ARCHIVED - Audit of Real Property

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December 2011

Table of Contents

1.0 Executive Summary

1.1 Introduction

The Federal Real Property and Federal Immovable Act and Treasury Board's (TB) Policy on Management of Real Property are the main legislative and policy instruments governing real property. The TB Guide to the Management of Real Property provides guidance on the application of the policy.

The TB Guide to the Management of Real Property highlights real property as a valuable asset that enables the delivery of federal programs and benefits Canadians and should be carefully managed to protect its value. Proper management of these assets is therefore as important as the proper management of other resources, including financial, that are administered by the federal government in the service of all Canadians. As of March 31, 2010, the CFIA had land valued at $3.3 million, and buildings with a net book value of $81.2 million disclosed in the audited financial statements.

Currently, functional management of CFIA's real property portfolio rests with Real Property Services (RPS) Division of the Assets and Security Management Directorate of the Finance, Administration and Information Technology Branch (FAIT). FAIT is responsible for policy, guidance and direction on real property matters, is solely responsible for the acquisition and disposal of assets as well as the management of accommodations and facilities for office space.

The Science Branch and the Operations Branch are responsible for the operational management of special purpose space such as laboratories and quarantine and inspection stations.

1.2 Audit Objective and Scope

The objective of this audit was to provide assurance that the Agency, as a custodian of CFIA owned and operated facilities, is in compliance with the TB Policy on Management of Real Property.

The scope of this audit included the management of the 10 laboratories and 15 quarantine and inspection stations listed in the TB Directory of Federal Real Property (DFRP) (see Appendix B for details).

1.3 Findings and Recommendations

Governance

Finding 1.0: Accountability for CFIA real property is divided among Real Property Services, Science and Operations. Overall oversight for real property assets and associated expenses has not been clearly established.

Recommendation 1.0: The CFIA should establish and communicate clear oversight for the management of the real property portfolio to ensure compliance with all applicable legislation, policies, directives and standards.

Finding 2.0: The draft CFIA Real Property Management Framework has not been approved and implemented and does not meet the requirements of the Treasury Board Policy on Management of Real Property.

Recommendation 2.0: The Vice President, Finance Administration and Information Technology (FAIT) should ensure that the draft CFIA Real Property Management Framework and its required components are completed, approved and communicated and are in compliance with the Treasury Board Policy on Management of Real Property.

Risk Management

Finding 3.0: Risk management processes are not in place to provide management with risk-based information to support real property portfolio management and decision-making.

Recommendation 3.0: The Executive Director, Assets and Security Management Directorate, in collaboration with the Science and Operations Branch, should ensure that CFIA develops and implements a risk management framework and processes for real property.

Internal Control

Finding 4.0: Long terms plans are not in place to address facility requirements and to life cycle manage custodial real property assets.

Recommendation 4.0: The Executive Director, Assets and Security Management Directorate should ensure that CFIA has a long term investment plan that ensures that the Agency has a life cycle management process that complies with the TB Policy on Management of Real Property.

Finding 5.0: Information Management Systems have not been consistently implemented across the real property portfolio. Systems are not providing management with information on the status of real property assets.

Recommendation 5.0: The Executive Director, Assets and Security Management Directorate should ensure that CFIA has an integrated information management system in place that is implemented across all custodial assets and meets applicable Treasury Board policy requirements.

1.4 Statement of Assurance

In my professional judgment as Chief Audit Executive, sufficient and appropriate audit procedures have been conducted and evidence gathered to support the accuracy of the opinion provided and contained in this report. The opinion is based on a comparison of the conditions, as they existed at the time, against pre-established audit criteria. The opinion is applicable only to the entities examined and within the scope described herein.

1.5 Audit OpinionFootnote 1

In my opinion, CFIA has weaknesses, with risk exposure related to the governance, risk management and control processes relative to the management of custodial real property assets that require management attention.

Brian Smith
A/Chief Audit Executive, CFIA

2.0 About the Audit

2.1 Background

The Canadian Food Inspection Agency (CFIA) is the largest science-based regulatory agency in Canada. It has close to 7,200 professionals working across Canada, in the National Capital Region and in the four operational Areas (Atlantic, Quebec, Ontario and the West). The CFIA is dedicated to safeguarding food, animals and plants, which contributes to a safe and accessible food supply and plant and animal resource base, thereby enhancing the health and well-being of Canada's people, environment and economy.

CFIA's four operational areas are divided into 18 regional offices, 185 field offices (including border points of entry) and 408 offices in non-government establishments (such as processing facilities). As of March 31, 2010, the CFIA had land valued at $3.3 million, and buildings with a net book value of $81.2 million disclosed in the audited financial statements.

The Federal Real Property and Federal Immovable Act and Treasury Board's (TB) Policy on Management of Real Property are the main legislative and policy instruments governing real property. The TB Guide to the Management of Real Property provides guidance on the application of the policy.

The TB Guide to the Management of Real Property highlights real property as a valuable asset that enables the delivery of federal programs and benefits Canadians and should be carefully managed to protect its value. Proper management of these assets is therefore as important as the proper management of other resources, including financial, that are administered by the federal government in the service of all Canadians.

CFIA Real Property Portfolio

Currently, functional management of CFIA's real property portfolio rests with Real Property Services (RPS) Division of the Assets and Security Management Directorate of the Finance, Administration and Information Technology Branch (FAIT). FAIT is responsible for policy, guidance and direction on real property matters, is solely responsible for the acquisition and disposal of assets as well as the management of accommodations and facilities for office space.

The Science Branch and the Operations Branch are responsible for the operational management of special purpose space such as laboratories and quarantine and inspection stations.

Custodial Laboratories - Science Branch

The Science Branch laboratory portfolio is comprised of laboratories located across the country. The laboratory network is organized into four areas (West, Ontario, Quebec and Atlantic) in addition to the National Centre for Foreign Animal Diseases in Winnipeg. These laboratories provide analysis, testing, research, methodology development and scientific advice and consultation.

Quarantine and Inspection Stations - Operations Branch

CFIA has animal and plant inspection facilities, and regulates quarantine stations. The animal quarantine facilities are equipped to house and feed animals during a quarantine period before they can be allowed into the country. The key activity at animal inspection facilities includes the unloading, inspecting and re-loading of animals, under the supervision of CFIA veterinarians. There are two special purpose plant inspection stations in Newfoundland. There are four animal/plant quarantine stations.

2.2 Objective

The objective of this audit was to provide assurance that the Agency, as a custodian of CFIA owned and operated facilities, is in compliance with the Treasury Board Policy on Management of Real Property.

2.3 Scope

The scope of this audit included the management of the 10 laboratories and 15 quarantine and inspection stations listed in the TB Directory of Federal Real Property (DFRP) (see Appendix B for details).

Audit planning was initiated in May 2010 with audit fieldwork beginning September 2010 and completed October 2010.

2.4 Methodology and Approach

Audit criteria and detailed sub-criteria (see Appendix A) were developed to serve as standards against which our assessment could be made, clarify the audit objectives and form a basis for the work plan and the conduct of the audit. For each of the criteria, the relationship to governance, risk management and control or a combination of the three were identified. For this audit, we determined the audit criteria to be as follows:

Governance

  • An appropriate Real Property Management Framework (RPMF) is in place and maintained.

Risk Management

  • Formal risk management processes are in place for CFIA Real Property.

Controls

  • Policy, programs and procedures are in place to support the consistent implementation and compliance with TB policies and directives.
  • Lines of communication exist between the organization, users and other external stakeholders.
  • Real Property assets are life-cycle managed.
  • Comprehensive Information Management systems exist to provide reliable information in support of management decision making.
  • CFIA Real Property assets are managed and protected in accordance with Government of Canada requirements.
  • A control and oversight function is in place to monitor adherence to TB Policy on Management of Real Property and its associated directives and standards.

The audit was conducted in a manner consistent with the TB Policy on Internal Audit. The following approach was used by the audit team to gather evidence and meet the audit objective:

  • Review of TB policies, directives and guidance related to real property management;
  • Examination of CFIA's policies and procedures related to real property management;
  • Interviews with Science, Operations and FAIT Branch staff, including facility managers;
  • Visits to 5 laboratories (Ottawa Fallowfield, Charlottetown, Dartmouth, Calgary and Lethbridge) and 2 inspection stations (Coutts and Sweetgrass), chosen on the basis of geographic diversity; and
  • Document review and analysis.

3.0 Findings and Recommendations

3.1 Introduction

This section presents detailed findings from the Audit of Real Property at CFIA. Findings are based on the evidence and analysis from both the initial audit risk analysis and conduct phase of the audit.

3.2 Governance

Finding 1.0: Real Property Accountability is Divided

Accountability for CFIA real property is divided among Real Property Services, Science and Operations. Overall oversight for real property assets and associated expenses has not been clearly established.

We expected to find clear accountability and decision-making structures, including authorities and responsibilities that are consistent with organizational needs and capacity.

In the Letter of Delegation related to Section 3 of the Federal Real Property and Federal Immovable Act (acquisition, administration and disposition of real property), the Minister of Agriculture and Agri-Food delegates authority for real property to five individuals in CFIA: President, Executive Vice President, VP FAIT, Executive Director, Assets and Security Management Directorate, and Director, Real Property Services. The financial delegations for real property further assign authority for ongoing expenditures to RPS, to Science Branch and to the Operations Branch in separate instruments.

These delegations reflect the current practice for CFIA real property management, which is divested among RPS, Science and Operations. For example, the management of the life cycle of the Laboratories owned by CFIA is divided between RPS, who are responsible for the acquisition and disposal and capital projects, and Science Branch, who are responsible for day-to-day maintenance of the facilities. Laboratory facility managers report to the laboratory director in each location; laboratory directors do not report to RPS.

Science Branch seeks to ensure that its operational requirements are protected. RPS indicates that they are accountable for ensuring that the requirements of the Treasury Board Policy on Management of Real Property are met. With the divided accountability for CFIA facilities, it is not clear how the Agency undertakes life cycle management.

The management of the quarantine and inspection stations reflects this divided accountability as well. A manager at RPS is responsible for the quarantine and inspection stations and the day-to-day management of the quarantine and inspection stations is with the Operations Branch.

The Treasury Board Policy on Management of Real Property requires clear accountability and decision-making structures, including authorities and responsibilities that are consistent with organizational needs and capacity. The absence of a complete and approved CFIA Real Property Management Framework contributes to a situation in which accountability for the management of Agency's real property, including the specific roles and responsibilities of corporate functional authorities and the end users, has not been clearly established.

The current oversight of real property is inefficient in correcting  real property deficiencies. The risks associated with divided accountability relate to the management of the Agency's real property portfolio and associated expenses to ensure that operational and policy requirements are met.

Recommendation 1.0:

The CFIA should establish and communicate clear oversight for the management of the real property portfolio to ensure compliance with all applicable legislation, policies, directives and standards.

Finding 2.0: The CFIA Real Property Management Framework is not Complete

The draft CFIA Real Property Management Framework has not been approved and implemented and does not meet the requirements of the Treasury Board Policy on Management of Real Property.

We expected that CFIA would have a Real Property Management Framework (RPMF) in place that conforms to Treasury Board Policy on Management of Real Property requirements and that the RPMF is maintained to support timely, informed real property decisions and strategic outcomes of programs.

The TB Policy on Management of Real Property requirements for an RPMF includes the following:

  • Clear accountability and decision-making structures, including authorities and responsibilities that are consistent with organizational needs and capacity;
  • Policies, practices and processes that comply with federal legislation, regulations and government policies; and
  • Systems that provide relevant program, financial, and real property performance information.

A draft RPMF, prepared by Assets and Security Management Directorate in 2008 provides an overview of CFIA real property management. The draft RPMF has yet to be formally approved and distributed and the specific requirements for an RPMF as described in the TB Policy on Management of Real Property have not been developed or implemented, including:

  • A clear description of the real property accountability and decision making structures;
  • A CFIA Policy on the Management of Real Property (currently in draft form dated November 2009); and
  • A performance management framework has not been developed. Systems that provide relevant program, financial and real property performance information do not exist.

While the draft RPMF is a step in the right direction, CFIA has not met the requirements for a RPMF as described in the TB Policy on Management of Real Property. With the framework and its required components either incomplete or draft form, there are risks to the Agency that result from managers not having a comprehensive and well-communicated RPMF. Overall accountability for real property has not been formalized and clear policy guidance and performance information to guide management decision-making is not in place.

Recommendation 2.0:

The Vice President, Finance Administration and Information Technology (FAIT) should ensure that the draft CFIA Real Property Management Framework and its required components are completed, approved and communicated and are in compliance with the Treasury Board Policy on Management of Real Property

3.3 Risk Management

Finding 3.0: Incomplete Risk Management

Risk management processes are not in place to provide management with risk-based information to support real property portfolio management and decision-making.

We expected to find that CFIA has formal risk management processes in place for real property which includes risk identification and risk mitigation.

The CFIA has specialized real property requirements to deliver its programs and fulfill its mandate. These include laboratories, quarantine and inspection stations that cover plant, animal and food business lines. Risks associated with real property that impact on program delivery as well as health and safety should be managed.

While formal risk management processes exist for capital projects, CFIA risk management approaches are not being applied broadly across the real property portfolio. The Project Risk Management Plan template provides a framework for conducting risk assessments at the project level for major capital expenditures. These templates have been used for capital projects currently under way.

While portfolio risks have been identified in the draft 2009-10 CFIA Real Property Investment Plan prepared by RPS (February 2009), data is not available for RPS management to conduct an assessment of risks or to mitigate the risks identified.

Without a formal risk assessment, it is possible that CFIA would not have appropriate mitigation strategies, for risks, such as:

  • The inability to deliver programs through the use of facilities;
  • Environmental liability occurring at a CFIA site;
  • Risk to health and safety of employees and the public;
  • Inefficient and ineffective use of capital investment in real property; and
  • Ineffective management decisions resulting from inadequate information.

Recommendation 3.0:

The Executive Director, Assets and Security Management Directorate, in collaboration with the Science and Operations Branch, should ensure that CFIA develops and implements a risk management framework and processes for real property.

3.4 Internal Control

Finding 4.0: Limited Investment Planning and Life Cycle Management

Long terms plans are not in place to address facility requirements and to life cycle manage custodial real property assets.

We would expect to find that real property planning and decision making processes are supported by an assessment of the life cycle costs associated with all investment decisions.

The Treasury Board Policy on Management of Real Property requires departments and agencies to acquire, operate, maintain, and dispose of real property to the maximum long-term economic advantage of the government.

Life cycle management entails long term planning to ensure that the assets are protected over their productive life. It includes a consideration of the acquisition, operation, maintenance, replacement and disposal of real property assets. The TB Policy on Management of Real Property requires that an economic and program analysis be undertaken that considers the full life-cycle costs and benefits of real property options.

At the CFIA, acquisition and disposal activities in the past three years has been limited; and given the specialized nature of CFIA laboratories, quarantine and inspection stations, life cycle management is critical.

There is no long term plan to ensure that custodial properties are life-cycle managed at the CFIA. A long term plan should outline the minimum actions required to bring or keep assets at their minimum condition to meet program requirements. Currently funding for major capital projects is reviewed by the Agency's Strategic Investment Board. Real property projects have to compete against projects related to other asset types (IT, fleet,laboratory and other science equipment) and there is no assurance on the funding level for real property in any given year.

At the facility level, independent Building Condition Reports (BCRs) provide reference on what is needed to ensure facilities meet requirements. BCRs were available for all of the custodial labs as of 2009. The BCRs identified 380 priority projects (defined as emergencies; a deficiency or condition occurring already or that will shortly result in the shutdown of the building or support system) totalling $31M that were required for 2009-2010. Although we were unable to determine the actual spending against these priorities; total capital spending amounted to only $14.6M (including stimulus funding) for 2009-2010. The BCRs for quarantine and inspection stations were last updated in 2005.

Facility managers are aware of the need for life cycle based decision making and indicated that due to resource constraints and competing immediate priorities they have been unable to move forward with a structured approach to life cycle management.

The TB Guide to the Management of Real Property suggests a minimum 2% of what it would cost to rebuild an asset is what should be invested annually for its maintenance and repair. Assuming that a built asset will last about 50 years, an additional 2% should be invested in capital projects that renew the life of the asset. The minimum level of annual investment to maintain real property that is in good condition is 4% of replacement value.

Data obtained from RPS, suggested that investment is falling below TB guidance for real property. RPS data indicates that, on the average, less than 1% has been set aside for preventive maintenance and less than 1.5% has been set aside for capital investments. While in 2009-10 and 2010-11 stimulus funding provided short term relief at capital investment level, there is a risk that, in the long term, funding will fall short of TB guidance.

Without the application of life cycle based processes there is a risk that CFIA will not meet program delivery requirements due to inadequate and deteriorating facilities. The lack of formal life cycle processes and long term capital plans places CFIA in non-compliance with the TB Policy on Management of Real Property.

Recommendation 4.0:

The Executive Director, Assets and Security Management Directorate should ensure that CFIA has a long term investment plan that ensures that the Agency has a life cycle management process that complies with the TB Policy on Management of Real Property.

Finding 5.0: Inconsistent Implementation of Information Management Systems

Information Management Systems have not been consistently implemented across the real property portfolio. Systems are not providing management with information on the status of real property assets.

We would expect to find that CFIA has comprehensive Information Management Systems to provide reliable information in support of management decision making. The TB Policy on Management of Real Property requires:

  • An appropriate real property management framework is in place with systems that provide relevant program, financial and real property performance information.
  • The overall performance of real property is regularly and systematically assessed for functionality, utilization, and physical and financial performance.
  • Key performance benchmarks and targets are developed based on appropriate benchmarks.

The management of real property information enables: the integration of real property and financial information; linkages to program objectives and to the management, resources and results structure of the department; and the recording and updating of information in the Directory of Federal Real Property and the Federal Contaminated Sites Inventory.

TB's Directory of Federal Real Property (DFRP) provides a central record and complete listing of all federal real property holdings. The TB Policy on Management of Real Property requires custodial departments to keep a current, complete, and accurate record of the real property they administer in the DFRP. CFIA's real property inventory information is maintained by RPS. RPS also provides annual updates to the DFRP. We found that the status of a number of properties was not displayed consistently between the CFIA database and the DFRP.

TB's Federal Contaminated Sites Inventory includes information on all known federal contaminated sites. The CFIA assessed and identified contaminated sites and the Agency's inventory reported on 11 cases of contaminated sites and these have been cleared.

We were unable to identify any management information systems to track preventive maintenance and performance at CFIA quarantine and inspection stations. Information management systems have not been implemented in all CFIA laboratories. Only one of the five laboratories we visited had fully implemented the most recent facility management software. At two laboratories, the software was purchased in 2005, and is yet to be implemented. Two facilities use paper or spreadsheets to manage their preventive maintenance tasks. National reports summarizing the status of laboratory maintenance activities can not be generated due to the different levels of system implementation.

CFIA has not satisfied the requirements of the TB Policy on Management of Real Property and the Agency is unable to measure and assess the performance of real property assets, and to provide linkages to program objectives.

The inconsistent level of implementation of the information systems results in a lack of reliable data and information needed to allow management to make informed decisions with regard to the acquisition, maintenance and disposal of real property assets.

Recommendation 5.0:

The Executive Director, Assets and Security Management Directorate should ensure that CFIA has an integrated information management system in place that is implemented across all custodial assets and meets applicable Treasury Board policy requirements.

Appendix A: Detailed Audit Criteria

Governance

An appropriate Real Property Management Framework (RPMF) is in place and maintained.

  • CFIA's RPMF exists and supports timely, informed real property management decisions and the strategic outcomes of the program.
  • CFIA's RPMF includes clear accountability and decision-making structures, including authorities and responsibilities that are consistent with organizational needs and capacity.
  • CFIA's RPMF ensures that CFIA real property policies, practices and processes conform to federal legislation, regulations and government policies.
  • CFIA's RPMF provides relevant program, and financial information.
  • Operational plans and objectives are in place to achieve strategic objectives.

Risk Management

Formal risk management processes are in place for CFIA real property.

  • Management has identified and assessed the risks that may preclude the achievement of real property objectives.
  • Risk management measures are in place to address significant risks.

Controls

Policy, programs and procedures are in place to support the consistent implementation of and compliance with TB policies and directives.

  • A CFIA approved real property policy, management framework, manuals and procedures are in place, up to date and reflect TB requirements.
  • CFIA real property guidance material is communicated and meets the needs of CFIA real property staff and managers.
  • Training and development plans are in place, implemented and meet individual and organizational needs.

Lines of communication exist between the organization, users and other external stakeholders.

  • User requirements are identified and documented.

Real Property assets are life-cycle managed.

  • Real Property Assets are managed with a clear consideration of asset life-cycle and for achieving the objectives of the organization.
  • Plans for the management of assets have been documented and implemented and include short and long term time frames for managing assets:
    • Up to date long term capital plan;
    • annual and multi-year budgets with adequate funding;
    • strategic assets management plans; and
    • building management plans.

Comprehensive Information Management systems exist to provide reliable information in support of management decision making.

  • An information system exists for the purposes of maintaining an accurate inventory of CFIA real properties.
  • A comprehensive information management system is in place to support the management and tracking of real property activities. (Accommodation, projects, scheduled and unscheduled maintenance, and interfacing with other property management control systems).
  • All CFIA real property assets are accounted for and the TB Directory of Real Property is up to date for CFIA properties.

CFIA real property assets are managed and protected in accordance with Government of Canada requirements.

  • CFIA exercises sound stewardship of assets in accordance with legislation, regulations and TB policies. (Security, fire, health and safety, environmental, heritage, optimized revenue opportunities and accessibility).
  • CFIA ensures that real property surplus to program requirements is not retained.

A control and oversight function is in place to monitor adherence to TB Policy on Management of Real Property and its associated directives and standards.

  • Performance management framework, including key performance indictors, has been developed.
  • The overall performance of the real property program is regularly and systematically assessed and information related to asset condition, environmental performance, functionality, utilization, and financial performance is provided to Senior Management.

Appendix B: Real Property Asset Summary

(From the Treasury Board's Directory of Federal Real Property)

Laboratories
DFRP Property# Laboratories
30125 Burnaby, BC
32511 Calgary, AB
69563 Charlottetown, PEI
09346 Dartmouth, NS
14990 Lethbridge, AB
29801 Ottawa Laboratory, Fallowfield, ON
14142 Saskatoon, SK
58422 St-Hyacinthe, QC
17130 Sidney, NS
70604 Winnipeg, MB
Quarantine & Inspection Stations
DFRP Property# Quarantine & Inspection Stations
00091 Argentia Vehicle Inspection Station, NL
32597 Boissevain Animal Inspection Corral, MB
14981 Coutts Animal Inspection Station, AB
32596 Emerson Animal/Plant Quarantine, MB
12356 Emerson Inspection Station, MB
13267 Emerson Stockyard, MB
16543 Huntingdon Animal Inspection Station, BC
16119 Kingsgate Animal Inspection Station, BC
76261 Lacolle Animal/Plant Quarantine, QC
13474 Monchy Animal Inspection Station, SK
33945 Nisku Animal/Plant Quarantine Station, AB
13316 North Portal Quarantine/Inspection, SK
36543 Port-Aux-Basque Vehicle Inspection, NL
30210 Windsor Animal/Plant Quarantine Inspection Station, ON
67184 Woodstock Animal Inspection Station, NB
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