Opening Statement to the Standing Committee on Public Accounts

Report to the Minister of Public Works and Government Services on Three Contracts Awarded to Groupaction

Thank you, Mr. Chair. I am pleased to have the opportunity to brief members of the Committee on the results of our audit of the three contracts worth a total of $1.6 million awarded to Groupaction between 1996 and 1999. I am accompanied today by Ronnie Campbell, the Principal responsible for the audit.

All three contracts called for advertising-related services in connection with the visibility of the Government of Canada. The second and third contracts required those services for the purpose of recommending sponsorships. They were not sponsorship contracts such as those audited by PWGSC's Internal Audit Directorate in 2000.

The three contracts were awarded by parts of Public Works and Government Services Canada, namely the Advertising and Public Opinion Research Sector and the Communications Coordination Services Branch (CCSB). Responsibility for public opinion research and advertising now rests with Communication Canada, while PWGSC remains the contracting authority for these services.

Our audit revealed significant shortcomings at all stages of the contract management process. The government files on the three contracts are so poorly documented that many key questions remain surrounding the selection of the contractor and the basis for establishing the price and the scope of work for the contracts. In our opinion, the government did not receive much of what it contracted and paid for.

The nature of the findings was such that I referred the matter to the RCMP and, as you know, they have decided to conduct a criminal investigation. I also decided to undertake a government-wide audit of advertising and sponsorship programs and contracts. We anticipate reporting on the results of this audit in late 2003.

Before I discuss the findings of our audit in more detail, let me point out that the audit focussed on the actions of public servants and not on the communication firm Groupaction, the contractor.

The Financial Administration Act and government contracting regulations are rules that apply to public servants, not to contractors. And senior public servants broke just about every rule in the book.

We identified several practices that did not comply with the law or with government regulations that apply to the government's financial transactions. In particular, we found the following:

• The documentation that Groupaction produced on the second and third contracts had similarities because the government itself called for similar work in both contracts. It is not clear why the government awarded the third contract in 1999.
• The government did not receive everything it contracted for and paid for. Key elements of what was specified in the contracts were never delivered, and no one has been able to find either a draft or an earlier version for the report for the second contract, for which the government paid $549,990.
• Officials approved payments for work that varied considerably from what the contracts specified. In a few cases, payments were approved with the knowledge that the requirements of the contracts had not been fully met.
• Payments were made that we were told were for verbal advice, but no such advice was either stipulated in any of the contracts or documented as having been received.
• We found that the first contract had been amended to double its value without any documentation to support the need for the amendment.
• None of the documents we examined contained any explanation of how the government had determined the need for the services or why it had decided that contracting was the best way to fill the need.
• We found no evidence that a proper selection process was followed in awarding the first contract.
• We saw little documented support for the decision to award the second and third contracts to Groupaction.
• Officials did not comply with the requirements of the Financial Administration Act and contracting regulations and did not verify that the amount of time billed for by the contractor was an acceptable reflection of the work that was done.

I am troubled by the appalling lack of regard for rules and regulations that we saw in the way these three contracts were managed. Equally disturbing is that it happened in the very department that is supposed to ensure prudence, probity, and fairness in contract management throughout the government.

In closing, I would like to take this opportunity to acknowledge the efforts of my staff who conducted this audit and prepared this report in less than six weeks. I thank them for their diligence and professionalism.

Thank you, Mr. Chairman. We would be pleased to answer your questions.