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TheSenateofCanada

AnnualReporton InternalAudits 20112012


ReportoftheStandingCommitteeon InternalEconomy,BudgetsandAdministration December2012

AnnualReportonInternalAudit,20112012 TABLEOFCONTENTS

Introduction.............. ..................................................................................................................................1 . I. II. AuditofPartnershipAgreements.........................................................................................................5 PerformanceAuditoftheSenateAdministrationbytheOfficeoftheAuditorGeneral(OAG)........19

III. StatusofManagementActionsonPriorYears'Audits.......................................................................21 III.A. Senators'OfficeExpendituresAudit(2010)............................................................................21 III.B. ServicesContractsAudit(2010)..............................................................................................21

Introduction

OversightandAuditintheSenate
ThedaytodayoversightoftheSenatesresourcesandadministrativepracticesrestswiththeStanding SenateCommitteeonInternalEconomy,Budgets,andAdministrationandwiththeClerkoftheSenate, whose responsibilities are described in chapters 2:02 and 2:03 of the Senate Administrative Rules as follows: Chapter2:02 2.(1) Subjecttotherules,directionandcontroloftheSenate,theCommitteeis responsibleforthegoodinternaladministrationoftheSenate. (2) Forthepurposesofsubsection(1),goodinternaladministrationmeansa competentadministrationthatisflexible,fairandtransparent,with appropriatepoliciesandprograms,suitableservicelevels,adequateresources includinghighqualitystaff,appropriatereportingmechanismsandregular auditsandassessments.

Chapter2:03 3.(4) theprincipalfunctionsoftheClerkoftheSenateasheadoftheSenate Administrationare:

(a) toprovideadviceoncorporategovernance,includingonstrategic,administrative andfinancialplanningandadministration; (b) toorganizetheinternaladministrativeandfinancialstructures; (c) todirecttheSenateAdministration; (d) tocontrolandmonitorthefunctionsoftheSenateAdministration;and (e) toreporttotheSenatethroughtheInternalEconomyCommittee. The internal audit function supports the Committee and the Clerk in meeting their responsibilities by providingindependent,objectiveassuranceservicesdesignedtoaddvalueandimprovethestewardship of Senateoperations and resources.This assists theSenate inaccomplishing its internalmanagement objectivesbybringingasystematic,disciplinedapproachtoevaluateandimprovetheeffectivenessof riskmanagement,control,andgovernancepractices. TheinternalauditfunctionreportsfunctionallytotheAuditSubcommitteeandadministrativelytothe Clerk of the Senate and is led by the Director, Internal Audit and Strategic Planning. The functions processesand practices are designed tomeettheInstituteofInternalAuditorsProfessionalPractices Framework.

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An Audit Subcommittee, made up of three members of the Internal Economy Committee, is the governance body charged with overseeing and directing the internal audit function. The Audit Subcommitteesprimaryresponsibilitiesareto: ! Recommend for approval by the Internal Economy Committee a multiyear internal audit plan, reports and recommendations regarding the internal audit function, including audit reports that havebeensubmitted,andothermatters,asappropriate; Review management action plans and ensure (1) that they adequately address the recommendationsandfindingsarisingfrominternalaudits,and(2)thattheactionplanshavebeen effectivelyimplemented; Submit an annual report with its observations and recommendations to the Internal Economy Committee;and ReviewtheInternalAuditCharterandInternalAuditPolicyandrecommendchangesasrequiredto theInternalEconomyCommittee.

! !

The Senate maintains a Multiyear Audit Plan that covers a three to fiveyear period and is updated annually using a riskbased audit planning methodology. The plan is reviewed by the Audit Subcommittee before being presented to the Internal Economy Committee for approval. Once approved,theDirector,InternalAuditandStrategicPlanning,isresponsibleforensuringthattheaudits arecarriedoutasplanned.Auditworkistypicallycarriedoutbyoutsideauditfirmsengagedthrougha competitiveprocess.

20112012Audits
In20112012,theSenatesinternalauditactivityreceivedthepermissionoftheAuditSubcommitteeof InternalEconomytodelayauditsintheMultiyearAuditPlanbysixtoeightmonths,inordertoallow SenatemanagementandtheauditactivitytodevoteitsresourcesmorefullytotheOfficeoftheAuditor Generals(OAG)performanceauditoftheAdministration.TheexaminationphaseoftheOAGauditwas completedinlate2011,andbyJanuary2012,InternalAuditrecommencedwithanassuranceauditof PartnershipAgreements,reportedinApril2012.Anadvisoryengagementonprojectmanagementalso began at the end of fiscal year 20112012, and was reported to the Steering Committee in October 2012.

WhatHappensAftertheAudits?
Onceanaudithasbeencompleted,theresultsaresubmittedtotheClerkoftheSenatewho,alongwith hismanagementteam,considersandvalidatestheobservations,preparesmanagementresponsesand developsafollowupactionplanforaddressingtherecommendations.Thefinalauditreport,alongwith managementsresponsesandactionplans,arepresentedtotheAuditSubcommitteeandsubsequently totheSenateCommitteeonInternalEconomy,Budgets,andAdministration. Thefollowupprocessonauditrecommendationsbeginsassoonasaweaknesshasbeenidentifiedand itisnotunusualtohavecorrectivemeasuresimplementedduringthecourseoftheaudit,evenbefore 2|Page


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the final report is issued. Other recommendations require more extensive changes to policies, procedures, practices and systems and can take anywhere from a few months to two years to fully implement. These actions often form the basis of key initiatives in the Administrations annual work plans. TheClerk,withtheassistanceoftheDirector,InternalAuditandStrategicPlanning,monitorsprogress madeonthe implementation of audit recommendations.TheAuditSubcommitteeiskeptapprised of anydelaysorsituationsthatmightrequirecloserattentionandreceivesprogressreportsonaquarterly basisuntilallauditrecommendationshavebeenaddressed.

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I.

AuditofPartnershipAgreements

ThefollowingreportwaspreparedbythefirmErnstandYoung:

ExecutiveSummary
Therisksassociatedwithpartnershipagreementswerefirstidentifiedin20062007.Theriskassessment performed as part of the development of the audit plan in 2009 continued to identify partnership agreementsasariskareacitingthatthereisahighinherentriskthatongoingservicemaybehindered ornotdelivered,andinternalcapacityisnotdeveloped.Asaresult,theSenaterequestedanauditof partnership agreements to ensure that an effective management control framework is in place to manageandmonitorpartnershipagreements. TheSenateispartytoapproximately30writtenagreementsforservices,itsprincipalpartnersbeingthe House of Commons, Public Works Government Services Canada (PWGSC) and the Royal Canadian MountedPolice (RCMP). These agreementsincludeawiderangeofservicessuchassecurity,building maintenance and translation. The management of these common services is accomplished using partnershipagreements,whichcurrentlytotallessthan$1millionperyearincostsforservicesreceived bytheSenate,andatotalpotentialreimbursementofover$1.8millionforcostsofservicesdeliveredby theSenate. This audit report provides details regarding audit objectives, scope, approach, and key findings and observationsmadeduringourauditconductedbetweenNovember2011andJanuary2012. Our audit found that the Senate has established effective controls to manage risks associated with partnership agreements. While conducting our audit we noted the following opportunities for improvement: 1. TheSenateshouldimplementaprocessthatensuresabusinesscaseispreparedwhenconsidering obtaining goods and/or services through the use of partnership agreements that result in a significantfinancialrisk.ThebusinesscaseshouldidentifytheSenatesbusinessneeds,optionsfor meetingthebusinessneedsandcosts(ifapplicable),benefitsandrisksofthoseoptions. 2. The Senate should ensure that all risks identified corporately and at the Directorate level are assessed against common criteria (i.e., probability and impact), and have been assessed by appropriatelevelofmanagement. 3. Where risks related to services obtained through informal agreements are identified, the Senate should ensure that the services obtained through such informal agreements are identified separately to fully and accurately reflect the impact and operational effects of the risk to the organization.Amoreaccurateriskassessmentwillalsofacilitatetheprioritizationofriskmitigation plans. 4. TheSenateshouldimplementasystematicprocessbywhichidentifiedriskareasareaddressedat theappropriatelevelofmanagement.Inparticular,highriskareasshouldbeelevatedfordiscussion 4|Page


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and mitigation at the appropriate senior management subcommittee or Senior Management Committee and decisions to accept the current mitigation strategies in place or supplement with additionalmitigationactionsshouldbenotedinthemeetingminutesforfollowupifrequired. 5. The Senate should develop a project management approach that incorporates the following activities: planning, cost/quality management, monitoring and performance measurement, risk management,andreporting.Theextenttowhicharigorousprojectmanagementapproachneedsto beappliedshouldbeproportionaltothecosts,impact,andcomplexityoftheprojecttotheSenate. Partnership agreements that are ledbytheSenateandwheretheSenateisprovidingservices for payment from a partner organization should utilize a more structured project management approach. 6. Where partnership agreements involve multiple internal stakeholders, the Senate should put in place project management processes that identify the requirements of those stakeholders and secure their commitment (e.g. identification of requirements in the directorates work plan) to ensurethatitcanfulfilltherequirementsoutlinedinthepartnershipagreement. 7. ForpartnershipagreementsinwhichtheSenateisreceivingfundingusingacostrecoveryapproach, the Senate should ensure monitoring and reporting activities (e.g. timesheets) are in place, appropriatelyutilizedanduptodatetosupporttheaccuraterecoveryofcostsincurred. 8. Partnership agreements that include the use of costrecovered resources should be supported by establishedmechanismstoensuretheSenatehasaccesstotheresourcesitisentitledtoonatimely basis. 9. The Senate should ensure where a business case has been prepared prior to engagement in a partnershipagreement,anassessmentagainsttheoriginalcostandperformancecriteriapresented inthebusinesscaseoccursperiodicallytoassessthevalueandappropriatenessofthepartnership agreementgiventhechangingbusinessneedsoftheSenate.

1.0
1.1

Introduction
Background

InconsultationwiththeSenateAuditSubcommittee,theClerk,theSeniorManagementteam,andwith the assistance of independent auditors, the Clerks Office developed a20092012 Internal Audit Plan that was approved by the Senate Audit Subcommittee and the Standing Committee on Internal Economy, Budgets and Administration. Partnership agreements were first identified as a risk in 2006 2007.Theriskassessmentperformedaspartofthedevelopmentoftheauditplanin2009continuedto identifypartnershipagreementsasariskareacitingthatthereisahighinherentriskofongoingservice may be hindered or not delivered, and internal capacity is not developed. As a result, the Senate requested an audit of partnership agreements to ensure that an effective management control frameworkisinplacetomanageandmonitorpartnershipagreements. TheSenateispartytoapproximately30writtenagreementsforservices,itsprincipalpartnersbeingthe House of Commons, Public Works Government Services Canada (PWGSC) and the Royal Canadian 5|Page


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MountedPolice (RCMP). These agreementsincludeawiderangeofservicessuchassecurity,building maintenance and translation. The management of these common services is accomplished using partnershipagreements,whichcurrentlytotallessthan$1millionperyearincostsforservicesreceived bytheSenate,andatotalpotentialreimbursementofover$1.8millionforcostsofservicesdeliveredby theSenate.

1.2

AuditObjective,ScopeandCriteria

1.2.1 AuditObjective
Theobjectiveoftheauditwastoprovideassurancethataneffectivemanagementcontrolframeworkis inplace:
! Toassesstheadequacyofthedecisionmakingprocessesfrompartnershipinitiationtocontracting; ! Tomanageandmonitortheexecutionofpartnershipagreements.

1.2.2 AuditScope
The audit scope included the examination of decisionmaking processes, including consultation, negotiations,preparationofbusinesscases,approvalsandcontractingauthorities.Italsoassessedthe controls in place to monitor and mitigate risks associated with the management of agreements, includingservicedeliveryfailureandobtainingvalueformoney. All active partnership agreements in 20102011 between the Senate and the Houseof Commons and PublicWorksGovernmentServicesCanadawereinscope.Aspartoftheexecutionandtestingphaseof this audit, four partnership agreements were selected utilizing a risk based nonstatistical sampling approach.Thefourpartnershipagreementsselectedwere:
! FreeBalance:AgreementinsupportoftheFreeBalanceClusterGroup; ! AMMIS:(AutomatedMaterielManagementInformationSystem)Agreementinsupportofthe

AMMISClusterGroup;
! LTVPAccommodationProgramFundingKnowledgeableClientFundingAgreement; ! ServiceAgreementExtensionforSenateBroadcastingServices(extensionby1year).

The execution and testing phase of this audit was conducted between November 2011 and January 2012.

1.2.3 AuditCriteria
Thecriteriaappliedinthisauditwere:
! ProcurementpolicyTheSenatesProcurementPolicyiswellcommunicated,understoodand

accessibletothepartiesthatneedtoapplyit.
! Consultationandservicedeliveryoptionsassessedthenecessarypartiesareconsultedand

servicedeliveryoptionsareexploredaspartofthedecisionmakinganddraftingprocessfor

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partnershipagreementstoensurethepartnershipagreementisthebestvehicletomeetthe businessneedsoftheSenate
! ClausesandauthoritiesThepartnershipagreementscontainthenecessaryclausesandare

signedbytheappropriateauthority
! InformalagreementsTheSenateisawareof,andhasconductedriskassessmentswith

associatedmitigationstrategiesfor,servicesreceivedthroughinformalagreements
! RolesandresponsibilitiesRolesandresponsibilitiesformanagingandmonitoringthefinancial

andoperationresultsofthepartnershipagreementsaredefined,communicatedand understood
! PlanningandprojectmanagementPlanningandprojectmanagementactivitiesareinplaceto

managerisksrelatedtothepartnershipagreementsonaregularbasistoaddresscurrentrisks oridentifynewrisksthatcouldimpedethedeliveryofservices
! MonitoringandperformancemeasurementMonitoringandperformancemeasurement

activitiesareinplacetoensureservicesdeliveredmeetestablishedstandards,providevaluefor moneyandthepartnershipagreementcontinuestobethebestvehicletoreceiveordeliver services

2.0

Approach&methodology

Ourapproachinconductingtheauditwascomprisedofthefollowingthreephases:
! Planning ! Executionandtesting ! Reporting

Planningphase Duringtheplanning,aninitialriskassessmentwasperformedbasedonareviewofkeydocumentation andinterviewswithkeymembersofSenateAdministrationtodevelopanunderstandingofthemajor risks and issues associated with partnership agreements. Based on the results of the documentation review and interviews a preliminary list of risks were identified and categorized. Customized audit criteriaandanauditprogramweredevelopedtoaddressthesignificantrisksidentified. Riskassessment Thepurposeofthe risk assessment wastoidentifypotentialareasofrisktothemanagementcontrol framework in place for the management and monitoring of partnership agreements. The assessment identifiedkeyriskareas,whichformedthebasisforwhichtheauditworkwasundertaken. Theriskassessmentalsoformedthebasisofourauditcriteriastatedabove.Someoftheareasofrisk included:
! ProcurementPoliciesandProcedures.TheSenatesProcurementPolicy(formerlytheGeneral

MaterielManagementPolicy)wasrecentlyadoptedbytheInternalEconomy,Budgetsand 7|Page


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AdministrationCommittee(IEC)on20October2011andincludesguidanceonproceduresthat shouldbefollowedinformalizingapartnershipagreement.IftheProcurementPolicyisnotwell communicated,understoodandaccessibletotherelevantparties,thereisariskthatitwillnot beconsistentlyorappropriatelyapplied.


! IdentificationofPartnershipSolutions.TheSenatesendusersidentifytheneedordesirability

ofpursuingapartnershipagreement.Ifservicedeliveryoptionsarenotwellexploredand businesscasesnotdeveloped,thereisariskthatthepartnershipagreementwillnotbethe mostcostbeneficialormosteffectivesolution.


! ConsultationandDecisionMakingProcess.TheSenatesendusersinitiatetheprocessfor

puttinginplaceapartnershipagreement.Ifthenecessarypartiesarenotconsultedaspartof thedecisionmakinganddraftingprocessforpartnershipagreements,thereisariskthatthe partnershipagreementinplacedoesnotcontainthenecessaryclauses,doesnotappropriately addresstheSenatesbusinessneeds,andisnotsignedbytheappropriateauthorities.


! InformalAgreements.TheSenatehasinplaceinformalagreementswithpartnersinwhichit

receivesservices.Ifariskassessmentandmitigationstrategyisnotconsideredforthese informalagreements,thereisariskthattheSenatemaynotbepreparedtoactintheeventthe partnerorganizationwishestoendthepartnershipanddiscontinueprovidingtheSenatewith serviceswhichitpreviouslyreceived.Further,thereisariskthatformalizationofthese arrangementscouldleadtohighercostsand/orlowerservicelevelsfortheSenate.


! ManagingandExecutingPartnershipAgreements.TherolesandresponsibilitiesoftheSenate

andpartnersareoutlinedinthepartnershipagreements.Ifappropriateplanningandproject managementisnotinplace,thereisariskthattheSenatewillnotreceivetheexpectedservices orwillnothavethenecessaryresourcestodelivertheexpectedservicestopartnersasdefined inthepartnershipagreements.


! MonitoringandPerformanceMeasurement.Partnershipagreementshaveinplacedefined

termsandconditionsrelatedtoroles,responsibilities,andfinancialand/oroperational performancestandards.Ifthemonitoringandperformancemeasurementactivitiesarenot welldefinedandimplemented,therearerisksthattheSenatemaynotbereceivingtheservices outlinedintheagreement,maynotbegettingvalueformoney,ormaynotbedevelopingan adequateunderstandingofitsownbusinessneedsandprocessesshouldtheotherpartycease toprovideservices. ExecutionandTestingPhase Based upon the planning results and the detailed work plan, we executed the testing through a combination of interviews, observation and review of documentation related to the selected partnershipagreements.Specifically,ourtestingplanincludedthefollowingworksteps: 1. Conducted interviews with managers to determine if the Procurement Policy has been communicatedandunderstood,andreviewedcommunicationdocuments. 2. Reviewed documents to determine if risk assessments for informal agreements are in place and appropriatemitigationstrategieshavebeendeveloped. 3. Forthefourpartnershipagreementsselected: 8|Page


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! Interviewedtheresponsiblemanagersforthepartnershipagreementsselectedfortestingto

determineifthenecessaryconsultationoccurredduringthedraftingprocess.
! Identifiedkeyclauseswhichshouldbepartofallpartnershipagreementsandreviewedthe

selectedagreementstoensurethattheycontainedthekeyclausesandweresignedbythe appropriateauthority.
! Interviewedstaffwithresponsibilitiesinthemanagementandmonitoringofthepartnership

agreementtodeterminethatrolesandresponsibilitiesareassigned,understoodandexecuted.
! Revieweddocumentstodetermineifrisksidentifiedaremanagedthroughoutthedurationof

thepartnershipagreement.
! Reviewedfinancialandoperationaldocumentstodetermineifperformancereportingisinplace

andreportedtoassessservicedeliveryandvalueformoney. ReportingPhase ApreliminarydebriefwasheldwithAuditandPlanningtodiscussfindingsandseekclarificationwhere necessary. AdraftreportwasreleasedformanagementscommentsandwassubsequentlypresentedtotheAudit Subcommittee.

3.0
3.1

Observations&recommendations
AuditCriteria#1Procurementpolicy

TheSenatesProcurementPolicyiswellcommunicated,understoodandaccessibletotheparties thatneedtoapplyit. BackgroundInformation The Senates Procurement Policy was approved and adopted on October 20, 2011 by the Standing Committee on Internal Economy, Budgets and Administration. The policy provides the framework to acquiregoodsandservicesinanefficientandeffectivemannerthatresultinbestvaluewhilemitigating risks, enhancing access, competition and fairness to suppliers. The Procurement Policy applies to all contracts,includingpartnershipagreementswhicharedefinedasallagreementsbetweentheSenate andotherorganizations(excludingtheprivatesector)withorwithoutanyfinancialcommitments.These includeMemorandum ofUnderstanding,MemorandumofAgreements,ServiceLevelAgreementsand LettersofUnderstanding. ThecommunicationofthenewlyadoptedProcurementPolicyisessentialinensuringthatthenecessary individuals understand and apply the appropriate process for formalizing partnership agreements so thatrisksareproperlymitigated.TheProcurementPolicyshouldalsobeaccessibletoallindividualswho mayneedtoapplyitsothatitcanbeeasilyretrievedinatimelymannerininstanceswhereitrequires referencing. 9|Page


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FindingsandObservations
! Overall,theSenatesProcurementPolicyiswellcommunicated,understoodandaccessibleby

thepartiesthatneedtoapplyit.InNovember2011,atthetimetheProcurementPolicycame intoeffect,amemorandumwasissuedtoallSenatorsandstafftocommunicateandhighlight therequirementsofthePolicy.Therewasalsoevidenceofcommunicationstoallmanagersthat reiteratedtherequirementsrelatedtotheconsultationandapprovalprocessforpartnership agreements.


! InterviewswithkeyinternalstakeholdersconfirmedthattheProcurementPolicyhasbeen

communicatedtothemandindicatedagoodunderstandingoftheprocurementprocessasit pertainstopartnershipagreements.Inparticular,intervieweesdemonstratedunderstandingof therequirementstoexercisepropersigningauthoritiesandconsultwiththeProcurement divisionandtheOfficeoftheLawClerkandParliamentaryCounselduringthedraftingprocess. IntervieweesalsoindicatedthattheProcurementPolicywaseasilyaccessibleviaIntrasenfor referencing. Recommendation None

3.2

AuditCriteria#2Consultationandservicedeliveryoptionsassessed

Thenecessarypartiesareconsultedandservicedeliveryoptionsareexploredaspartofthe decisionmakinganddraftingprocessforpartnershipagreementstoensurethepartnership agreementisthebestvehicletomeetthebusinessneedsoftheSenate. BackgroundInformation Partnershipagreementswere first identifiedasariskinthecorporateriskinventoryin20062007. At thetime,partnershipagreementswerebeinginitiatedbytheresponsibleManagersandwerenotbeing systematicallyreviewedbyotherkeyparties.TheProcurementPolicyincludes,butisnotlimitedto,the reviewofdraftpartnershipagreementsbytheProcurementdivisionandtheOfficeoftheLawClerkand ParliamentaryCounselprior to issuance.ThiscontrolensuresthattheSenateisadequatelymitigating risksandlimitingliabilitiesbyusingappropriateclausesinthetermsandconditionsoftheagreement. As part of the consideration for forming partnership agreements, the Senate should have in place a process to assess alternate delivery methods of services. A formal process that includes the documentation of identified business needs and evaluation of service delivery options allows Senate Administration to ensure it is obtaining the best value for money in pursing partnership agreements. Documentation of these considerations for alternate deliverymethods forservices also allows Senate Administrationtoreassesspartnershipagreementsmoresystematicallyatthetimeofrenewaltoensure thepartnershipagreementcontinuestomeetchangingbusinessneedsandisacosteffectivesolution. FindingsandObservations

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! Theauditfoundthatforallfourpartnershipagreementsexamined,theresponsibleManager

appropriatelyconsultedtheProcurementdivisionandtheOfficeoftheLawClerkand ParliamentaryCounselwiththedraftpartnershipagreementpriortobeingfinalized.
! Twoofthefourpartnershipagreementsundertookathoroughassessmentofbusinessneeds

andoptionsanalysisincludingidentificationofbenefitsandrisksassociatedwitheachoption. Theassessmentconcludedwitharecommendedoption;however,uponfurtherreviewofcosts obtainedthroughRequestsforInformation(RFIs),theSenatedeemedtherecommendedoption tooexpensivetopursue.Basedonavailableinformation,theSenateselectedaserviceprovider thatwouldbestmeetitsbusinessneedsinacosteffectivemanner.Althoughadetailedand documentedassessmenttookplacetoassesstheSenatesbusinessneeds,aformalbusiness casewasnotpreparedtosupporttheoptionthatwasultimatelyselected.Theserviceproviders thattheSenateAdministrationselectedusepartnershipagreementsasthestandardvehicleto contractwithitsusersand,asaresult,apartnershipagreementwasformedwiththeservice provider.ItwasnotedininterviewsthattheSenateAdministrationsresponsiblemanager(s)felt thattheappropriateoptionwasselectedbecauseseveralotherorganizationsofsimilarsizeand capacityselectedthisserviceoptionaswell.
! OneofthepartnershipagreementswasputinplaceseveralyearspriortothecurrentDirectors

tenureanddocumentationofabusinesscasethatincludesanassessmentofneeds,options, benefitsandrisksforwhenthepartnershipagreementwasfirstsignedwasnotavailable. Assessmentstoidentifyneworchangingbusinessrequirementsoccuronanongoingbasisand arereflectedinthetermsandconditionswhenthepartnershipagreementisrenewed.


! Inoneinstance,theneedtoprepareabusinesscasewasnotapplicable.Aspartofanapproved

TreasuryBoardsubmissionfromanotherdepartment,aMemorandumofUnderstanding(MOU) wasputinplacewitheachHouseofParliament,therebyidentifyingtheresponsibilitiesofthe Senate.Theresultingpartnershipagreementarticulatesingreaterdetailtheaccountability, rolesandresponsibilities,recoverableresources,fundingapproachandreportingrequirements amongotherthings. Recommendation The Senate should implement a process that ensures a business case is prepared when considering obtaininggoodsand/orservicesthroughtheuseofpartnershipagreementsthatresultinasignificant financialrisk.ThebusinesscaseshouldidentifytheSenatesbusinessneeds,optionsformeetingthe businessneedsandcosts(ifapplicable),benefitsandrisksofthoseoptions.

3.3

AuditCriteria#3ClausesandAuthorities

Thepartnershipagreementscontainthenecessaryclausesandaresignedbytheappropriate authority. BackgroundInformation The Procurement Policy and the Delegated Financial Authorities Policy were adopted and updated respectively in October 2011. The Procurement Policy requires consultation with the Procurement division and the Office of the Law Clerk and Parliamentary Counsel to ensure that the agreement 11 | P a g e


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containsthenecessaryclauses.Althoughpartnershipagreementsvarygreatlyinnatureandscope,itis expectedthatcoreclausesexistinallagreements,inparticularforpartnershipagreementsthatcontain afinancialcommitment.ConsistentwiththetemplatethatProcurementhasinplace,itisexpectedthat partnershipagreementswithafinancialcommitmentcontainclausestoaddressthefollowingareas:


! Thedurationoftheagreement ! Referencestoadditionaldocumentsformingtheagreementsuchasappendices,ifapplicable ! Definitionsfortermsusedwithintheagreement ! Theconditionsforterminationoftheagreement ! Howamendmentstotheagreementaretobemade ! Adescriptionoftheentireagreementthatconstitutestheunderstandingbetweentheparties

withrespecttothesubjectmatterorservicereferencedintheagreement
! Adescriptionofsupplementaryconditions,ifapplicable ! Contacts/coordinatesofthepartiestotheagreement ! Signaturesofbothparties ! Thetotalamountoftheagreement ! Thebasisofpayment

For partnership agreements, the authority to enter into agreements rests with the Manager of Procurement.However,theauthoritytoenterintocontracts,bywayofapartnershipagreement,may bedelegated,whereappropriate,totheresponsibleManagerbywayofwrittenauthorizationfromthe Manager of Procurement. In such cases, the agreement cannot be modified or changed without the approvalofthepersondelegatingthecontractingauthority. FindingsandObservations
! Indraftingandapprovingallfourpartnershipagreements,theSenateAdministration

appropriatelyconsultedrepresentativesfromtheProcurementdivisionandtheOfficeofthe LawClerktoobtainfeedbackandincludedtheappropriateclausesinthepartnership agreement.


! AllfourpartnershipagreementswerecompliantwiththeProcurementPolicy.Threeofthefour

partnershipagreementsweresignedbytheMangerofProcurementandoneofthepartnership agreementswassignedbytheappropriatedelegatedauthority. Recommendation None

3.4

AuditCriteria#4InformalAgreements 1

Section 3.4 contains three paragraphs that are summarized from the original report, in order to protect internal and third party business information.

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TheSenateisawareof,andhasconductedriskassessmentswithassociatedmitigationstrategies for,servicesreceivedthroughinformalagreements. BackgroundInformation As part of the corporate risk inventory, the Senate Administration identified informal agreements between the Senate and partner organizations as a risk area. In most instances where no written agreementisinplacetheSenateisbenefitingfromajointservicebyrelyingonthegoodwillofthe partnerorganization.TheSenateAdministrationrecognizedthatahigherriskexistedwherenoformal agreement for the services is in place. As a result, it is the responsibility of Directors to assess their existingrelationshipswithexternalpartnerstodetermineifwrittenagreementsshouldbeputinplace forservicesobtainedthroughinformalagreements. Whereinformalagreementsareinplaceanditisdeterminedtobemoreadvantageoustomaintainthe statusquothantoputaformalagreementinplace,itisexpectedthatamitigationstrategyisinplace. ThemitigationstrategyshouldincludeconsiderationsthatallowtheSenatetobeadequatelyprepared tocontinuewiththeservicewithminimaldisruptionshouldtheSenatebechargedbackinthefuture. FindingsandObservations
! InterviewswithseniormanagementindicatedtheirawarenessoftheSenatescommitmentto

formalizingexistinginformalagreements.Managersinterviewedwereawareofatleastone informalagreementinplace.
! Ariskassessment,conductedin2009bytheformerManagerofProcurementinconsultation

withtheDeputyLawClerk,identifiedrisksassociatedwithservicesprovidedbycommon servicesorganizations.
! OneriskassessmentcompletedbyaDirectoratedidnotincludeanassessmentofimpact.Risk

assessmentforinformalagreementswithoutacorporatelevelassessmentofimpactdoesnot fullyandaccuratelyreflecttherisktotheorganizationandasaresulttheSenatemaynot adequatelypreparetomitigatetheriskshoulditarise.Itwasnotedthatrisktrainingwas providedinMarch2010.TheSenatesPolicyonRiskManagementandtheStepbyStepGuide toRiskManagementdefineariskmanagementapproachfortheorganizationthatincludesa highleveldelegation,decisionmakingmatrix.TheGuidespecifiesthehighertheriskscore,the moreextensivethemanagementinvolvementwillbe,andthehigherupinthe program/organizationdelegationwillbetransferred.However,itdoesnotclearlydefinethe reportingrequirementsandaccountabilitiesofrisksateachlevel,inparticular,highriskareas. Recommendations TheSenateshouldensurethatallrisksidentifiedcorporatelyandattheDirectoratelevelareassessed against common criteria (i.e., probability and impact), and have been assessed by the appropriate levelofmanagement. Where risks related to services obtained through informal agreements are identified, the Senate shouldensurethattheservicesobtainedthroughsuchinformalagreementsareidentifiedseparately 13 | P a g e


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to fully and accurately reflect the impact and operational effects of the risk to the organization. A moreaccurateriskassessmentwillalsofacilitatetheprioritizationofriskmitigationplans. TheSenateshouldimplementasystematicprocessbywhichidentifiedriskareasareaddressedatthe appropriatelevelofmanagement.Inparticular,highriskareasshouldbeelevatedfordiscussionand mitigationat theappropriate seniormanagementsubcommitteeorSeniorManagementCommittee and decisions to accept the current mitigation strategies in place or supplement with additional mitigationactionsshouldbenotedinthemeetingminutesforfollowupifrequired.

3.5

AuditCriteria#5Rolesandresponsibilities

Rolesandresponsibilitiesformanagingandmonitoringthefinancialandoperationresultsofthe partnershipagreementsaredefined,communicatedandunderstood. BackgroundInformation The roles and responsibilities of the Senate as well as the partner organization are defined in the partnership agreement or accompanying governance frameworks. They describe broadly the responsibilities of both parties as they relate to the management and delivery of the partnership agreement and may include the financial commitment of the party paying for services, the basis and timingorpayment,participationofpartiesincommitteemeetings,theservicestandardoftheservice deliveryagent,andtheprocessforproblemresolution. To ensure that the Senate is delivering on the requirements of the partnership agreement, the responsibilities should be communicated and understood by the individuals that are responsible for carryingthemout. FindingsandObservations
! Rolesandresponsibilitiesformanagingandmonitoringthefinancialandoperationalresultsare

definedforallfourpartnershipagreementsintheagreementand/orsupportinggovernance frameworks.
! Ultimateaccountabilityforservicesdeliveredunderthepartnershipagreementsareaccurately

reflectedinjobdescriptionsofthoseindividualswhoareaccountable.
! Individualsinterviewedhadagoodunderstandingofwhattheirresponsibilitieswereasthey

relatetothedeliveryofthepartnershipagreements. Recommendation: None

3.6

AuditCriteria#6Planningandprojectmanagement

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Planningandprojectmanagementactivitiesareinplacetomanagerisksrelatedtothepartnership agreementsonaregularbasistoaddresscurrentrisksoridentifynewrisksthatcouldimpedethe deliveryofservices. BackgroundInformation PartnershipagreementsattheSenatecurrentlyrepresentatotaloflessthan$1millionperyearincosts forservicesreceivedbytheSenate,andatotalpotentialreimbursementofover$1.8millionforcostsof services delivered by the Senate. Planning and projectmanagement activitiesare critical to managing risks to ensure the Senate will receive the expected services or will have the necessary resources to deliver the expected services. Project management activities include planning, cost/quality management,monitoringandperformancemeasurement,riskmanagement,andreporting. FindingsandObservations
! Planningandprojectmanagementactivitiesvariedgreatlyamongthefourpartnership

agreementsexamined.Planningandprojectmanagementactivitieswerenotwelldefined, inconsistentlyapplied,andlargelydependentonscopeoftheservicesandthecostofthe agreementinplace.


! ThreeofthefourpartnershipagreementsinvolvetheSenatepayingforservicesreceived.Asa

result,theplanningandprojectmanagementactivitiesareledbythepartnerorganizationand theSenateAdministrationliaiseswiththepartnerorganization,eitherindirectlythroughtheir participationatcommitteemeetingsordirectlywiththeorganization,toensuretheyare accuratelyidentifyingandmanagingrisksoftheagreementtothesatisfactionoftheSenate. Althoughthesamelevelofplanningandprojectmanagementactivitiesforthesepartnership agreementswouldnotbeexpectedasforthosewheretheSenateisthelead,wewouldstill expectbasicperformancemeasurementactivities.ThiswouldallowtheSenatetoperformon goingassessmentsoftheserviceitisreceivingunderthepartnershipagreementandregularly evaluateifitisreceivingvalueforthecostoftheservice.


! Onepartnershipagreementhasinplacetoolsandprocessestoplanandtrackactivities

performedagainstaplantoensuretheSenatemeetstherequirementsofthepartnership agreementtoensureappropriateresourcesarecostrecovered.However,thesetoolswerenot keptuptodateanddidnotreflecttheamountinvoicedtothepartnerorganizationforcosts incurred.Duetothenatureofthispartnershipagreement,whichincludesrecoverable resources,itwasnotedthattheDirectorateresponsiblefordeliveringtherequirementsofthis partnershipagreementwereexperiencingcapacitychallengesthatresultedinariskof insufficientdeliveryofservicesandmonitoring.ThisriskisreflectedintheDirectoratesrisk inventoryandworkplan.However,mitigationofthisriskismademorechallengingduetothe currentrestrictionsinplacewithintheSenatetolimitstaffingandspending.Giventhatthecosts incurredbytheSenateintheseinstancescanbecostrecoveredinfullfromthepartner organization,theSenatesstaffingandspendinglimitationsshouldbeconsideredseparately fromthepartnershipagreement. Recommendations

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TheSenateshoulddevelopaprojectmanagementapproachthatincorporatesthefollowingactivities: planning, cost/quality management, monitoring and performance measurement, risk management, and reporting. The extent to which a rigorous project management approach needs to be applied shouldbeproportionaltothecosts,impact,andcomplexityoftheprojecttotheSenate.Partnership agreementsthatareledbytheSenateandwheretheSenateisprovidingservicesforpaymentfroma partnerorganizationshouldutilizeamorestructuredprojectmanagementapproach. Wherepartnershipagreementsinvolvemultipleinternalstakeholders,theSenateshouldputinplace projectmanagementprocessesthatidentifytherequirementsofthosestakeholdersandsecuretheir commitment(e.g.identificationofrequirementsinthedirectoratesworkplan)toensurethatitcan fulfilltherequirementsoutlinedinthepartnershipagreement. ForpartnershipagreementsinwhichtheSenateisreceivingfundingusingacostrecoveryapproach, the Senate should ensure monitoring and reporting activities (e.g. timesheets) are in place, appropriatelyutilizedanduptodatetoensuretheaccuraterecoveryofcostsincurred. Partnership agreements that include the use of costrecovered resources should be supported by establishedmechanismstoensuretheSenatehasaccesstotheresourcesitisentitledtoonatimely basis.

3.7

AuditCriteria#7Monitoringandperformancemeasurement

Monitoringandperformancemeasurementactivitiesareinplacetoensureservicesdeliveredmeet establishedstandards,providevalueformoneyandthepartnershipagreementcontinuestobethe bestvehicletoreceiveordeliverservices. BackgroundInformation Manyofthepartnershipagreementsinplacehavebeeninplaceforanumberofyearsandareregularly renewed with the partner organization. As the Senates operating environment changes and business needsevolveovertimethroughthelifeoftheagreement,theSenateshouldhaveinplaceaprocessto ensurethattheorganizationcontinuestobegettingthebestvalueformoneyforservicesreceivedor delivered through the partnership agreements they have in place. Monitoring and performance measurement activities should be in place for existing partnership agreements to ensure that the services received continue to meet the needs of the organization in the most cost effective manner availabletotheSenate. FindingsandObservations
! Twoofthefourpartnershipagreementshaveinplacelimitedmonitoringandperformance

measurementactivities.Theseactivitiesconsistofparticipationincommitteemeetingsbutno formalprocessexiststotrackandassesstheperformanceoftheserviceprovideragainstthe amountpaidbytheSenatetodeterminevalueformoney.Theselectionoftheserviceproviders didnotincludeanassessmentofotheroptionsbasedoncost,benefits,andrisksandasaresult 16 | P a g e


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aformalreviewagainsttheoriginalassessmentdidnotoccuratthetimeofrenewaltoensureit continuestobethebestoptiontoobtainservices.Thisassessmentisconductedinformallyand takesintoconsiderationtheoverallsatisfactionwiththeserviceproviderandthecostsincurred bytheSenate.ItwasnotedduringtheexecutionphaseoftheauditthattheSenate Administrationrecognizedtherisksassociatedwiththepartnershipagreementsandareinthe processofreviewingtheirservicedeliverymodel.Thereviewwilldocumentthecurrentservice deliverymodel,identifyoptionsthatbestmeettheneedsinacosteffectivemannerandidentify apreferredlongertermvisionincludinganassessmentofcosts,benefits,risksandotherissues thatimpactimplementation.


! Onepartnershipagreementhasinplaceprocessestomonitortheservicesreceivedfromthe

serviceprovider.Monitoringactivitiesidentifiedvalueformoneyasapotentialriskforthis partnershipagreement.Inthesubsequentrenewalofthepartnershipagreement,clausesto incorporatequarterlyreportsfromtheserviceproviderwereaddedtomitigatethisrisk. Performanceassessmentactivitiesincludethenumberofhoursworkedtodeliverrequirements, acomparisonofservicesrequestedandreceived,andadditionalhoursworkedonspecial projects.Thiswasassessedagainstthecostbreakdownfromtheserviceprovider.Itwasnoted thattheavailabilityofperformancemeasurementinformationwasstrengthenedbyaclausein thepartnershipagreementwherebyquarterlyreportsareprovidedbythepartnerorganization.


! Inoneinstance,theneedtoprepareabusinesscasewasidentifiedasnotapplicableandas

such,anassessmenttoensurethepartnershipagreementcontinuestobethebestvehicleto receiveordeliverservicesisnotapplicable. Recommendation The Senate should ensure where a business case has been prepared prior to engagement in a partnershipagreement,anassessmentagainsttheoriginalcostandperformancecriteriapresentedin the business case occurs periodically to assess the value and appropriateness of the partnership agreementgiventhechangingbusinessneedsoftheSenate.

4.0

Conclusion

Ourauditfoundthat,overall,theSenatehasestablishedeffectivecontrolstomanagerisksassociated with partnership agreements. The partnership agreements examined are compliant with the Policy, with opportunities identified to improve overall management and monitoring of partnership agreements. Theauditorswouldliketoexpresstheirappreciationforthefullcooperationreceivedfromemployees oftheSenateduringtheconductoftheaudit.

SenateResponsetotheAuditReportandFollowupAction
The risks relating to informal agreements are now identified and managed individually. Risk managementsessions,includingreview,ratingandassessmentofindividualsharedservicesandsome corporaterisks,wereconductedinApril2012.Newtoolstomeasureriskimpactwereintroducedatthat time.AfurtherreviewandprioritizationofsignificantcorporateriskstookplaceinOctober2012.The 17 | P a g e


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StepbyStep Risk Management Guide now prescribes conditions for escalating risks within the governanceframework.Aswell,riskinformationissystematicallysharedwithIECthroughinternalaudit reportsandquarterlyfinancialreports. An advisory engagement was commenced in Q4 of 20112012 to design a Project Management Framework for the Senate Administration that is standardized, scalable and repeatable. The draft FrameworkwascompletedinEnglishonlyattheendofJune2012andwasapprovedbyManagementin August2012.Itiscurrentlybeingintroducedonapilotprojectbasis.Administrationwideintegrationof theframeworkisscheduledtobegininthe20132014fiscalyear. To assist the Senate Administration in accessing costrecovery resources to which it is entitled on a timelybasis,considerationwillbegiventomovingfromapersonyeartoanFTEmodelfortheSenates humanresources.Standardizationofmonitoringandreportingofcostsforrecoveryisunderway.Tothis endandinanefforttoensureaccuratecostrecovery,theSenatehascompletedfundingforecastsfor knowledge client roles, to which the PWGSC has given its support. The roles have been incorporated intodirectorateworkplansorbasedonestablishedjobdescriptions.Standardizedtimesheetsarealso beingused. Businesscaseswithoptionsandriskanalysesaswellastheidentificationofspecificdeliverablesforthe provisionofservicesarenowarequirementforneworrenewedpartnershiparrangements.

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II.

PerformanceAuditoftheSenateAdministrationbytheOfficeofthe AuditorGeneral(OAG)

TheperformanceauditoftheSenateAdministrationbytheOfficeoftheAuditorGeneralwasconducted duringthe20112012fiscalyear.TheAuditreportwastabledintheSenatebytheChairoftheSenate StandingCommittee on Internal Economy,BudgetsandAdministration(IEC)onJune13,2012.Eleven recommendationsemergedfromtheauditintheareasofstrategicandoperationalplanning,financial management, human resources, information technology services and security. The Senate Administrationhasdevelopedanactionplanandhasalreadyinitiatedfollowupactiononseveralfronts. The complete report can be accessed on the OAG website at: http://www.oag bvg.gc.ca/internet/English/parl_otp_201206_e_36891.html. BelowisasummaryofactionthathasbeentakenthusfarinresponsetotheOAGrecommendations.

II.1. StrategicandOperationalPlanning
! Riskmanagementsessions,includingreview,ratingandassessmentofindividualsharedservices andsomecorporaterisks,wereconductedinApril2012.Newtoolstomeasureriskimpactwere introduced at that time. A further review and prioritization of significant corporate risks took placeinOctober2012. HRFIN has established a schedule for the review of certain corporate risks. As well, risk information is systematically shared with IEC through internal audit reports and quarterly financialreports. ! Enhanced reporting requirements for workplans and budget submissions were developed for 20132014. The Administration hasbeguntoemploycostingworksheetstoforecastmultiyear resource requirements for individual initiatives and projects. The data contained in the 2013 2014workplansshouldenablegenerationofreliableinformationfortheBusinessPlan. ! Reportingrequirementsandtimelinesforsubmissionofperformancedatawerediscussedwith directorates. Data was collected for 20112012 and the resulting Performance Report was similartoprioryears.Workiscontinuinginordertorefineandsupplementindicatorsforthe nextreportingperiod.

II.2. FinancialManagement
! The new travel policy, together with new processes put in place for parliamentary boutique expenses, parliamentary restaurant expenses, as well as confirmation of orders for invoices without a contract or PO, address most of the requirements for documentation sufficient to establish appropriateness of expenses. Furthermore, a quality assurance framework has been presentedtotheClerkandactualtestingandreportingwillbeundertakeninearly2013. 19 | P a g e


AnnualReportonInternalAudits,20112012

! UnderthenewSenateProcurementPolicy,allcontractsover10KarereportedtotheIEC.The currentAMMISsystemisunabletoextractthedatarequiredtoreportonlowervaluecontracts. AreviewoftheAMMISsystemcapabilitiesiscurrentlyunderway,andalternateoptionswillbe considered,includingmanualextractionifnecessary,toproducetherequiredreports. ! OndirectionoftheInternalEconomyCommittee,regularreviewsofpastfinancialtransactions andauditsofSenatorsexpenseclaimshavebeenprovidedforintheMultiyearAuditPlanonan ongoingbasis.

II.3. HumanResources
! TheSenateAdministrationhassetanimplementationplanforthecontinuousreviewoftheHR management policies based on the objectives and performance criteria contained therein, as wellasrelatedprocesscontrolsandrisks. ! TheSuccessionManagementProgramhasbeenupdatedtoincludetheClerksposition.Afinal listofprofessionalcompetencieshasbeenpreparedandwillbesubmittedtotheManagement Committeeforconsiderationandapprovalpriortoupdatingindividualcompetencyprofiles.

II.4. InformationTechnologyServices
! The Project Management Framework has been approved by Management and is being introduced on a pilot project basis. Administrationwide integration of the framework is scheduledtobegininthe20132014fiscalyear.

II.5. Security
! A draft policy has been developed and is currently going through the review and approval process. ! Subcommitteesofthe Senate InternalEconomyCommittee (IEC)andtheHouseofCommons BoardofInternalEconomy(BOIE),wereestablishedtoexplorethematterofaunifiedsecurity force. A joint meeting took place in June to review the current model and to consider basic principles and the potential organizational structure of a single security service for the ParliamentaryPrecinct.Asecondjointmeetingwasheldinthefall,atwhichtimeitwasagreed that the Senate and House of Commons administrations work jointly to prepare operational options on working towards a unified security force. Results of these discussions will be submittedtotherespectivesubcommitteesforconsideration.

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III.

StatusofManagementActionsonPriorYearsAudits,20092010
III.A. Senators'OfficeExpendituresAudit

As previously reported, one final initiative was required in order to complete the followup action in addressing the recommendations of theaudit, the approvalof theSenators TravelPolicy. The policy was approved by the Committee on Internal Economy, Budgets and Administrationon May10, 2012, andcameintoeffectonJune5,2012.Withtheapprovalofthispolicy,theauditrecommendationshave nowbeeneffectivelyaddressed,andtheauditcanbeclosed.

III.B. ServicesContractsAudit

One recommendation has yet to be fully implemented before this audit can be closed. It relates to Senators occasional noncompliance with the Policy on Hiring and Compensation of Senators Staff requiring an employment contract to be in place prior to the start of work by the hired individual. Arrangementshavebeenmadetohavetheissuediscussedwiththecaucuses,andHRisinvestigatinga formalprocessintheeventoffuturebreachesinpolicy.

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