What we examined (see Focus of the audit)

The defence of Canada involves military and non-military efforts that require extensive construction and engineering. For example, armouries, shipyards, hangars, and barracks must be built and upgraded to reflect changing requirements. Such projects often have unique requirements, especially for security, which in turn require a specific set of highly trained and qualified people.

The mandate of Defence Construction Canada is to provide procurement, construction, professional, operational, and maintenance services in support of the defence of Canada. The main beneficiary of these services is the Department of National Defence, but the Corporation also provides services to the Canadian Forces Housing Agency, the Communications Security Establishment Canada, Shared Services Canada, and Public Services and Procurement Canada. The services are generally defined in yearly memorandums of understanding.

Our objective for this audit was to determine whether the systems and practices we selected for examination at Defence Construction Canada were providing it with reasonable assurance that its assets were safeguarded and controlled, its resources were managed economically and efficiently, and its operations were carried out effectively, as required by section 138 of the Financial Administration Act.

What we concluded

In our opinion, based on the criteria established, there were no significant deficiencies in Defence Construction Canada’s systems and practices that we examined for corporate management and management of contracts and services. We concluded that the Corporation maintained these systems and practices during the period covered by the audit in a manner that provided the reasonable assurance required under section 138 of the Financial Administration Act.

What we found

Corporate management practices

Overall, we found that Defence Construction Canada did a good job of managing its corporate governance, strategic planning, risk management, and performance measurement and reporting. However, as a subset of risk management, we found that the Corporation did not consider all aspects related to fraud risks, such as the inability to deal with potential allegations of fraud, corruption, and collusion. The Corporation’s fraud-related systems and practices were limited—which in turn limited the ability of management and the Board to manage the fraud risks strategically. The Corporation needs to address fraud-related risks more proactively.

This finding matters because well-designed corporate management practices provide a sound basis for decisions on allocating human and financial resources, especially when the demand for services changes. They also promote transparency and accountability, instilling confidence in the Corporation’s ability to manage federal resources responsibly. Analyzing fraud risks at the operational and strategic levels is a prerequisite to addressing fraud risks across the Corporation.

• The Corporation had good corporate management practices in place, but some improvements were needed

  Recommendation. The Corporation should better define fraud risks in its corporate risk register, ensuring that it covers all relevant aspects of these risks, and should put in place the systems and processes needed to assess, monitor, and address them.

Management of contracts and services

Overall, we found that the Corporation did a good job of managing contracts and delivering its services. For example, the contracts were carried out according to industry standards and clients’ requirements, and client deadlines and budgets were met. However, we found that they did not manage or store required information in an organized manner, which resulted in incomplete files. Also, despite having an internal verification process, the Corporation did not perform the verification for 2014–15. Furthermore, the Corporation could not know if all of its processes were being applied as intended, and the tracking of employee training was not consistent.

These findings matter because good information management is vital to the Corporation’s monitoring to ensure that all processes and procedures have been applied as required. This in turn supports the Corporation’s continuous effort to provide value for its clients, the government, and ultimately the public. The Corporation relies on the expertise of its employees to deliver its services.

• The Corporation had good management practices in place for its operations, but some improvements were needed

  Recommendation. The Corporation should ensure that the supporting documentation for each contract is classified efficiently and systematically in its filing software, to ensure that all required documents can be obtained, monitored, and verified as complete.

  Recommendation. The Corporation should regularly perform its internal service-line verifications, and clearly document follow-up on the resulting recommendations, to ensure that procurement activities are being carried out in accordance with established practices.

  Recommendation. The Corporation should ensure that its tracking and planning tool for training records employees’ training consistently and accurately.

Entity Responses to Recommendations

Defence Construction Canada agrees with our recommendation(s) and has responded (see List of Recommendations).

Related Information

Report of the	Auditor General of Canada
Type of product	Special Examination
Topics	Crown Corporations Financial Management and Government Spending
Entities	Defence Construction Canada
Completion date	15 November 2016
Tabling date	2 December 2016
Related audits	Chapter 2—Status Report on Security in Contracting, 2013 Spring Report of the Auditor General of Canada Chapter 7—Special Examinations of Crown Corporations—2008, 2009 Spring Report of the Auditor General of Canada

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