This Web page has been archived on the Web.

1996 November Report of the Auditor General of Canada

Main Points

23.2 Since 1980 we have identified significant deficiencies in the government's materiel management practices. This audit has confirmed that many of these deficiencies still exist.

23.3 Departmental information systems for managing materiel are generally inadequate. Key deficiencies are the variety and incompatibility of systems, the lack of cost and performance information, and the inadequacy of essential records to safeguard and control public property. The consequence of inadequate cost information is that not all relevant materiel costs, including inventory holding costs, are considered when making purchasing and inventory decisions. This has resulted in poor value for money and excess inventory. A 1996 National Defence study estimated that $1.7 billion of the total inventory of $8.55 billion in that department alone was excess to the total usage projected for the next four years.

23.4 We believe the Treasury Board Secretariat does not have all of the information it needs to fulfill its role in monitoring and providing leadership to departments. In our opinion, the essential elements of an effective accountability relationship are missing in the policy and management frameworks for materiel management in departments.

23.5 The use of the Crown Assets Distribution Directorate, a unit of Public Works and Government Services Canada, remains mandatory for the disposal of surplus assets, despite the government's 1992 initiatives to improve the process by allowing departments to use optional methods of disposal. We have identified several examples where departments have done so and obtained higher revenues, more quickly and at less cost.

23.6 Most departments have only recently recognized that there are problems with their materiel management practices and, due in part to reduced resources, have begun to make extensive changes to remedy the deficiencies of the past. A 1995 Treasury Board Secretariat study estimated that, based on certain assumptions, the potential annual cost savings from eliminating unnecessary inventory could reach $1.25 billion. We noted many departmental initiatives that may have reduced the amount of excess inventory since 1995, but significant potential for savings remains. We are encouraged by the scope and direction of the many departmental initiatives under way. However, it would be too early to attempt to judge their ultimate effectiveness, and we remain concerned about whether these initiatives will be implemented as planned and will achieve their intended goals. If departments do not succeed, hundreds of millions of dollars will be at risk.

Introduction

23.8 The government estimates that more than 17,000 employees are involved in materiel management. They have a direct impact on purchases of more than $10 billion worth of goods and services annually and on the management of government materiel holdings estimated at more than $50 billion. We have calculated the total cost of materiel acquired by the Government of Canada in 1994-95 at approximately $8 billion. Spending by the departments included in our audit was as follows: National Defence, $4.2 billion; RCMP, $231 million; Fisheries and Oceans (excluding Coast Guard), $133 million; and Natural Resources Canada, $84 million.

23.9 The government has estimated that it holds between $8 billion and $10 billion worth of materiel in warehouses. Based on an estimated yearly carrying cost of 25 percent of the purchase price, the cost to the government to maintain these holdings has been estimated at between $2 billion and $2.5 billion per year. In a recent inventory rationalization study draft report, National Defence calculated that its inventory had a value of approximately $8.5 billion and a direct annual inventory management cost of $567 million (excluding financing and other costs).

The government's policy framework for management of materiel

23.11 The Treasury Board Secretariat has implemented a new expenditure planning and management system that provides for a strategic focus on departmental management of all resources, including materiel. The policy framework allows departments and agencies to be innovative and adapt quickly and easily to changing circumstances and opportunities for achieving the best value for taxpayer dollars. The role of the Treasury Board includes leading the reform of administrative processes and systems across departments; the Secretariat supports the Board by promoting innovation and best practices and, together with departments, developing effective accountability mechanisms.

23.12 The government has developed a strategy for the management of materiel that focusses on the following priorities:

• using materiel effectively;
• increasing the line manager's role in materiel management;
• considering all costs in making decisions on inventories or disposal;
• improving responsiveness to program requirements rather than focussing on individual transactions and "before-the-fact" controls; and
• increasing emphasis on training and development in materiel management.

23.14 Exhibit 23.1 illustrates the phases and activities in the life cycle materiel management model that departments are to follow. Exhibit 23.2 sets out the broad division of responsibilities among the key players for managing the government's materiel.

Focus of our audit

23.16 The Canadian Coast Guard, formerly with Transport Canada, was merged with Fisheries and Oceans in April 1995. The vessel fleets of the two organizations have now also been merged, and the combined fleet is managed by the Coast Guard Sector within Fisheries and Oceans. Because our audit started before the merger, some of our observations relate to the situation of the two organizations before the merger and others after the merger. Nevertheless, our observations are still valid and apply to future activities.

23.17 The observations and recommendations in this chapter apply only, but not necessarily equally, to the six organizations audited. While the observations and recommendations may be applicable to all departments, a broader application cannot be supported by our audit activities at this time. The Treasury Board Secretariat may wish to consider this matter in its review of our audit findings, and to include all departments in any resulting policy changes, as appropriate.

23.18 Our audit did not examine in depth the departmental and central agency activities in the procurement of materiel, as these will be included in an audit to be reported at a later date. Although we did not audit Public Works and Government Services Canada, there are references to the Department arising from our findings in the audited organizations, because of the Department's common services role in materiel management. Further details on audit objectives, criteria, scope and approach can be found at the end of the chapter in the section About the Audit .

Observations and Recommendations

Previous audits indicated poor value for money

• ineffective accountability;
• few incentives to manage materiel economically and efficiently;
• inadequate information for decision making;
• inadequate performance measurement;
• uneconomical acquisitions;
• lack of economy and efficiency in managing inventory; and
• too much inventory.

Policy and Management Framework

Requirements for an effective accountability framework were not met

• clear roles and responsibilities;
• clear performance expectations;
• a balance of expectations with capacities;
• credible reporting; and
• reasonable review and adjustment.

23.23 A department's policy and management framework needs to include its materiel management policies, their linkage with Treasury Board policies, and clearly established roles, responsibilities and accountability. In all organizations we audited, we noted deficiencies in the materiel management policy and accountability framework. In each case, policies and information on roles and responsibilities were out-of-date and did not fully reflect the current organizational realities.

23.24 However, major efforts are under way in the organizations we examined to revise and simplify policies and to clearly define roles, responsibilities and accountability for materiel management. Exhibit 23.3 provides more details. The Treasury Board Secretariat's 1996 inventory management task force also found that authorities, policies, procedures and practices were inconsistent and diffused and that there seemed to be a lack of real accountability at all levels. The task force recommended, and we agree, that a system of performance indicators and metrics be developed to facilitate reporting, visibility and best practices to increase accountability.

23.25 The Treasury Board Secretariat should identify what remedial measures are needed for an effective accountability framework for materiel management, and should ensure that these measures are carried out.

The Treasury Board Secretariat does not have all the information it needs to fulfill its responsibilities

23.27 The Bureau of Real Property and Materiel, a unit of the Treasury Board Secretariat, has access to departmental internal audit and program evaluation reports but does not monitor them systematically to identify problems with the materiel management policy or its implementation. Treasury Board Secretariat officials have advised us that this monitoring is not carried out because the departmental reports do not provide information they consider useful to address systemic issues; they prefer to address horizontal issues across departments through special audits and reviews.

23.28 The Treasury Board Secretariat has conducted periodic reviews of materiel management activities in departments. For example:

• It commissioned a study on warehouse management practices in 1995, and in 1996 chaired the inventory management task force to address the findings of the study. This task force stated that materiel management services can be provided more effectively and efficiently and that the potential for cost-savings and performance enhancement is ``enormous".
• In 1994 the Secretariat published its Guide to the Review of Materiel Management. The guide provides a framework for conducting reviews of materiel management in the federal government by auditors, evaluators, materiel management specialists and program managers.
• It supported a number of pilot projects of departmental disposal initiatives and subsequently evaluated the results in 1993.

23.30 The Treasury Board Secretariat should initiate means to ensure that it has adequate monitoring and performance information to discharge its responsibilities for materiel management.

Sharing information on best practices

23.32 However, our audit identified problems that cut across several or all of the organizations we audited. While the Secretariat has provided guidance in some areas, such as the Shared Systems Initiative, we found that some organizations with similar problems are addressing them separately. The Treasury Board Secretariat's inventory management task force recommended establishing an interdepartmental system to disseminate information on best practices in supply and inventory management.

23.33 The Treasury Board Secretariat should further assist departments to develop common solutions to common materiel management problems and to share information on best practices.

Treasury Board Secretariat's response: The Treasury Board Secretariat recognizes the need to continue to improve the management of materiel in government.

As noted in the chapter, we have already initiated a number of projects in collaboration with other departments that are specifically designed to address many of the areas highlighted. Some have been under way for some time and are approaching implementation, while others, such as making more effective use of the Internet, are still in their development stages.

Increased sharing of information and best practices, and greater use of technology as a key enabler, are essential elements of our renewal strategy. The Secretariat will continue to monitor the evolution of materiel management practices, and will encourage the development of networks among the materiel management community in both the private and public sectors. Our objective is to encourage sharing of information, development of a collaborative process for training and human resource development within the community, adoption of best practices and the use of enabling technologies.

Management information systems are inadequate

23.35 All of the organizations we examined have developed and are using computerized materiel management systems. However, most organizations have several systems in use, with differing levels of functional capability and of capability to communicate with each other.

23.36 We found deficiencies in all the organizations' materiel management information systems, the most important being the inadequacy of cost and performance information. To make cost-effective decisions, managers need information on all relevant costs of operations, including materiel.

23.37 Treasury Board policy requires that the full cost of inventories be visible and distributed to the end user. Such information enables managers to compare the real net benefits of various options when making decisions. However, the organizations we examined do not charge all costs to users of materiel, who therefore consider inventory holding costs insignificant. The Treasury Board Secretariat's inventory management task force found that these pricing practices lead to a sense of false economy and to poor business practices. It recommended that the real cost of all goods and services be charged or at least made visible to responsibility centres and that inventory carrying costs be made visible to and recoverable from users.

23.38 National Defence has informed us that it recognizes cost information as a key component of the information that managers need to manage their operations; it has initiated the Cost-Visibility Project to provide them with more integrated cost information. The Department further recognizes a need to harmonize several diverse initiatives on which it has embarked, and has recently initiated a managerial accounting system, capable of supporting financial and managerial accounting, business planning and performance measurement.

23.39 Except for National Defence, no organization we examined had a comprehensive, organization-wide asset and inventory management system accessible by headquarters and regions. Even in National Defence, the aggregate information provided by the Canadian Forces Supply System is deficient and a system upgrade project is under way. In other organizations, the absence of aggregate organization-wide information could result in one region buying an item when another region has excess or is disposing of an identical item as surplus. We note that all organizations have major initiatives under way to develop information systems that respond to their needs. Exhibits 23.4 and 23.5 present detailed cases supporting these summary findings.

23.40 Departments should ensure that their materiel management systems are integrated with other departmental systems and that they provide reliable and timely cost and performance information to support decision making.

The government is introducing major accounting changes

23.42 The 1996 federal Budget announced the government's intention to begin the transition to full accrual accounting in 1997-98, including the capitalization of physical assets. The change to accrual accounting will enable the government to report annual costs of programs more realistically, give better information to support decisions, and improve accountability. The government intends to achieve full accrual accounting by 2001-02.

23.43 The Treasury Board Secretariat has issued a proposed policy on accounting for capital assets and is currently examining departments' responses to it.

23.44 We commend the effort to include the capitalization of many of the items we have defined as materiel under the umbrella of the accrual accounting initiative. It is important to reiterate that capitalization of physical assets needs to be implemented at the departmental level, not just at the summary level. There are few compelling reasons to capitalize physical assets in the summary financial statements alone; the real benefits to the government of capitalizing physical assets are in improved departmental program management. We believe that this would be an important step in focussing on the issues surrounding appropriate inventory and materiel management.

Procurement

Not all relevant costs were considered in selected materiel acquisitions

23.46 An interdepartmental marine working group has recommended that the departments' additional costs of vessel fuel and crew transportation costs be factored into future consideration of contract bids.

Problems identified with the use of acquisition cards

23.48 In 1991, the Treasury Board approved the use of acquisition cards for departmental procurement and payment of goods and services, where efficient, economical and operationally feasible. The policy requires departments to establish their own policies and procedures for ensuring that their use of the cards is economical, efficient and secure and, based on risk, to establish procedures outlining the extent of verification required.

23.49 In 1993, the Treasury Board conducted a government-wide evaluation of the use of acquisition cards in 66 departments and agencies. The evaluation reported a number of improvements in the payment process, including fewer cheque requisitions, simplified foreign supplier payment, streamlined account verification, and fewer petty cash replenishments. It noted improvements in the procurement process, including less paperwork and much faster service. The evaluation also identified a number of problems, such as lack of training, non-compliance with payment dates and non-payment of interest due, problems with suppliers' acceptance of the cards, and the time taken to reconcile acquisition card statements to departmental invoices.

23.50 The Treasury Board Secretariat informs us that it supports the use of acquisition cards because the results of a cost/benefit analysis from the perspective of financial transactions indicates that the benefits outweigh the costs and the risks. The Secretariat continues to work with departments to mitigate the risk factors identified.

23.51 We reviewed internal audit reports in two organizations, and selected transactions in several regions of three organizations, to determine whether there were appropriate controls over the use of acquisition cards. This preliminary work indicated that controls for ensuring the validity of acquisition card charges and for post verification were not working as expected. For example, the acquisition cards were used for some purchases that were not authorized under the Treasury Board's acquisition card policy. We are currently conducting an audit of the use of credit cards in the government, and plan to report in 1997.

Inventory and Warehouse Management

Essential records need to be improved

23.54 We found considerable variation in monitoring practices among organizations and among different sectors and regions within organizations. Organizations' records covered a whole range of possibilities, from records well maintained and verified for accuracy to no records whatsoever.

23.55 Exhibit 23.7 provides examples where essential records were not being maintained.

23.56 Departments should ensure that their records of materiel holdings are accurate and complete.

Too much inventory is being held

23.58 The Treasury Board Guide to the Review of Materiel Management states that materiel consumption, rates of use, level of materiel turnover, holding costs of inventory and other performance measures should be recorded, monitored and reviewed by departments. In every organization we examined we found little evidence that inventory holding costs (which are significant - see Exhibit 23.8 ) and other performance measures are considered. Exhibit 23.9 provides illustrations of the need for good performance information.

23.59 We expected to see, but did not find, a systematic approach to determining optimal quantities and identifying surplus inventory. In some organizations, for some product lines, there is a well-planned and executed process for identifying and disposing of surplus assets, for example, RCMP vehicles. In some cases, there have been ad hoc reviews as a result of individual initiatives or events such as downsizing, moving of warehouses, budget cuts, changes in personnel, etc.

23.60 Most of the officials we interviewed at the beginning of our audit in 1995 said they believed that their organizations had too much inventory. They were holding excessive quantities of items that had to be stocked, and were stocking items that were commercially available and did not have to be stocked. One senior manager said, "If we build them [warehouses], they will fill them [with inventory]." Since the items had been paid for and little consideration is given to holding costs, there was little incentive to dispose of excess inventory. Managers tended to keep surplus items "just in case" there was a future need.

23.61 There are a number of reasons why materiel could become surplus to departmental needs, including program changes, technological obsolescence and organizational restructuring. In such cases, managers need to decide whether it is better to sell the surplus, with the possibility of buying more in the future, or hold on to the surplus until it is used up. Such decisions need to take into account many factors, including the inventory holding costs, the resale value of the goods, and likely future costs and timing of acquisition.

23.62 Our audit did not attempt to estimate the value of the materiel in inventory or to determine the value of excess inventory. However, a study carried out for the Treasury Board Secretariat in 1995 estimated that, based on certain assumptions, the potential annual cost savings from eliminating unnecessary inventory could reach $1.25 billion. We noted many departmental initiatives that may have reduced the amount of excess inventory since 1995, thereby affecting the study's projection, but the estimate does provide an indication of the significance of the potential savings.

23.63 In July 1996, a draft National Defence inventory rationalization study estimated that, of the Department's total inventory of $8.55 billion, 20 percent or $1.7 billion was excess to the total usage projected for the next four years.

23.64 Our audit found that the magnitude of overstocking varied with the organization. All of the organizations have initiatives under way to address the problem of holding excess inventory. Exhibit 23.10 provides examples of excess inventory; Exhibit 23.11 provides examples of initiatives intended to correct the situation.

23.65 The Treasury Board Secretariat conducted a study of inventory management practices in 1995 and subsequently chaired the inventory management task force to address that study's findings. The task force stated that materiel management services can be provided more effectively and efficiently and that the potential for cost savings and performance enhancement is ``enormous". We were advised that presentations were made by Treasury Board Secretariat officials to deputy ministerial and other senior-level committees, which have endorsed the recommendations of the task force.

23.66 Departments should have procedures in place to ensure a systematic, thorough and periodic review of their inventories to determine optimal quantities and identify surplus holdings.

23.67 Our audit has identified an innovative approach by Fisheries and Oceans to providing spare parts and technical support for components of the Louis S. St. Laurent icebreaker. Rather than the traditional approach of purchasing spare parts and incurring holding costs to store them itself, the Department has entered into an agreement with a private sector firm to provide these services for a fee. This initiative has the potential to be beneficial to the Crown, and we will report on it in 1997.

National Defence supply depots are changing to address deficiencies

23.69 The Montreal depot has 600,000 square feet of floor space and 8.6 million cubic feet of storage capacity in the new warehouse, plus 12 other buildings with a total of 1.8 million square feet of floor space. At the time of our audit, the depot handled about 400,000 different line items. The Edmonton facility has about 800,000 square feet of floor space and 5 million cubic feet of storage space. It handled approximately 300,000 different line items.

23.70 The new Montreal depot building was constructed by a private sector firm to National Defence specifications and leased to the Department at an annual cost of $6.6 million. The lease gives the Government of Canada the option at specific intervals to purchase the building. In addition to the annual leasing costs, National Defence has budgeted one-time construction and fit-up costs totalling $31.8 million.

23.71 National Defence has encountered difficulties in consolidating the inventory from the Toronto and Moncton depots into this new facility. The Department tried to calculate the total storage space requirements for the Montreal depot after consolidation, but was unable to because of the inadequate information available from the Canadian Forces Supply System (see Exhibit 23.5 ). The Department could not determine on the basis of that information what was obsolete and what would be surplus after consolidation.

23.72 In its planning, the Department assumed a new consolidated inventory requirement equal to 70 percent of that required to be held in the Toronto, Moncton and Montreal depots. This meant that 30 percent of the total inventory could, when moved to one location and when depot operations returned to normal after consolidation, be disposed of as obsolete or as surplus. We have seen no analysis that would validate this assumption about disposal. In a comparable private sector situation, detailed inventory rationalization would normally precede the planning of any new facility.

23.73 The Edmonton and Montreal depots were designed for a combination of long-term storage and regular distribution of inventory. This dual usage requires that items be placed in the appropriate locations for the most efficient operation of the facility. However, we found that movement or turnover of items is not considered in determining the assigned storage locations in these facilities. Faster-moving items are not necessarily being stored in the most appropriate locations, resulting in longer travel times and an inefficient process for issuing inventory. The current warehouse management system does not have the information required to make the optimum storage decisions. The Department reports that this will be corrected later when the supply system is upgraded.

23.74 Furthermore, the materiel storage layout makes these supply depots unsuitable for items requiring a high turnover and fast response. While the Edmonton depot has some flexibility, the layout of the Montreal depot is relatively inflexible for adding personnel in peak periods. National Defence must be ready to respond at any time to an emergency situation. However, we believe the design of the depot facilities constrains its ability to do so.

23.75 The Department informs us that it plans a comprehensive assessment of the depot operations to look at optimizing work flow and resources.

23.76 At the depots, we observed extensive physical inspections of incoming commercial goods, a labour-intensive activity. In the private sector, random technical inspections are performed or supplier quality levels are established for all non-critical items. We were informed that at the time of our field work in February 1996, extra inspections were required to provide database information for the new warehouse management system. Once these items are entered into the database, the Department will follow its new policy (June 1996) on physical inspections, which should reduce substantially the number of inspections performed. The intent of the policy is that, given the costs and benefits of checking all receipts from commercial suppliers, some commodities and some contractors warrant more attention than others.

Disposals

Alternative disposal mechanisms may result in higher net proceeds in certain cases

23.78 Currently, Treasury Board policy requires the Crown Assets Distribution Directorate, a unit of Public Works and Government Services Canada, to provide a mandatory common service for the disposal of surplus Crown assets held by departments and agencies. Departments receive the proceeds of disposals, less the associated costs and fees.

23.79 In 1992, amendments were made to the Surplus Crown Assets Act aimed at achieving better strategic management of materiel. The life cycle approach to materiel management would be encouraged by improving incentives for incorporating the disposal phase into the management process.

23.80 Specifically, amendments to the Act were made to allow departments to dispose of surplus Crown assets either through Public Works and Government Services or directly, subject to terms and conditions established by the Treasury Board; and to provide departments with the statutory authority to receive and spend the net proceeds from disposals.

23.81 In planning the implementation of the changes to the Act, the Treasury Board Secretariat proposed a limited number of pilot projects of surplus asset disposals by departments. These pilot projects were to provide input to the development of Treasury Board terms and conditions to govern departmental disposal activities in the future, and to the development of guidelines to assist departments in improving the management of disposals. The pilot projects were also to identify key success factors and "best practices" associated with effective management of disposals by departments.

23.82 We did not audit the Crown Assets Distribution Directorate. Our audit examined whether alternative disposal mechanisms could achieve greater returns to the Crown in selected cases. We did not examine the issues of prudence and probity. Every organization we examined expressed concerns about the "value added" by the services of the Crown Assets Distribution Directorate. Officials also stated their belief that they could conduct selected disposals themselves more quickly at less cost, and achieve higher selling prices. Exhibit 23.12 presents specific cases that came to our attention, but the results cannot be extrapolated more generally. The exhibit also shows that even when low dollar values are involved and the Directorate's services are limited, the departments must still pay its 30 percent commission.

23.83 In 1993 the Treasury Board Secretariat evaluated the disposal pilot projects and identified some positive results, including that assets could be disposed of more quickly; that revenues potentially could be increased by more than the additional cost by using "hands on" disposals; and that greater flexibility over disposals may allow departments to maximize benefits from each disposal.

23.84 However, there were limitations in the data available for the 1993 study. Public Works and Government Services Canada informs us that it does not accept the conclusions of the Treasury Board Secretariat evaluation of the disposal pilot projects because of this data limitation.

23.85 At the time of our audit, the Crown Assets Distribution Directorate remained a mandatory common service. The Treasury Board Secretariat informs us that none of the organizations involved in the pilot disposals has withdrawn from the pilots in order to have the Directorate provide the disposal service. Therefore, we conclude that the departments prefer to have alternative disposal methods and to remain part of the pilot projects.

23.86 Under the government's Common Services Policy, the Treasury Board is required to review all mandatory common services and, if there is not an overriding reason to maintain their mandatory status, it will determine how the services can become optional in a cost-effective manner.

23.87 Public Works and Government Services Canada informs us that the government's Program Review exercise confirmed that the management of assets disposal in government by the Crown Assets Distribution Service will remain mandatory. The Program Review further concluded that alternative service delivery options were to be explored with a view to identifying the most efficient way of delivering disposal operations.

23.88 The Treasury Board Secretariat and Public Works and Government Services Canada have recently agreed to study the cost of in-house disposal compared with outsourced disposal operations. The guiding principles will be as follows:

• The greater good of government requires that surplus Crown assets disposal be managed within a controlled framework.
• Departments must receive fair return on sales and should not be required to "cross subsidize" other departments' disposal activities.
• Departments have to be provided with a choice as to disposal agent.

23.90 Our review of selected disposal transactions and the Treasury Board Secretariat's 1993 evaluation of the disposal pilots point to the need for a thorough analysis of existing disposal operations in the government to determine if alternative disposal mechanisms could yield higher returns.

23.91 Within the period specified in the Program Review decision, the Treasury Board Secretariat and Public Works and Government Services Canada should resolve the issue of the mandatory common services requirement to use Public Works and Government Services Canada's in-house disposal operations as the disposal agent for surplus Crown assets, and determine if alternative disposal mechanisms would bring greater returns. The decision should include an action plan for implementation and the monitoring of results.

Conclusion

Departments are taking action, but will the long-standing deficiencies be remedied?

23.93 In the organizations we examined, we noted several attributes that they all shared:

• recognition by senior management that there are problems with the way materiel is managed;
• acceptance by all organizations, to varying degrees, that they need to change their materiel management practices; and
• a willingness to act.

23.95 It is too early to judge whether the departmental initiatives will be effective; their potential benefits may not be realized for some time. History has demonstrated that change of the magnitude now being attempted by departments is slow to take hold. However, the potential for real and significant savings to the government in its materiel management practices makes it imperative that departments follow through with the changes they have begun. We will monitor the progress being made by the government to achieve these savings.

About the Audit

Objectives

• to assess the adequacy of the policy and management frameworks for materiel management in the Treasury Board Secretariat and selected departments and agencies; and
• to determine if materiel management practices in the selected departments and agencies are consistent with managing materiel with due regard to economy and efficiency and consistent with established policy.

Scope

Within the broad range of materiel management, we did not include the management of major capital projects or fleet vehicles (which we reported in 1991) or commodities such as electricity, natural gas and water.

Our audit did not examine in depth the departmental and central agency activities in the procurement of materiel, or the disposal activities of the Crown Assets Distribution Directorate.

Specific information associated with the following areas is reported in the identified chapters:

• National Defence - Support Productivity, Chapter 34
• Systems under Development - Getting Results, Chapter 24
• Renewing Government Services Using Information Technology, Chapter 16 (September 1996)

Criteria

• the Materiel Management Policy of the Treasury Board Manual;
• the Common Services Policy of the Treasury Board Manual;
• the guide to the Review of Materiel Management, Treasury Board Secretariat, November 1994;
• departmental standards and directives;
  
• studies from academic sources; and
• reports of auditors general in other jurisdictions.

Audit Team

For information, please contact Reno Cyr, the responsible auditor.