship that occurs when one department provides a service to another. Typically, the arrangements can be on a fee-for-service basis (client-provider relationship) or can involve two or more departments pooling resources to jointly create and/or deliver a service or project (collaborative relationship).
Interdepartmental service arrangements for internal services can include human resources management services, financial management services, information management services, information technology services, communications services, real property services, material services, acquisition services, and internal support services.

Most interdepartmental service arrangements are formalized through written service agreements, which can enhance governance, accountability, and service quality by clearly defining roles, responsibilities, processes, and performance expectations. The practice of establishing service agreements is strongly recommended in any type of client-provider or collaborative relationship. Agreement types can include the following:

  • Memorandum of Understanding (MOU): This type of agreement defines the broad parameters of the service relationship between the parties to the agreement, the service vision, and the way decision-making authorities are to be exercised.
  • Master Agreement (MA): This type of agreement is an overarching document that sets out the services included, the terms for managing a bundle of services, and the operational details common to all services. The MA also lays the framework for multiple service level agreements, typically one for each service covered by the MA.
  • Service Level Agreement (SLA): This type of agreement establishes the operating parameters and performance expectations between the parties to the agreement. Normally, an SLA is established for each line of service or project.

One or more agreement types can be used independently or in conjunction in order to document and establish the service agreement. For example, in cases where arrangements are simple, organizations may elect to use MOUs to document service agreements. In more complex and collaborative relationships, all three agreement types may be integrated and used together.

It should be noted that there is no Treasury Board policy that specifically focuses on interdepartmental service arrangements; however the following policy instruments provide guidance in this area:

  • Directive on Internal Support Services (DISS): The objective of this directive is to ensure that interdepartmental arrangements for the provision of internal support services authorized by section 29.2 of the Financial Administration Act (FAA) are managed with integrity, transparency, accountability and in a manner that is sensitive to risks.
  • Guideline on Service Agreements: An Overview (GSA-O): This guideline provides program and service managers and executives with an overview of the key concepts and steps in establishing service agreements.
  • Guideline on Service Agreements: Essential Elements (GSA-EE): This guideline provides advice, guidance, practical examples, and templates for individuals charged with developing a service agreement or reviewing a service agreement drafted by the other party in an evolving service relationship.

Implementing the TBS Directive on Internal Support Services is a mandatory requirement for Departments. The Directive establishes that departmental managers and chief financial officers are responsible for supporting their deputy head by overseeing the implementation and monitoring of this directive in their departments. The TBS Guideline on Service Agreements include best practices such as guidance, practical examples and templates that may be used at the discretion of management when preparing interdepartmental service arrangements.

AUDIT PURPOSE AND OBJECTIVES

The objective was to assess whether NRCan has implemented a control framework for establishing and managing interdepartmental service arrangements for the provision of internal services. It was also intended to provide reasonable assurance on the effectiveness of its management control framework for establishing and managing interdepartmental service arrangements for the provision of internal services.

Specifically, the audit assessed whether:

  • At the departmental level, governance structures are in place for the management of interdepartmental service arrangements;
  • The Department has control structures to ensure the establishment and management of each interdepartmental service arrangement; and
  • The Department has procedures in place at the departmental level to ensure consistent monitoring of and reporting on the administration of interdepartmental service arrangements.

DEPARTMENTAL RISK

Interdepartmental service arrangements offer benefits in terms of economies of scale and efficiency. While interdepartmental service arrangements between federal departments have a low inherent financial risk they create unique risks related to the number of departments involved and the complexity of their collaborative arrangements. Moreover, in an environment where legislation and policies are focused on departmental accountability, the increase in interdepartmental arrangements has created a new challenge for departments with respect to sharing accountabilities.

Failure to adequately establish and manage shared accountabilities in interdepartmental arrangements presents the following key risks:

Transformation:

  • There is a risk that the Department may enter into service arrangements without full consideration of all the risks associated with changes in their operating environment (e.g., budgetary restrictions, centrally mandated initiatives).

Alignment and Priority Setting:

  • There is a risk that interdepartmental service arrangements may not align with broader federal government priorities or with departmental priorities, including changes in the environment (i.e. technology, legislation, policy) which may result in ineffective or inefficient use of resources.

Business Processes:

  • There is a risk that resources, processes and control structures may not be in place to ensure the effective establishment and management of interdepartmental service arrangements. Ineffective management of these arrangements could lead to failed or unsuccessful interdepartmental service arrangements for both the service provider and the recipient.

SCOPE

The scope of this audit includes management control activities (control frameworks) used by NRCan to establish and manage interdepartmental service arrangements, in place during the fiscal year ending March 31, 2014. The elements of the control framework for interdepartmental service arrangements are expected to be consistent with the Directive on Internal Support Services, the Guideline on Service Agreements: An Overview and the Guideline on Service Agreements: Essential Elements, where applicable.

The scope also includes an examination of financial transactions related to interdepartmental service arrangements. This was intended to provide assurance that these transactions are coded and recorded accurately in order to support departmental monitoring and reporting (audit criteria 3.1).

The scope excludes federal government enterprise solutions and common services specifically identified through legislation (e.g., the Shared Services Canada Act and the Department of Public Works and Government Services Act) or policy (e.g., Treasury Board’s Common Services Policy), as NRCan Audit Branch has provided coverage on these common services issues through other audit and advisory engagements.

It should also be noted that while the audit did not assess the quality of the services delivered to service recipients; it did focus on the arrangements that define the delivery of services, including the performance elements and recourse mechanisms for addressing non-compliance to service standards.

Because an inventory listing of all NRCan interdepartmental service relationships has not been established at the department level, the sample of agreements selected for examination as part of the audit were identified through analysis of transactional information related to inter-departmental settlements contained within NRCan’s financial system. The selection was based on scope restrictions noted above and included interdepartmental service arrangements that were above the materiality threshold of $100,000. The agreements selected for examination included:

  • NRCan’s SAP Financial System – hosted by Agriculture and Agri-Food Canada;
  • GCDOCS Information Management System hosted by Citizen Immigration Canada; and
  • Northern Pipeline Agency support services provided by NRCan as a cost recovery.

The audit has also noted that it is possible that NRCan may be engaged in interdepartmental service arrangements where no money is exchanged (e.g. in-kind services). As the sample selection was based on a population of financial transactions contained within NRCan’s financial system, the arrangements for in-kind services were not included in the audit.

APPROACH AND METHODOLOGY

The approach and methodology followed the Internal Auditing Standards for the Government of Canada, which incorporates the Institute of Internal Auditors’ International Standards for the Professional Practice of Internal Auditing. These standards require that the audit be planned and performed in such a way as to obtain reasonable assurance that audit objectives are achieved.

The audit included various tests, as considered necessary, to provide such assurance. Internal auditors performed the audit with independence and objectivity as defined by the Internal Auditing Standards for the Government of Canada.

The audit methodology was based on internal auditing guidelines and included:

  • Interviews with the key personnel responsible for interdepartmental service arrangements;
  • Reviews of key documents and relevant background documents;
  • Reviews of process and practices related to the control frameworks; and
  • Tests of financial transactions related to interdepartmental service arrangements. 

CRITERIA

Please refer to Appendix A for the detailed audit criteria which guided the audit fieldwork and formed the basis for the overall audit conclusion.

FINDINGS AND RECOMMENDATIONS

GOVERNANCE

Summary Finding

The Department has established governance structures which serve to ensure that service arrangements are developed and managed with due diligence and are consistent with the Department’s objectives. Management and operational committees are in place with respective roles and responsibilities and authorities clearly defined for the development, implementation and management of the significant agreements.

Supporting Observations

Accountability and Oversight

As noted above, the audit examined three agreements to determine whether NRCan had in place adequate governance and accountability structures, including definition of roles and responsibilities, authorities for the management of these interdepartmental service arrangements.

The audit found that governance and accountability structures, including definition of roles and responsibilities, authorities for the management and oversight of interdepartmental service arrangements examined were in place.

Governance and accountability structures during the development and implementation of the more significant interdepartmental services agreements such as SAP, and GCDOCS, included NRCan’s senior executive Business Transformation Committee (BTC).

Corporate Management and Services Sector is the secretariat of the Department’s Business Transformation Committee (BTC). Chaired by the Associate Deputy Minister, the committee guides transformation of NRCan business practices to be more effective and efficient. The Department’s Business Transformation Committee, has the mandate to transform internal business processes that enhance the utilization of human, financial, Information Management/Information Technology, asset and real property resources, and improve the resilience and responsiveness of NRCan. The BTC makes decisions on common business processes within the NRCan and other federal partners including, cluster opportunities for potential cost savings and priority service relationships. The BTC includes processes to determine what interdepartmental service arrangements would be of most benefit to the Department. The BTC also oversees risk management of the Department’s corporate functions and assets, and improvements to business processes, including the implementation of government-wide management initiatives which impact NRCan’s business processes and practices. It provides direction to proposal sponsors or submits its advice and recommendations to the Deputy Minister for decision or final deliberation in the Executive Committee.

Management and operational committees were also found to be in place with respective roles and responsibilities and authorities clearly defined for the development, implementation and management of the agreements that were examined.

The audit also assessed whether, at the departmental level, a service strategy for the provision of interdepartmental service arrangements has been developed and whether this is discussed at the senior-executive level. While an overarching departmental level service strategy was not observed, the audit noted that service strategies are developed on an as needed basis and are discussed at the senior-executive level, including the BTC. This allows for a risk-based, custom-tailored approach given the different materiality and complexity levels of service arrangements.

Specifically, the departmental planning process involves each Sector identifying its objectives and priorities based on environmental scans (i.e. based on speech from the throne, government priorities, budgets and allocations, and its infrastructure needs, etc.). Departmental priority services and service relationships are identified and integrated into the overall departmental planning process (including the Department’s Integrated Business Plan) and reported within Departmental Plans and Priorities. As noted above, SAP Financial System and GCDOCS Information Management System, involve significant service and transformation initiatives for NRCan. In both cases, the audit found that these-interdepartmental service arrangements are overseen by NRCan’s most senior executives.

The audit also noted value proposition exercises for new business processes and service strategies are completed at the project level and approved by the BTC prior to entering in a service arrangement. Decisions relating to the SAP financial system and GCDOCS information systems were tabled and approved by senior management at the BTC prior to entering into an agreement.

Risk Management

The audit examined whether a process is in place that incorporates risk management when entering into an interdepartmental service arrangement to determine whether the arrangement will provide value at departmental level. It was observed that risks related to significant interdepartmental service arrangements examined are evaluated at the agreement level and where appropriate, at the Departmental level.

During the development and implementation of the more significant agreements, such as SAP Financial System and GCDOCS Information Management System, risks were discussed at the BTC prior to entering into a service agreement. Senior Management considered the risk elements as part of the business case approval process. The audit also noted that the BTC, in its oversight role, monitors and advises on new and emerging risks on an ongoing basis. For example, recent changes with respect to the service provider for GCDOCS have been raised with BTC and are being monitored closely.

At the departmental level, during the course of the development of the Corporate Risk Profile, organizational risks related to significant ISAs and the Department’s strategic objectives and operating environment were considered. Specifically, significant ISAs were included within the departmental assessment as risk drivers. In addition, the Departmental Integrated Business Plan 2013-2016 included corporate risks related to a significant ISA.

Departmental Guidance

The audit examined whether the Department utilizes tools including guidance (i.e., policies, directives, or guides) and provides internal support to enable the development of interdepartmental service arrangements.

NRCan’s Finance and Procurement Branch (FPB) within the Corporate Management and Services Sector is mandated to provide advice and assistance, both at the corporate and sector levels, with regards to implementing and maintaining financial policies, systems and procedures to meet departmental needs.

The audit found that NRCan’s FPB has assigned an interdepartmental settlement coordinator to provide guidance to financial officers that post interdepartmental settlements to the financial system. Financial coding guidance for interdepartmental settlement transactions has been developed and has been posted on NRCan’s intranet. The Finance and Procurement Branch has established procedures and processes related to the reviewing and processing of what has been established as high risk is transactions that include a material threshold of over $100,000. In reviewing financial transactions related to interdepartmental service arrangements selected for examination, it was found that these were coded and recorded accurately.

The audit noted that FPB has established accountability structures, including definition of roles and responsibilities, authorities, and accountability for management of contracting for services including MOUs agreement between two or more departments. However, the audit found that the Directive on Internal Support Services along with the TBS guidance related to interdepartmental service arrangements have not been communicated to departmental managers.

The audit did note that an updated Delegation of Financial Signing Authorities Instrument and Chart has been developed and approved by the Minister and the Deputy Minister on July 29, 2014. This updated delegation of authority matrix includes more specific signing and delegation authorities related interdepartmental service arrangements between entities of the crown and other jurisdictions.

MANAGEMENT OF INTERDEPARTMENTAL AGREEMENTS

Summary Finding

NRCan has control structures in place for the management of interdepartmental service arrangements.

All agreements examined met the requirements of the Directive on Internal Support Services. Each written agreement included the required elements such as a description of the scope of services to be provided, clear delineation of respective roles and responsibilities, mechanism for decision making and dispute resolution, the period of agreement and notice required for withdrawal, service level and performance expectations, the basis for charging, invoicing, as well as the type of personal information to be collected and disclosed under the agreement.

All agreements examined included elements on governance, operations, financial arrangement, performance and implementation elements that stem from the TBS Guideline on Service Agreements. All of the agreements tested used a proper agreement structure based on the scope and significance of the agreement, complexity of the arrangement, type of services covered and term of the relationship. However, opportunities for improvement were identified related to the timeliness of signing off on agreements.

Supporting Observations

As noted above the audit examined the agreement in place for the management of NRCan’s SAP Financial System hosted by Agriculture and Agri-Food Canada (AAFC). In this partnership, AAFC, the Canadian Food Inspection Agency and NRCan share a single SAP system currently operated by AAFC, along with common business support processes. NRCan’s initial business case was approved in 2009 by the senior management of both NRCan and AAFC. NRCan formally launched this arrangement in 2011.

The SAP Service Level Agreement examined as part of the audit is a renewal of the previous arrangement which expired in March 2013. The renewal extends from April 1, 2013 to March 31, 2018. At the time of the audit, the previous SLA had expired and a signature was pending with respect to the current SLA. While the agreement has since been signed, the audit noted an opportunity to ensure more timely sign-off on changes and renewals to this agreement.

The SAP SLA is made up of four Service Agreements (SAs) in the form of addendums to the broader Service Level Agreement (SLA). These include: Training and Access, Release Management, Change Management and Incident Service Request and Problem Management. All of the SAs are inextricably related to the SLA as well as one another.

The audit found that the type of the SLA structure was based on the complexity of the service relationship and that the agreement included the required elements such as: a description of the scope of services to be provided; a clear delineation of respective roles and responsibilities and governance; a mechanism for decision making and dispute resolution; the period of agreement and notice required for withdrawal; service level and performance expectations; the basis for charging, invoicing; as well as, the type of personal information to be collected and disclosed under the agreement. The audit also found that, mandatory performance elements have been incorporated in service agreements that include the outputs and outcomes of the service relationship and the consequences and recourse mechanisms for addressing non-compliance to service standards. The agreement met the requirements of the Directive on Internal Support Services.

The audit also examined the agreement in place for the management of NRCan’s new GCDOCS Information Management System which, at the time of the audit, was being hosted by Citizen Immigration Canada.Footnote1 GCDOCS is the Government of Canada's new enterprise-wide content management solution, designed to ensure standardized electronic document and record management across the public service.

An MOU for the provision of GCDOCS signed by the Chief Information Officer took effect June 2013, prior to drafting the SLA. The MOU stated the requirement to develop a service model including an SLA for the ongoing maintenance and support of GCDOCS. The MOU includes the scope of services to be provided to NRCan.

The Service Level Agreement which was under development at the time of the audit covers the period from go live to ongoing service standards and has the duration effective upon signing and expires on March 31, 2015. The milestones for the implementation process were included in the GCDOCS business case. The Service Level Agreement contains a detailed governance structure of the project including an ADM steering committee who is responsible for approving and monitoring operational management and performance and Enterprise Project Management Office.

The audit found that the agreement met the requirements of the Directive on Internal Support Services however; opportunities for improvement were identified with respect to clarifying the SLA’s audit clause and disaster recovery section.

The third agreement examined involved the Northern Pipeline Agency (NPA). The NPA has been the federal regulator of the Alaska Highway Gas Pipeline in Canada. Reporting to the Minister of Natural Resources, the Agency has contracted NRCan to provide a variety of services. Services performed by NRCan include Finance, Human Resources, Information Management/Information Technology, Real Properties and, Access to Information and Privacy on behalf of the Agency as a cost recovery.

The Northern Pipeline Agency agreement is a renewal of two previous agreements. The first Service Partnership Agreement between NRCan and the Northern Pipeline Agency was in 2007 with updates in 2009 and 2011. The agreement establishes NRCan as an internal support services provider on a cost recovery basis and was developed and implemented prior to the Directive on Internal Support Services coming into force. Documentation surrounding a risk assessment was unable to be located at the time of the audit. It should be noted, however, that this agreement does not significantly impact NRCan’s business processes and practices and as such is considered low risk and did not rank among NRCan’s higher corporate risks. The audit found that the type of the SLA structure was based on the complexity of the service relationship and that the agreement included the required elements of the Directive on Internal Support Services.

Corporate Management and Services Sector, Planning and Operations Branch are currently working on the new version of the Northern Pipeline Agency Service Partnership Agreement. The updated SLA is estimated to be drafted in Fall 2014.

In conclusion, all agreements examined met the requirements of the Directive on Internal Support Services. Each written agreement included the required elements.

MONITORING AND REPORTING

Summary Finding

Monitoring and reporting is conducted at the departmental-level based on the nature of risk, or the complexity of the service arrangement, and the Department has governance and accountability processes in place to monitor on significant service arrangements via senior management committees. Furthermore, the audit found that interdepartmental service arrangements are being monitored on an individual basis to determine if the objectives of the arrangements are being achieved.

However, the audit noted that a listing of all NRCan interdepartmental service relationships has not been established and there are reporting capabilities that could be further utilized to enable better monitoring. The audit has also noted that there is an opportunity to communicate the requirements of the Directive to managers with responsibilities related to these types of agreements in order to ensure awareness and compliance.

Supporting Observations

Departmental Level Monitoring and Reporting

The audit examined whether the Department has practices in place at the departmental level to monitor and report on the administration of interdepartmental service arrangements. As noted above, the audit found that service arrangements that involve significant changes and risks to NRCan’s operations and business processes receive senior executive level oversight and monitoring; that is the oversight provided via Associate Deputy Minister led NRCan Business Transformation Committee (BTC). The audit also found that interdepartmental service arrangements are being monitored on an individual basis to determine if the objectives of the arrangements are being achieved.

Specifically, it was noted that the SAP SLA and the four SAs set out roles and responsibilities at various levels of the governance structure for monitoring and reporting against objectives and established performance measures. For example, reporting on performance with respect to Training and Access SAs are made up of monthly reports presented at committees on training standards and reporting and post training assessments. In addition the Incident Service Request and Problem Management SA include required monthly performance reporting. Both change and release management processes include monitoring and reporting procedures. In addition, the SAP Partnership Steering Committee receives regular updates with regards to operations and functionality.

With respect to GCDOCS, the executive governance committee receives periodic status reports, including dashboard reports which provide details on status of the overall project and deliverables, along with project implementation risk rankings the monitoring and reporting requirements. In addition, the Agreement Service Provider and NRCan are required to monitor service levels and make the required resourcing adjustments in order to meet the service level objectives.

With regards to NRCan’s service arrangement with the Northern Pipeline Agency, the audit found that there is regular financial monitoring and reporting by Planning and Operations Branch.

The audit has found that there is no complete listing of all interdepartmental service agreements. A full listing of all these agreements would enable the Department to monitor more effectively. The audit also noted that there are existing reporting capabilities that are not fully utilized. If the Department were to leverage these capabilities, creation and periodic monitoring of all service agreements could be achieved without significant time and resource commitments.

Monitoring of Compliance with the Directive on Internal Support Services

The Directive on Internal Support Services sets out that departmental managers and chief financial officers are responsible for supporting their deputy head by overseeing the implementation and monitoring of this directive.

The audit found that while monitoring and reporting are conducted on individual service arrangement level, monitoring of compliance with the Directive on Internal Support Services is not performed.

As noted above under the heading of “Departmental Guidance”, the Financial Management Branch has provided limited guidance on internal support services. Moreover, it was observed that the Directive has not been communicated to those with responsibilities related to interdepartmental service arrangement for internal support services. Through interviews, it was observed that only one of the three project managers preparing the interdepartmental service arrangements examined as part of the audit was aware of the Directive on Internal Support Services and related guidance. Therefore, there is an opportunity to communicate the requirements of the Directive to managers with responsibilities related to these types of agreements in order to ensure awareness and continued compliance.

RISK AND IMPACT

A lack of awareness related to the requirements of the Directive on Internal Support Services as well as a lack of a complete list of all interdepartmental service arrangements in support of departmental and TBS oversight may result in ineffective and unproductive service agreements and may cause delays in the provision of services/remediation strategies.

RECOMMENDATION

1. The Director General (DG), Finance and Procurement Branch (FPB) should continue building the reporting capability to generate a listing of all interdepartmental service arrangements (ISAs) and related information to help support departmental oversight.

2. The DG, FPB should ensure that managers with responsibilities related to interdepartmental service arrangements are aware and respect the requirements of the Directive on Internal Support Services.

MANAGEMENT RESPONSE AND ACTION PLAN

Management agrees.

In response to recommendation 1, throughout the course of the audit, the Financial System Unit has the capacity for screening transactional information at all times. Management will use this capacity in order to generate a listing of ISAs within the Department when required. In addition, a copy of the agreements for interdepartmental services arrangements with payments greater than $100K will be saved in GCDOCS as a departmental repository.

Expected completion date: November 2014

Management agrees.

In response to recommendation 2, the July 2014 revision of Delegation of Financial Signing Authorities (DFSA) Instrument and Chart added a new section specially addressing Memoranda of Understanding between Entities of the Crown.

A reference to the Treasury Board Directive on Internal Support Services outlining managers responsibilities related to ISA’s will be added, to this section, in the next revision to the Natural Resources Canada’s Delegation of Financial Signing Authorities (DFSA) Instrument.

Communiqué for the revised Natural Resources Canada’s DFSA Instrument and Chart will be published on the Source, when completed.

Expected completion date: March 31, 2015

APPENDIX A – AUDIT CRITERIA

This appendix details the specific audit criteria related to each of the objectives of the audit along with the sources of the criteria (see * below).

The objective was to assess whether NRCan has implemented a control framework for establishing and managing interdepartmental service arrangements for the provision of internal services. It is also intended to provide reasonable assurance on the effectiveness of its management control framework for establishing and managing interdepartmental service arrangements for the provision of internal services.

Audit Sub-Objectives Audit Criteria

Sub-Objective 1: NRCan Governance

NRCan has in place governance structures for the management of interdepartmental service arrangements.

1.1 NRCan has established accountability structures, including definition of roles and responsibilities, authorities, and accountability for management of interdepartmental service arrangements.

1.2 NRCan has a process in place that incorporates risk management to determine whether entering into an interdepartmental service arrangement will provide value at a departmental level.

1.3 NRCan utilizes tools including guidance (i.e., policies, directives, or guides) and provides internal support to enable the development of interdepartmental service arrangements.

Sub-Objective 2: Management of Specific Interdepartmental Service Arrangements

NRCan has control structures to ensure the establishment and management of each interdepartmental service arrangement.

2.1 NRCan has determined the type of interdepartmental service agreement structure for each specific interdepartmental service arrangement, based on the complexity of the service relationship.

2.2 NRCan has established the scope of services related to an interdepartmental service arrangement, including the purpose, principles, roles and responsibilities, delivery channels, and impact on the parties’ ability to fulfill departmental mandates.

2.3 NRCan has established a governance structure for each interdepartmental service agreement including roles, responsibilities, accountability, and legal implications.

2.4 NRCan has identified critical issues related to day-to-day operations and service delivery, and have considered these in the establishment of a resolution process.

2.5 NRCan has established financial arrangements, including the funding model, fee structure, resource pooling arrangements, cost transparency, variances and adjustments, and cost recovery arrangements in service agreements.

2.6 NRCan has incorporated performance elements in service agreements that include the outputs and outcomes of the service relationship and the consequences and recourse mechanisms for addressing non-compliance to service standards.

2.7 NRCan has built-in an implementation plan in their service agreements that include transition activities, transition roles and responsibilities, milestones, resource commitments, and human resource considerations.

Sub-Objective 3: Departmental Monitoring and Reporting

NRCan has procedures in place to ensure consistent monitoring of and reporting on the administration of interdepartmental service arrangements.

3.1 NRCan ensures that financial transactions related to interdepartmental service arrangements are coded and recorded accurately in order to support departmental monitoring and reporting.

3.2 NRCan has practices in place at the departmental level to monitor and report on the administration of interdepartmental service arrangements.

3.3 Deputy heads or their delegates provide information or reports regarding internal support services to the Secretary of the Treasury Board, where applicable.

3.4 Chief financial officers or their delegates ensure that monitoring of compliance with the Directive on Internal Support Services is performed, where applicable.

* The criteria have been developed from the key controls set out in the Treasury Board of Canada’s Core Management Controls, Management Accountability Framework and relevant associated policies, procedures and directives.