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

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Conformance With Professional Standards

The conduct of this engagement was done in accordance with the Institute of Internal Auditors' International Standards for the Professional Practice of Internal Auditing.[2]

Background

Within the Government of Canada, several departments are designated common service organizations (CSOs). These organizations are central suppliers of services to other government departments. Common services include but are not limited to legal, environmental, procurement, educational and statistical services. The government uses common services to take advantage of economies of scale and the benefits of pooling specialized expertise.

Common services are either mandatory or optional. Mandatory services are designated when a government-wide interest or consideration prevails over or coincides with the interests of individual departments and agencies. Mandatory services are designated either in legislation or in policy, and all departments are required to use them. Optional services are used by departments only when it makes sense to do so.

Common services are funded through revolving funds, net-voting authorities, appropriation, or, in limited cases, variations of these three funding models. Mandatory services are typically funded through an appropriated funding model, whereas optional services are typically funded through a revolving fund or a net-voting authority model.

Revolving funds must recover the full costs of the CSO in order to break even at the level of the overall operation over a reasonable period of time. Rates for a specific optional service, however, may be set by the CSO at competitive market rates.

Under a net-voting authority, CSOs are authorized to recover revenues from client departments to offset directly related costs. Any costs that CSOs do not recover from client departments are funded through other sources.

In an appropriated funding model, CSOs are fully funded for the cost of the delivery of a service through legislation, with no cost recovery from client departments.

Common services within the Government of Canada are governed by the Treasury Board Common Services Policy. The policy's objective is to ensure that CSOs offer services to client departments that support timely, effective and economical delivery of programs to the public. In addition, the policy outlines a strategy to make optional as many common services as possible and maintain mandatory services only when there is an overriding reason. This strategy is intended to ensure that CSOs focus on customer service, providing quality goods and services on time, and pricing competitively. As well, this strategy provides greater control and flexibility to departments over the costs for services received and promotes financial accountability.

In supporting the objectives and strategy, the policy outlines specific responsibilities. CSOs are responsible for establishing effective planning processes for their services, developing effective and transparent costing practices and rate-setting mechanisms, and putting practices and systems in place to manage the quality of their services. The Secretariat in turn is responsible for supporting CSOs through periodic reviews of the policy, reviewing and advising on fees charged, monitoring CSO compliance with the policy, and effectively communicating with departments to ensure that the requirements of the policy are well understood. CSOs and the Secretariat are jointly responsible for periodic reviews of mandatory services in order to determine whether a mandatory service should become optional.

In addition to the policy, departments are guided by the Guide to Costing (Office of the Comptroller General, Treasury Board of Canada Secretariat, 2008), which outlines the generally accepted management accounting principles that should be followed when conducting a costing exercise.

Audit Objectives and Scope

The objective of this audit was to determine whether CSOs and the Secretariat, in its role as a central agency, are complying with the requirements of the Common Services Policy.

The scope of this audit included an examination of the systems and practices of CSOs and the Secretariat in delivering common services as of March 2011. Detailed audit criteria can be found in Appendix A.

A sample of five CSOs that offer six services was selected for this audit. A detailed list of CSOs and services examined in this audit can be found in Appendix B.

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