Opening Statement to the Standing Committee on Government Operations and Estimates

Acquisition of Leased Office Space
(Chapter 7 - May 2006 Status Report of the Auditor General)

1 June 2006

Sheila Fraser, FCA
Auditor General of Canada

Madam Chair, thank you for the opportunity to present the results of Chapter 7 of my May 2006 Status Report—Acquisition of Leased Office Space. I am accompanied by Ronnie Campbell, Assistant Auditor General and Bruce Sloan, Principal, who were responsible for this audit.

PWGSC manages 6.6 million square metres of rental space and spends $3 billion annually to manage real property. As the Department handles as many as 500 lease transactions every year, it needs complete, accurate, and timely information to support its decisions. The Department's commitment to achieve the government's cost-reduction goal makes strong management practices even more vital for the Real Property Branch.

This audit has raised a number of important issues that affect the cost of office accommodation. Let me elaborate on these.

Currently, PWGSC, client departments, and the Treasury Board share the responsibility for decisions that affect the cost of office accommodation. The shared responsibility makes it difficult for PWGSC to impose and enforce government-wide standards for the quantity and quality of office accommodation. In our report, we have noted instances where the Department has not always enforced those standards, resulting in additional costs for taxpayers.

The committee may wish to ask the Department about the steps it will take to ensure that its standards are enforced.

A second factor that has an impact on the cost of office accommodation is the fact that the current funding mechanisms do not always allow the selection of the most cost-effective accommodation options.

In our current audit, we found that the Department had made satisfactory progress in identifying the most cost effective options to meet the accommodation requirements of its customers.

In assessing the various options for office accommodation, PWGSC considers the full cost of each option over the expected life of the requirement. Accommodation requirements often are for 15 to 25 years and include crown construction, lease-purchase, purchase, and lease.

The committee may wish to ask PWGSC and the Treasury Board Secretariat to establish a timeframe within which they will establish funding mechanisms that will allow the Department to select and implement the most cost-effective accommodation options.

In 2002, we reported that PWGSC needed to strengthen the integrity and availability of information to support the management of the acquisition of office space. In our report this year, we reported unsatisfactory progress in this area.

To make the right strategic decisions, managers need information that is timely, accurate, and complete. We found that the basic information that property managers need does not exist, is inadequate, or is difficult to get.

The committee may wish to ask the Department to describe the steps that it

• is taking to streamline the management of the real property portfolio, and
• will take to establish the information systems needed to support its strategy.

Finally, Madam Chair, I would like to raise the following issue. Often, government managers view office accommodation as a free good or service. However, at present, the cost of office accommodation is being paid by PWGSC and is being reported in departmental public accounts as a service that is provided without cost. The government should ensure that the system provides the right incentives for good management, including selecting the most cost-effective options.

Madam Chair, we would be pleased to answer any questions the Committee may have.