2006 May Status Report of the Auditor General of Canada

Responsibility for costs of office space

7.20 In its departmental performance report, Public Works and Government Services Canada should include progress against projected savings and the cost of those instances where the most cost-effective accommodation option was either not accepted or not enforced.
(7.14–7.19)

Public Works and Government Services Canada's response. Shared responsibilities inevitably give rise to some inefficiency. There is now a renewed effort, supported by the Treasury Board Secretariat, to enforce standards for space and fit-up, and this is resulting in savings to the government. We will work with the Secretariat to include more reporting to Parliament on this issue.

Assessing options

7.26 The Treasury Board Secretariat should develop a plan for departments to use financial information based on an accrual-based budgeting and appropriations approach in planning, budgeting, and reporting.
(7.23–7.25)

The Treasury Board Secretariat's response. The Treasury Board Secretariat agrees that there are limitations associated with annual capital appropriations. The Secretariat is addressing the issues through two initiatives.

The first initiative, as mentioned in the chapter, is the engagement of an independent contractor to conduct a comprehensive study of the concepts of accrual accounting to determine whether, and if so, how, they should apply to the development, documentation, and execution of the budgets and appropriations of the federal government.

The Treasury Board Secretariat will use the study to make an informed recommendation to the Treasury Board as well as the Department of Finance and the Privy Council Office (given their central roles in Budget planning) on the extent and manner of the implementation of accrual concepts in the budgeting process and/or the appropriations at the government-wide and departmental levels. The government can approve changes to the budgeting process; however, Parliament must approve changes to appropriations.

The second initiative is a pilot project under development for non-lapsing capital appropriations. The pilot project proposes allowing up to three departments to carry forward unexpended asset funds from one fiscal year to the next, beginning as soon as next year. This will provide departmental managers with more flexibility in planning their operations and remove the current short-term focus of the planning horizon for asset and associated resources.

7.28 The Treasury Board Secretariat and Public Works and Government Services Canada should ensure that funding methods support the selection of the most cost-effective option that meets the long-term accommodation requirements.
(7.27)

Public Works and Government Services Canada's response. We are pleased that the Auditor General has found that Public Works and Government Services Canada adequately analyzes the cost of accommodation options before decisions are made. The issue of how funding mechanisms affect rational decision making is an important one. We agree with the recommendation and will continue to work with the Treasury Board Secretariat and other parties to ensure that, wherever possible, funding mechanisms support the most cost-effective solution that meets the long-term accommodation requirements. We recognize that this may take some time to resolve since it represents a fundamental change to government accounting and budgeting.

The Treasury Board Secretariat's response. The Treasury Board Secretariat recognizes that, in some instances, current funding mechanisms may limit PWGSC's ability to select the most cost-effective option for long-term accommodation requirements.

The Capital Asset Review (CAR), conducted in 2004 as one of the federal government's expenditure management reviews, raised this same issue in the broader context of capital asset management. Responding to the CAR, the Secretariat is considering a more flexible funding mechanism, known as non-lapsing capital appropriations, and it has developed a pilot program with three departments to confirm the anticipated benefits of this option.

Subject to this experience, the Secretariat will consider expanding the pilots to other departments and agencies, including PWGSC, providing they meet the participation criteria. The Secretariat will keep departments and agencies, including PWGSC, informed of progress in this area.

Irrespective of the potential change toward non-lapsing capital appropriations, PWGSC is responsible for managing its investment program, within existing reference levels. This must be done in accordance with key Treasury Board policies related to assets management, namely the Policy on Long-term Capital Plans, the Project Management Policy, and the Real Property Policy Suite, including the Treasury Board Real Property Investment Policy, all of which support least-cost best-value decisions.

Management information

7.37 Public Works and Government Services Canada should continue to improve the availability, accessibility, and reliability of information to support sound decision making for real property investments.
(7.34–7.36)

Public Works and Government Services Canada's response. We agree with this recommendation. While current systems enable Public Works and Government Services Canada to control costs incurred by the Department on individual projects, we recognize that our systems are cumbersome for overall management and acknowledge that improvements remain to be made.

Management property risks

7.53 Public Works and Government Services Canada should

• continue its efforts to develop guidance and to implement continuous risk management as part of the process for acquiring office accommodation, and
• provide staff with the necessary training in risk management.
  (7.38–7.52)

Public Works and Government Services Canada's response. We agree with this recommendation. Public Works and Government Services Canada has made considerable progress in this area and will continue to do so. In areas of great importance, such as managing the risk related to achieving our five-year cumulative savings target of $150 million from leasing operations, we have implemented compensating controls. These controls include the establishment of a Strategic Transformation Branch to monitor and control achievement of our goals. In addition to implementing more rigour in its leasing practices and providing ongoing training to its staff, the Real Property Branch has implemented a Lease Savings Tracking System to monitor net transaction savings on a monthly basis. As a result of these measures, we have already achieved, as of 1 January 2006, more than half of our five-year cumulative savings target of $150 million, and will continue to monitor our progress carefully.