Federal building audit finds errors, misspending

The latest review of federal building-maintenance contracts worth almost $6 billion has uncovered several instances of overcharging, missing documentation and record-keeping errors.

The forensic audit of a sampling of transactions under the contracts has triggered reimbursement of tens of thousands of dollars and prompted a more in-depth examination of some expenditures.

The findings represent the latest development in the scrutiny of repair and maintenance contracts with SNC-Lavalin O&M Inc. totalling $5.9 billion for upkeep of 320 federal buildings across the country.

Public Works Minister Rona Ambrose ordered the forensic audit after an initial review turned up a problematic transaction.

In the latest audit, consultant PricewaterhouseCoopers looked at 70 randomly selected expenditures between April 2005 and late March 2010 worth $5.3 million.

In a review of billing, the auditors found SNC 0&M overcharged Public Works in 38 instances totalling $44,244. It also undercharged the department in five cases worth a total of $16,290.

In a number of cases, the company charged Public Works for security services "when there was no documentation to support that security services had been performed/rendered or invoiced," says the audit report.

In another case, SNC O&M did not obtain a credit from a subcontractor for work that was not performed. In turn, the company paid the full amount to the subcontractor and passed the cost on to Public Works.

Public Works says SNC O&M has reimbursed the department $52,000 as a result of billing irregularities discovered by the auditors. In addition, the company has said it will conduct an audit of 100 per cent of the amounts charged in 2009-10 under the maintenance contracts in the areas of design, construction and security.

A Public Works spokesman could not say Thursday whether this audit was complete. However, a departmental plan indicates federal officials expect to see the results in March and address actions to be taken the following month.

In studying the 70 randomly chosen transactions, PricewaterhouseCoopers identified 39 projects where "documentation was inadequate and/or incomplete."

SNC O&M's hard copy and electronic project files were incomplete and did not contain all of the documents to support the amounts charged by the company to the department, says the audit report.

In its response to the auditors' draft findings, the company said, "There are numerous supporting documents that cannot be located in the files."

SNC O&M said the incomplete files were a result of the volume of transactions the company processes each year, "implementation issues" in the first few years of the contract and a lack of archival tools.

The company has pledged to create new systems to ensure every document required by Public Works will be archived.

The auditors also turned up "various types of errors" in records concerning a minority of projects examined, including several incorrect amounts.

In its audit report, completed last August but only recently released publicly, PricewaterhouseCoopers made numerous recommendations to help SNC O&M correct the deficiencies.

The company worked with the department to develop a detailed response with timelines for implementing the recommendations. They also teamed up on training sessions for more than 500 government and company staff to explain the new processes.

SNC-Lavalin declined an interview request. But in an emailed statement, the company said it had co-operated fully with the requirements of the audit "and are confident that we have acted, and continue to act, in the best faith of our client and ultimately, Canadians."

Public Works maintains that contracting out building management "remains the best value" for Canadians.

"While some process improvements needed to be made -- as this review demonstrated -- overall there are clear benefits from this model," the department says in an article about the process on its website.