PACC Committee Report

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INTRODUCTION

OBSERVATIONS AND RECOMMENDATIONS

CONCLUSION

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Pursuant to Standing Order 108(3)(e), the Standing Committee on Public Accounts has the honour to present its

NINETEENTH REPORT

The Standing Committee on Public Accounts has considered Chapter 8 of the December 2002 Report of the Auditor General of Canada (Public Works and Government Services Canada — Acquisition of Office Space) and the Committee has agreed to report the following:

INTRODUCTION

The Real Property Services Branch of Public Works and Government Services Canada (PWGSC) provides office accommodation to about 100 departments and agencies. It manages about 5.6 million square metres of space, including 4 million square metres in office space, in more than 2,500 locations across Canada, and provides leadership and stewardship for the management and administration of office facilities. The Branch manages the largest portfolio of office space in the country.

PWGSC’s Real Property Services Branch, in cooperation with client departments, plans and manages the real property needs of the federal government. Because of shared responsibilities, the Department does not control all the factors that affect the economy and efficiency of office space acquisition. Client departments can and do make decisions that limit PWGSC’s ability to choose the best option. However, the Department does have an important role to play, and, according to the audit, it needs to improve the way it manages several aspects of its responsibility.

The Public Accounts Committee is particularly interested in how the federal government manages the provision of common services to its departments and agencies. It therefore decided to convene on 24 March 2003 to consider the evidence and testimony of the following witnesses regarding the acquisition of office space: Mr. Shahid Minto (Assistant Auditor General), Mr. Ronnie Campbell (Principal) and Mrs. Sue Morgan (Director) for the Office of the Auditor General of Canada. Present for Public Works and Government Services Canada were Mrs. Carol Beal (Assistant Deputy Minister, Real Property Services Branch) and Mr. Rod Monette (Assistant Deputy Minister, Operations Branch).

OBSERVATIONS AND RECOMMENDATIONS

The audit examined the planning, acquisition and management practices of the Real Property Services Branch. In doing so, it focussed on the planning framework for office space acquisition, and not on individual transactions. It was noted that key components of the long-term planning framework are not developed or implemented on a consistent basis. For example, investment strategies are not prepared and used systematically, and information on the supply of available office space is not consistently updated and reviewed. These issues are not new. Previous audits by the Office have identified similar weaknesses in the planning and leasing of office accommodations, and PWGSC’s own internal audit function has concluded that elements of the long-term planning process were not working as expected. Key planning documents either were not developed or were outdated. Such weaknesses reduce the Department’s strategic planning capacity.

In order to carry out its duties effectively, the Department needs to have good information on office supply — that is, information about space available in individual markets and the space it already has in excess inventory. The audit team noted that PWGSC’s regional offices do not routinely prepare a regional investment strategy and that some community-based plans are not up to date. Without current supply information, the Department cannot properly evaluate whether proposed investments are consistent with its overall strategy.

The Department also relies on client departments to give it accurate information on their requirements for office space far enough in advance so that all possible solutions can be considered. The audit found that PWGSC had not yet developed long-term accommodation plans for departments and agencies. Without these long-term plans, it is difficult for the Department and its clients to plan ahead and optimize the cost-effectiveness of their office accommodation.

The Department needs to improve the manner in which it analyzes all the available accommodation options. Treasury Board policies require PWGSC to base its decisions on the long-term costs of available options. The audit noted, however, that the Department did not consider longer-term options — in part, because it did not have enough time to evaluate all the information. Such gaps in the Department’s options analysis may lead to more costly solutions in the long term.

The Department does not have adequate financial and management information to manage its resources effectively and meet the needs of its clients. Departmental systems do not provide adequate information about the costs of providing office accommodation for each client department. The Department acknowledges such weaknesses exist in its financial management systems and has a pilot project under way that is aimed at improving its cost information.

Mrs. Carol Beal told the Committee that the Department welcomed the Auditor General’s observations and supported her recommendations. The Department had distributed to the Committee copies of the Action Plan that it had prepared in response to the Auditor General’s report. Mrs. Beal briefly enumerated the measures designed to address the outstanding weaknesses in the Department’s planning framework for office space acquisition:

·       The Department continues to develop Master Occupancy Agreements to address long-term accommodation requirements and to optimize cost-effectiveness;

·       PWGSC has moved to a more proactive supply management approach that allows it enough time to fully consider all options. Furthermore, a process has been put in place to flag the expiry of leases well in advance;

·       The Department has spent considerable effort over the past three years to persuade clients to incorporate accommodation requirements into their planning as an element of program design;

·       The Department has taken a number of steps to improve data management, notably focussing on data integrity; and

·       Recognizing the importance of an effective performance reporting framework, the Department has been working hard with its partners on improving performance reporting; it claims that its performance measures are now comparable to those of leading G-8 countries, notably Britain and the United States.

Upon hearing and considering the evidence provided by the Office of the Auditor General of Canada and PWGSC, the Committee noted that many of the issues covered in the audit have been outstanding for a number of years. The Committee is clearly concerned about the Department’s slow progress in addressing these issues and immediately requested from the Department written responses to the following questions:

·       What progress has the Department achieved in developing and reviewing community and regional investment plans and strategies?

·       What success has the Department achieved in working with client departments to develop long-term accommodation plans?

·       What has the Department done to allow enough lead-time to ensure that all investment options are considered?

·       What success has the Department achieved through projects and initiatives designed to ensure the completeness and accuracy of financial and operational information?

·       Has the Department developed timelines to guide officials in the full implementation of its Action Plan?

The above prompts the Committee to make the following recommendations:

RECOMMENDATION No. 1

That Public Works and Government Services Canada prepare a detailed description of the progress achieved in developing and reviewing community and regional investment plans and strategies. That this information be provided to the Public Accounts Committee no later than 31 March 2004.

RECOMMENDATION No. 2

That Public Works and Government Services Canada prepare a document containing a detailed description of the progress achieved with client departments in developing long-term accommodation plans. That this information be provided to the Public Accounts Committee no later than 31 March 2004.

RECOMMENDATION No. 3

That Public Works and Government Services Canada prepare a document containing a detailed description of the progress of initiatives designed to strengthen long-term options analysis. That this information be provided to the Public Accounts Committee no later than 31 March 2004.

RECOMMENDATION No. 4

That Public Works and Government Services Canada prepare a document disclosing the progress of its initiatives designed to strengthen and upgrade its financial information systems, policies and practices to support project management. That this information be provided to the Public Accounts Committee no later than 31 March 2004.

RECOMMENDATION No. 5

That Public Works and Government Services Canada ensure that its Departmental Performance Report contains information on the progress (achievements versus planned targets) of the Action Plan initiatives designed to improve the Department’s planning, acquisition and management of office space. That the Department begin reporting this information in its Departmental Performance Report for the fiscal year ending 31 March 2004.

According to the Treasury Board Real Property Management Framework Policy and the Common Services Policy, PWGSC is the designated custodian of general-purpose federal office facilities. The Real Property Services Branch provides a mandatory common service that is funded from central appropriations. While most client departments do not pay for the Branch’s office accommodation services, there are some client departments, known as reimbursing clients, who do pay for accommodation services out of their own budgets. Status as a reimbursing client is determined in legislation or in policy. Most reimbursing clients do not have the option of going to the private sector for office space accommodation because it is a mandatory common service in the federal government, unless an exception is granted.[1]

PWGSC’s Real Property Services Branch controls the use of space through space envelopes. Each department has a space envelope, based on its office holdings in 1995; the Branch manages these envelopes. When client departments require additional office space, it can be financed in two ways. In one method, the client department obtains approval from the Treasury Board for an increase of the Branch’s appropriation to pay for office space costs associated with a new program. Alternatively, the client department can pay for the additional office accommodation out of its own budget.[2]

The appropriation method of financing office accommodation drew criticism from the Committee. The Committee asked whether PWGSC could improve the utilization of office space by charging client departments market rates for its accommodation services, thus placing the activities on a revenue-dependent basis. Mr. Shahid Minto told the Committee that the Office of the Auditor General had examined the issue in the past but had not pursued it recently and that it was really a matter of Treasury Board policy.[3] If a decision were made to adopt revenue dependency for PWGSC, it would be necessary for the Department to considerably improve its ability to determine the cost of accommodation and realty services and strengthen the relevant financial management and cost accounting systems.

Instead of mandatory common accommodation services being financed through appropriations, if PWGSC were allowed to treat all departments and agencies as reimbursing clients and charge them directly for accommodation and realty services, the Department would have more incentive to improve its financial management and cost accounting systems, policies and practices; this would eventually result in enhanced efficiency and cost effectiveness in the delivery of accommodation service; and greater parliamentary control over accommodation costs. It is also believed that if the federal government were to adopt revenue dependency or cost recovery for the delivery of accommodation and realty services, this would have a major impact on the way in which both PWGSC and its client departments plan, manage, finance and report on accommodation resources. Thus the Committee proposes the following recommendation:

RECOMMENDATION No. 6

That Public Works and Government Services Canada urge the Government of Canada to amend the Real Property Management Framework Policy, the Common Services Policy and other relevant policies to allow the Department to charge accommodation and realty services directly to all departments and agencies, and that the Department report back on this issue to the Public Accounts Committee no later than 31 March 2004.

Given its role and responsibilities as the government’s real property manager, and to further enhance transparency and accountability to Parliament, the Department ought to provide on a timely and regular basis a single detailed report providing financial information regarding accommodation services throughout the federal administration. Thus the Committee makes the following recommendation:

RECOMMENDATION No. 7

That Public Works and Government Services Canada collect from all its client departments and agencies all relevant financial and managerial information related to accommodation services and prepare, on a full accrual basis, a single financial report containing detailed information on the cost of accommodation and realty services across the federal government and that the Department table this report to Parliament on an annual basis beginning 1 April 2004.

CONCLUSION

Based on the audit findings and the witnesses’ testimony, the Department has been much too slow in resolving the outstanding issues concerning the acquisition of office space. Many of the observed shortcomings regarding the planning and management of the acquisition of office space have been outstanding for a number of years, and the lack of progress is a source of serious concern. That Public Works and Government Services Canada has developed an Action Plan is considered a positive first step, but plans are not enough. The Department must immediately begin to implement the corrective initiatives within a clear and precise timetable. There is no longer any reason for delay.

Pursuant to Standing Order 109, the Committee requests that the Government table a comprehensive response to this Report.

A copy of the relevant Minutes of Proceedings (Meeting Nos. 21 and 34) is tabled.

 

Respectfully submitted,




JOHN WILLIAMS, M.P.
Chair