ARCHIVED - Horizontal Internal Audit of Compliance with the Common Services Policy

• Previous Page
• Table of Contents
• Next Page

This page has been archived.

Detailed Findings and Recommendations

Finding 1: Common Services Policy

We examined whether the Secretariat is evaluating the policy on a periodic basis to ensure that it remains relevant with the needs of CSOs, the Secretariat and client departments. We also examined whether the Secretariat is monitoring departments for compliance with the policy requirements.

Policy requirements need to be useful, relevant and robust in order to provide appropriate direction for the delivery and use of common services. Monitoring helps the Secretariat understand whether policy requirements are being met and where additional guidance or direction may be needed.

The Common Services Policy has not been evaluated

The Secretariat has conducted reviews and developed a draft directive to update and clarify elements of the Common Services Policy but has not carried out an evaluation as required by the policy. Although no time frame is specified in the policy for an evaluation, the Secretariat is accountable for evaluating the policy. This should include an evaluation of the policy's integrity, the logic and practicality of policy requirements, the effectiveness of the policy in achieving its stated objective, and the appropriateness of the policy in the context of the government's overall direction.

The Secretariat has not evaluated the policy principally because it is waiting for further direction from three current government initiatives: the Service Strategy,[3] the Administrative Service Review[4] and the initiative on service delivery between line departments.[5] All three of these initiatives were ongoing at the end of the conduct phase of this audit.

As a result of not having conducted an evaluation, the current policy requirements do not reflect the present government environment. Specifically, the policy includes a list of mandatory services but it has not been updated recently. For example, since January 1, 2006, under the Policy on Learning, Training, and Development, the Canada School of Public Service was given the responsibility as the service provider for required training courses that are not subject to the mandatory provisions of the Common Services Policy. On the other hand, the policy lists Public Works and Government Services Canada's computer-assisted system for the selection of architectural and engineering firms as a mandatory service. However, the policy does not recognize that this system can be used only for consulting and construction contracts up to a specific dollar amount; otherwise, it may be contrary to international trade agreements. These inconsistencies result in confusion for CSOs and users on the roles and responsibilities related to certain services.

In addition, without an evaluation of the policy, the Secretariat cannot ensure that the current policy strategy is being met or that it continues to be appropriate. The current policy outlines a strategy that the government will make optional as many common services as possible, maintaining mandatory services only where there is an overriding reason. This strategy requires the Secretariat and CSOs to conduct a review of mandatory services on a periodic basis in order to determine whether a mandatory service should become optional. There was no evidence that the Secretariat or CSOs have undertaken any reviews of mandatory services since the policy's inception. The Secretariat has not deemed such reviews as necessary given that concrete issues or problems have not been presented to it.

The Secretariat is not monitoring departments for compliance with Common Services Policy requirements

Based on the current Common Services Policy, the Secretariat is required to monitor CSOs and policy requirements to ensure that the policy is being applied correctly and to inform future policy changes. There is no evidence that the Secretariat is monitoring CSOs to assess the extent to which they are complying with the requirements of the policy. Most policies that have recently been updated have gone through the Treasury Board's process of Policy Suite Renewal[6] and consequently follow the new strategy for Treasury Board policies, which is principles-based, less focused on compliance, and shifts most of the responsibility for monitoring compliance to the deputy heads of departments and agencies.

Recommendation

The Secretariat should evaluate and update the policy in line with the Policy Suite Renewal Initiative.

Finding 2: Management Control Framework within Common Service Organizations

We examined whether CSOs are taking into consideration federal government priorities when setting their service objectives. We also examined whether CSOs have appropriate planning processes from which to determine their services offerings, including identifying objectives for all key areas and internal and external environmental scans. We looked at how CSOs are focusing the provision of their services to other federal departments. Finally, we examined whether CSOs had relevant and transparent performance information from which to make decisions about the future of their services.

Common services are generally used to support broader government objectives such as concentration of expertise or technology in government, consistency and integrity of approach, or government-wide efficiency. These objectives should be considered when developing service-specific objectives. In addition, CSOs need comprehensive business planning to be assured that their service offerings are in line with their clients' needs. The delivery of services to crown corporations and non-federal organizations should not interfere with CSOs' primary responsibility of delivering services to federal departments. Lastly, timely information about the overall performance of CSOs' services allows managers to continuously improve and demonstrate accountability.

CSOs are delivering services in consideration of government priorities

Under the Common Services Policy, CSOs are responsible for supporting the achievement of government-wide social, economic and environmental objectives in acquiring or delivering goods and services. All CSOs in this audit show consideration of government-wide priorities within their business plans. This includes how their individual service objectives support the federal government's priorities and goals.

CSOs have varying degrees of planning processes with which to set their future direction

Half of the common services examined in this audit have planning processes that meet the expectations of the Common Services Policy. Some CSOs are not conducting regular environmental scans to inform service offerings. Some CSOs do not have objectives for all key business lines, and some CSOs have no service plans. Reasons for the lack of planning in CSOs vary from a lack of capacity to a low priority placed on planning for less significant services. Without strong planning processes, some CSOs may be offering services that do not reflect their clients' needs.

CSOs are offering services within their approved mandate

CSOs primarily offer services to federal departments. When offering services to crown corporations or non-federal organizations, they require ministerial approval, they must ensure that these services do not interfere with their primary role of delivering services to federal departments, and they must set rates charged to recover up to, but not exceed, the full costs of the services provided. All services we examined are meeting these requirements.

Most CSOs are using performance information to improve policy and decision making

CSOs are accountable under the policy for monitoring business volumes, levels of performance, resource use, financial results, and the implications of providing individual common services and reporting on these factors in annual reports. Most CSOs in this audit achieve this through regular performance reviews and assessments. In addition, most CSOs are publicly reporting on this performance information.

Recommendation

CSOs should establish comprehensive plans and performance objectives for their services based on an understanding of their current internal and external environments.

Finding 3: Costing Practices

We examined whether CSOs are setting rates and managing costs for their common services in compliance with the Common Services Policy. This included whether they are following the principles of the Guide to Costing. We also looked at practices that CSOs have put in place to manage and report on the cost-effectiveness of their services.

To have assurance over the accuracy of costs, departments should be following the principles of the Guide to Costing. In principle, there should be no cross-subsidization between or among optional services and no cross subsidization for mandatory services. CSOs should set their rates to break even on a year-over-year basis or be self-sufficient and not profit from the delivery of common services. Lastly, cost-effectiveness practices should be in place to ensure that services are providing value for money.

CSOs are managing costs for their common services within the requirements of the Common Services Policy

CSOs are following the principles of the Guide to Costing in developing their cost models and setting rates. In addition, the majority of CSOs are costing their services and setting their rates at the individual service level, and there is no cross-subsidization occurring between or among optional and mandatory services.

CSOs are setting rates to ensure self-sufficiency in the delivery of their services. In one case, that of the Public Prosecution Service of Canada, the Department of Justice Canada's costing model is being used to set rates. This model ensures consistency in fees for legal services within the government and has been approved by the Treasury Board.

Policies need to be revised to ensure that rate setting requirements related to the various service delivery models reflect the current government environment

CSOs and line departments[7] both offer optional services to other government departments. However, line departments and CSOs are subject to different policy requirements.

Line departments that offer services to other line departments are governed by the Policy on Interdepartmental Charging and Transfers Between Appropriations. They cannot charge more than the incremental or additional cost of providing the service.

Optional services provided by CSOs are funded mainly through either a revolving fund or net-voting authority. The Common Services Policy requires optional services that are funded by a revolving fund to recover up to full costs and break even over a reasonable period of time. The Policy on Special Revenue Spending Authorities provides additional requirements for revolving fund authorities to achieve a level of self-sufficiency over a specified period of time. CSOs have interpreted this to mean full cost. There has been no guidance offered that is contrary to this interpretation. As a result of a lack of guidance within these policies, CSOs may be unaware of the rate-setting flexibilities afforded to them.

The Federal Administration Act has recently been amended to provide line departments with more flexibility to provide continuous services to other line departments. The current policies may not address today's reality regarding the various service delivery models. The Secretariat has recognized this issue and is currently reviewing and updating policies and directives related to the delivery of services between departments.

CSOs have not developed practices to measure and report on the cost-effectiveness of their services

CSOs should be continuously managing their costs in order to ensure they are efficiently delivering their services. Most departments have not implemented cost efficiency reviews or comparisons with industry benchmarks to ensure that the service is providing value for money. This is due mainly to the lack of systems and practices put in place to measure cost efficiency; and a lack of a clear comparison for similar services that are available. Most client departments indicate that, in general, common services are providing value for money.

Without regular monitoring for cost efficiency, CSOs cannot ensure that they are employing the right resources in the right areas or that they have an efficient process that demonstrates to clients they can control costs while meeting agreed upon service levels.

Recommendations

1. The Secretariat should review its policies to ensure they are aligned with the service delivery models and should continue to review the current rate-setting controls and funding model requirements and determine whether they are appropriate and effective, for both CSOs and line departments that provide services to other federal departments.
2. CSOs should develop practices to measure cost-effectiveness and report on this information to key stakeholders.

Finding 4: Service Management

We looked at the systems and practices that CSOs have put in place to manage service quality. We also looked at whether CSOs have developed standards of service and are monitoring performance against these standards.

Quality management systems and practices give CSOs assurance that the services they are delivering are meeting their clients' needs. Service standards provide measures of performance and accountability for client departments and CSO management.

CSOs have practices in place to ensure effective management of service quality, but there are areas for improvement.

CSOs have put in place management practices and systems to ensure they are providing quality services that are meeting the needs of client departments. These include departmental policies and procedures, guidelines, and surveys of client departments. These practices are consistent with Common Services Policy expectations, which require CSOs to establish a client service environment. Most client departments indicated that the services they are provided with were generally meeting their needs.

Some CSOs have not fully developed and formalized appeal and redress mechanisms for dealing with disputes arising from memorandums of understanding or service agreements. This is generally due to a lack of formalized agreements between the CSO and client departments. Most client departments indicated that they have a limited awareness of available appeal and redress mechanisms. Clearly outlined appeal and redress mechanisms assure clients of a fair and impartial process when there are disputes over service delivery or payment issues.

Most CSOs do not have consistent service agreements with their client departments

CSOs examined in this audit have some service standards but do not have fully outlined expectations between the service providers and the client. In addition, CSOs have developed some targets in terms of expected response time, service and product deliverables, and client survey results. Performance against these targets is reviewed regularly and used to improve services. Most client departments indicated a low awareness of service standards, but they were satisfied that CSOs are considering their feedback for service improvements. Without visible service standards and performance targets, CSOs cannot hold managers accountable, and this limits their ability to inform service changes and improvements. Although service standards and performance targets may not be required for all service agreements, an assessment should be made to determine whether such standards and targets are necessary.

In the early 2000s, the Secretariat developed A Policy Framework for Service Improvement in the Government of Canada. This initiative exclusively focused on the delivery of external services to the public. No equivalent internal services policy framework exists. Outside of the Common Services Policy and the Secretariat's Guide to Costing, there are no policies, directives, guidelines or standards related to internal services. The Secretariat has developed guidance with respect to service agreements, but this has not been finalized. Without guidance and direction, departments may continue to face challenges in implementing service controls effectively.

Recommendations

1. CSOs should develop, when deemed necessary, service agreements in negotiation with client departments that include service standards and performance targets.
2. CSOs should develop and communicate appeal and redress mechanisms to client departments.
3. The Secretariat should finalize guidance for CSOs on service agreements.

Management Action Plans

The findings and recommendations of this audit were presented to the six departments included in the scope of the audit. The Office of the Comptroller General has asked each department that participated in the audit to prepare detailed management action plans and to discuss these plans with their respective Departmental Audit Committees.

• Previous Page
• Table of Contents
• Next Page