Auditor General: Tighter controls still needed on relocation programs
ottawacitizen.com
Kathryn May
25 Nov 2014
National Defence doesn't have the internal controls to ensure the $230 million it shells out every year to relocate thousands of military personnel to new postings is spent according to the rules.
Auditor-General Michael Ferguson's latest audit into the federal government's controversial relocation contract found the RCMP had procedures to properly monitor spending under the contact but the Canadian Forces lacked "adequate financial controls."
The government spends an estimated $300 million a year on various services and expenses to help settle the 18,000 or so employees uprooted for transfers across the country. The contract to manage the Integrated Relocation Program was last retendered in 2009 and won by Brookfield Global Relocation Services, which has held the contract since 1999.
This was the second audit Ferguson released this year into the relocation program, which has been under scrutiny for more than a decade in series of tribunals, hearings and a long legal battle over the 2002 and 2004 contract.
The audit focused only on three years of transactions under the 2009 contract handled by the military and RCMP, which account for most of the moves.
Last year, National Defence spent nearly $230 million to move 15,500 members of the Canadian Forces and the RCMP spent about $50 million to relocate 2,200 employees. Brookfield was paid an annual administration fee of $25 million to run the program.
Under the contract, Brookfield provides a range of services. It counsels and manages the moves for those being transferred, organizes out-of-town trips to hunt for and buy a new home, looking after the costs for such items as house appraisals and the fees to get out of mortgages or leases, money which is then reimbursed by the government. The cost of actually moving furniture and household goods is dealt with in separate contracts with moving companies.
The auditor-general last examined the relocation program in 2006 and found many deficiencies in the program's management, which the audit found have since been improved. The Canadian Forces, for example, set up a special 15-person unit to monitor and oversee the program.
But the audit found "weaknesses" in the way the Canadian Forces verified the transactions for the services provided under the contract, particularly when it came to confirming whether it received the services paid for.
The program was managed on a "zero-balance account" which every day paid Brookfield for the services and transactions handled. It reviewed 15 transactions every day to ensure payments were justified, which Ferguson found was not a large enough sample because of volume of transactions going through the account. Last year, 4,000 out of nearly 850,000 transactions were reviewed.
The audit also was also critical of the Canadian Forces for not sufficiently assessing the Brookfield's performance and whether military personnel were satisfied with the service. It found it failed to meet its target of not making errors exceeding two per cent of total dollar volume in overpayments or underpayments.
The audit found the National Defence had a plan in place to measure the program's performance but it didn't use the all the information it had to ensure members were getting the benefits to which they were entitled.
The auditor-general's 2006 report also uncovered irregularities in the bidding process that the Auditor-General Sheila Fraser concluded unfairly favoured Brookfield - then known as Royal LePage Relocation Services.
That audit was a catalyst for a lawsuit by losing bidder Envoy Relocation Services which was awarded an unprecedented $40 million in an Ontario Superior Court ruling that found the "misconduct" of bureaucrats during the bidding process stacked the deal in favour of Royal LePage Relocation Services.
The government has since settled that contract dispute out of court and the military and RCMP were forced to pay more than $32 million of the $35 million award. The rest was paid by Treasury Board, which uses the contract to move public servants.
The 2009 contract at the centre of Ferguson's probe was supposed to fix all the problems found in the earlier contracts but it also ended up shrouded in accusation of unfairness.
In May, Ferguson examined the awarding of the 2009 contract and found a series of missteps and delays during the 2009 contracting process that stopped suppliers - other than the incumbent - from bidding on the contract, but it found no evidence that it was done intentionally.
