ARCHIVED - Audit of Facilities Management
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This report presents the findings of the National Research Council Canada (NRC) Audit of Facilities Management. The decision to conduct this audit was approved by the President following the recommendation of the Audit, Evaluation and Risk Management Committee on March 19, 2008 as part of the NRC 2008-09 to 2010-2012 Risk Based Internal Audit Plan. Unlike most federal departments and agencies, NRC owns and operates for the most part its land and buildings which includes 6,920 acres of land and more than 183 buildings totalling more than 5 million square feet of space and representing an estimated current replacement value of more than $1 billion.
Audit objective, scope and methodology
The objective of this audit is to provide overall assurance that NRC manages its facilities in a manner that is compliant with Government of Canada policies and directives as well with NRC policies. The audit covered services and processes pertaining to facilities managed by Administrative Services and Property Management (ASPM) Branch and five Research Institutes located within and outside the National Capital Region.
The period examined covered fiscal years 2003-04 to 2008-09 and was undertaken in two phases with the aid of real property experts. Phase I was completed in 2005 including the drafting of preliminary findings and Phase II of the audit was undertaken in 2008-09. This second phase included an analysis to identify the current relevance of the Phase I findings vis-à-vis new systems and procedures that had been put in place by NRC as well as changes to the Treasury Board real property requirements made in 2006. Also undertaken were interviews with facilities management staff and site visits to five NRC Research Institutes. The same audit objectives and Research Institutes that were included in Phase I of the audit were examined as part of Phase II to ensure continuity and an assessment of relevant changes over time. Finally, facilities management practices in other science-based federal government departments were benchmarked against current comparable practices administered by five other departments.
The scope of the audit excluded all equipment for conducting research. Only equipment that is integral to the operation and maintenance of the buildings and supporting infrastructure (e.g., heating, ventilation, plumbing, etc.) was examined.
The audit was conducted using a series of detailed audit criteria that addressed the audit objectives against which we drew our observations, assessments and conclusions. These audit criteria were derived primarily from the Treasury Board suite of real property policies and directives including the Treasury Board Policy on Real Property, Policy on Long-Term Capital PlansFootnote 1 and the Policy Framework for the Management of Assets and Acquired Services.
Audit Opinion and Statement of Assurance
Within the limitations of the samples drawn and the audit procedures performed, we conclude that overall the application of Government of Canada and NRC policies and directives pertaining to facilities management is adequate in that most areas of practice / process are in compliance but there are some opportunities for improvementFootnote 2.
Opportunities for improvement include: identifying and incorporating more comprehensive performance measures and trend analyses to support facilities investment decisions; expediting the completion of a comprehensive and up-to-date suite of NRC real property policies that are easily accessible and monitored for their application; integrating real property information management systems for the existing asset base; and the development and use of a corporate-wide decision-making protocol that includes standard investment methodology and options analysis.
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 conclusions reached and contained in this report. The conclusions were based on a comparison of the situations as they existed at the time against the audit criteria. The evidence was gathered in accordance with the Treasury Board Policy, directives and standards on Internal Audit, and the procedures used to meet the professional standards of the Institute of Internal AuditorsFootnote 3.
Conclusion and recommendations
By and large, Building Condition Reports undertaken recently, reveal NRC's real property / facilities asset base is between fair and good condition and functionality. One-third have been assessed as being in poor condition; however, over 60 percent of these are storage / service type buildings. The combination of the Long-Term Capital Plan and the annual business plans, which incorporate facilities planning prepared by each IBP, constitutes an effective accountability structure for asset investment planning for NRC. Both documents are presented to the Senior Executive Committee for their review and strategic approval vis-à-vis other requests and NRC priorities. There are nonetheless opportunities for improving the annual business planning process to ensure the use of performance information and trend analysis to support facility investments and their linkages to other NRC strategies. We also found that ASPM and the Regional Directors General responsible for facilities management are still reliant on a number of real property maintenance and management documents that are significantly out-of-date and which have not been widely communicated across NRC.
For those Research Institutes that are fulfilling their own custodial facility management responsibilities, it would appear that reliance is placed on key facility managers who have the knowledge, expertise, locally-developed tracking systems and history with their own facilities to contribute meaningfully to the annual business planning process. However, these local facility management “experts” also represent the greatest risks to the IBP facility management processes. The loss of these individuals (through retirements or leavings to other organizations) could significantly impede their ability to efficiently manage their facilities in the short-to-medium term.
Collectively, the lack of a national, integrated asset information system which includes performance information of existing assets represents a significant opportunity for improving NRC's real property management framework. Without a documented asset performance management process or supporting database, NRC currently places a heavy reliance on human resources rather than on a replicable process. NRC's ability is therefore compromised at a corporate level to collect, report, analyze and benchmark the value of its assets in relation to program objectives. Performance information should consider, for example, asset condition, functionality, use, acquisition, operation and maintenance as well as alternative delivery methods.
Finally, funding constraints are a significant challenge for asset acquisition and life-cycle maintenance. As a result, managers are focusing on “risk management” in the traditional sense of relying less on prevention and more on dealing with problems as they occur or become critical. As noted earlier, approximately one-third of NRC's buildings have been assessed to be in poor condition with a backlog of $170 million in repairs and recapitalization. As well, almost one-half of NRC's total equipment assets have a net present value of zero suggesting that many assets are being used beyond the useful service life. Funds amounting to $19 million which have been allocated to NRC over two fiscal years (2009-10 and 2010-11) under Canada's Economic Action Plan will only address this concern in part.
1. ASPM should consistently identify for the inclusion in the annual business plans for all Research Institutes, Branches and Programs (IBPs) more comprehensive performance measures pertaining to facilities management. This would include trend analysis to support facility / equipment investment recommendations and detailed linkages to other NRC strategies. However, it will be the task of the Senior Executive Committee to ensure they are consistently identified in the IBP business plans and used to support annual resource decision making.
NRC Management Response:
We concur with this audit recommendation. NRC has commenced the process of transitioning from current policies to the new Investment Plan for assets and acquired services. The new policy requires a Real Property Investment Planning Framework to be included in the Investment Plan. The framework document will need to address the links to NRC strategy, risk assessments and mitigation strategies, investment and procurement strategy which will be used to acquire, maintain or dispose and asset or acquired service, life-cycle management costs and complexity and risk assessments for all complex real property projects. The Project Manager of the Investment Plan will take the lead in facilitating this work. Implementation will require the creation of a Real Property Working Group composed of ASPM and IBP representatives by March 2010. Their mandate will be to draft by May 2010 a Real Property Asset Management Framework, as well as the Terms of Reference for an asset management board and to work on a method for capturing life cycle costs. These will be presented to SEC for decision by June 2010.
2. The ongoing development of a comprehensive and up-to-date suite of NRC real property policies and procedures should be expedited and made easily accessible to all IBPs. ASPM should monitor their application NRC-wide including those facilities that reside outside the national capital region and any deviations should be identified for corrective action and reported to senior management.
NRC Management Response:
We concur with this recommendation. ASPM is currently finalizing a suite of real property policies for SEC Review and approval by February 2010. These will be communicated to IBPs and can form a part of the Real Property Asset Management Framework document.
Centralized compliance and oversight, given the current governance structure, would be a new role for ASPM. SEC will be requested to make a decision on how this requirement should be managed when the Asset Management Framework document is presented to them in June 2010.
3. ASPM should develop a nationally-coordinated approach to ensure the collection, analysis and reporting of performance information for facilities management NRC-wide that could include expanding the use of the existing SAP Plant Maintenance module to all IBPs. Whatever approach is adopted, IBPs should be consulted to ensure the information gathered and maintained locally is included so that both local and corporate needs can be met.
NRC Management Response:
We concur with this recommendation. The Real Property Working Group will draft an Asset Management Framework document which will outline an approach for the collection, analysis, and reporting of performance information for facilities management by June 2010.
The expansion of the use of SAP Plant Maintenance Module (PMM) has time and cost implications for NRC. The Real Property Working Group's options will be presented to SEC for a decision on the way forward in June 2010.
4. ASPM should champion the development of a standardized decision making protocol that is based on a life-cycle cost approach for facilities management that includes standard investment analysis methodology and options analysis for corporate-wide application and use.
NRC Management Response:
A readiness assessment for transitioning to the new Investment Plan is currently underway. It appears at this time to indicate that Asset Review Boards will be required to fill a gap in asset investment decision making and prioritization. A full briefing will be made to SEC by February 2010. SEC will be asked to endorse an action plan for the way forward in the management of all NRC assets.
Jayne Hinchliff-Milne, CMA, Chief Audit Executive
NRC Audit Team MembersFootnote 4:
Mark Shwed, CIA, Senior Auditor
Appendix: Potential Overall Ratings
Management Attention Required – significant issues exist that require management's attention.
Needs Improvement – some areas of practices / processes are in compliance with Government of Canada and NRC policies and directives but many deficiencies exist.
Adequate – most of the areas of practices / processes are in compliance with Government of Canada and NRC policies and directives but there are opportunities for improvement.
Strong – all areas of practices / processes are in compliance with Government of Canada and NRC policies and directives. No areas for improvement were identified.
- Footnote 1
The Treasury Board Policy on Long-Term Capital Plans will be rescinded on April 1, 2011 and replaced with the Policy on Investment Planning - Assets and Acquired Services which is now being phased in by a small number of federal departments. NRC will be phased-in during the third wave commencing next year. This has no impact on the findings of this report.
- Footnote 2
See Appendix for the list of potential overall ratings.
- Footnote 3
Although this audit was conducted in accordance with the International Standards for Professional Practice of Internal Auditing, NRC Internal Audit has not undergone an external assessment in the last five years as required by the standards.
- Footnote 4
For both phases of the audit, the NRC audit team was supplemented by different teams of experienced real property experts with audit expertise that were contracted to assist in conducting the audit work.
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