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Public Services and Procurement Canada Internal services: Planned results—2021 to 2022 Departmental Plan

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Internal services are those groups of related activities and resources that the federal government considers to be services in support of programs and/or required to meet corporate obligations of an organization. Internal services refers to the activities and resources of the 10 distinct services that support program delivery in the organization, regardless of the internal services delivery model in a department. These services are:

• management and oversight services
• communications services
• legal services
• human resources management services
• financial management services
• information management services
• information technology services
• real property management services
• materiel management services
• acquisition management services

Planning highlights

To better align resources to meet departmental priorities, Public Services and Procurement Canada (PSPC) will continue embedding integrated business planning across the department through the implementation of its evergreen integrated business plan, which it launched for the first time in May 2020. At the same time, the department will ensure information regarding its activities and results is more effectively communicated to Parliament and Canadians.

PSPC continues efforts to ensure compliance with proactive publication requirements under the Access to Information Act . To further support the government's commitment to openness and transparency, PSPC is developing a departmental transparency strategy to provide Canadians with relevant and timely information related to the department's mandate. As part of this approach, PSPC has published detailed information online about COVID-19 contracts.

The department is continuing to modernize the way it engages with Canadians and its employees by enhancing proactive communications approaches and its use of social media platforms to better reach its varied audiences. In 2021, management of PSPC web content will be centralized, allowing better integration of messages and supporting a user-centric, accessible and task-based approach to the provision of information and services. Communication approaches will be informed by the diverse information needs of PSPC employees, clients and partners, and the public, and aligned with the department's Integrated Business Plan and support the Minister's mandate and priorities.

Given PSPC 's role as common service provider, the department has a unique opportunity to be a leader and support its clients in reconciliation efforts. Important action is underway across the department, however, an overarching strategy is needed to ensure a coordinated approach across the organization and with Indigenous partners. To meet this need, the Reconciliation and Indigenous Engagement Unit is developing a Reconciliation Strategy to support all PSPC reconciliation and Indigenous engagement activities and identify opportunities to develop and enhance policies, programs and initiatives that will advance reconciliation.

With respect to diversity and inclusion, PSPC will continue the dialogue it initiated in 2020 to 2021 with diverse groups of employees on their lived experience at the department. This dialogue will allow the department to frame and refine its actions related to shifting departmental culture; improving the recruitment, development and promotion practices; and addressing barriers in the delivery of programs and services. The department's executives and middle management will continue their learning path on unconscious bias and anti-racism, with a view to engaging all PSPC employees on this important topic. PSPC will continue to develop targeted recruitment and development strategies and provide services, tools, and expert advice to hiring managers to promote a more inclusive workplace and to ensure the department's workforce reflects the diversity of Canada's evolving population.

In support of mental health, PSPC will continue to provide mental health tools for managers and employees, virtual access to all mental health and well-being services and mental health ombudsman's individual consultations, as well as increase mental health visibility and awareness.

PSPC is looking to optimize security throughout the department by continuing to deliver on a 3-year Departmental Security Plan and building security specialist capacity and expertise across the department. This will be accomplished through program transformation initiatives or leading innovative projects taking into account the evolving security landscape.

In support of its implementation of the Treasury Board Secretariat Policy on Service and Digital , PSPC will continue engaging with the service providers within PSPC branches to establish service management, service delivery practices, communities of practice, governance as well as systems that will enable the department to access its "one PSPC " vision in a predominantly digital and cloud ready landscape.

There are a number of risks that could impact the successful delivery of internal services.

Data analytics

There is a risk that PSPC will not be able to readily access reliable data and will not have the expertise needed to analyze it in order to make timely and informed decisions. To mitigate this risk, PSPC will implement the required data repositories like data warehouses, and will continue to invest in other data analytics capacity tools and related strategies. In addition, PSPC 's digital services will implement its recently-developed Human Resources Strategy, which will focus on developing capacities within data analytics, data science and artificial intelligence.

Departmental coordination

There is a risk that the diversity of PSPC 's varied business lines will impact the department's ability to collectively plan, and to make resourcing decisions that will achieve departmental results and support a culture of "One PSPC ". To mitigate this risk, PSPC will continue strengthening its department-wide integrated planning process, which includes the integrated business plan. This will improve PSPC 's common approaches to strategic and operational planning, budgeting, resource allocation, and performance monitoring and reporting. PSPC will also take advantage of opportunities for increased collaboration by strengthening its strategic policy function, promoting and reinforcing the "One PSPC " approach in planning and communication, and continuing to adapt training and governance structures. This will ensure a better alignment of resources with core priorities and more consistency in client service experiences.

Departmental risk management culture

There is a risk that PSPC 's departmental risk management culture change initiative will not foster the adaptability needed to seize opportunities and minimize threats in an integrated manner, while also maintaining the resilience required to safeguard trust in its ongoing ability to deliver. To mitigate this risk, PSPC has undertaken a number of important initiatives. These include developing a coherent and strong risk management framework, regularly renewing the department's risk profile in order to communicate key strategic risks, and developing a new risk tolerance approach, which will be progressively implemented across PSPC through stakeholder and partner engagement on pilot projects.

PSPC will continue building collaborative relationships between its integrated risk management and integrated business planning units, as well as business line specialists, in order to capture and communicate opportunities and threats to the department's operational priorities, as well as in managing risks linked to shared accountabilities with other departments.

Digital transformation

There is a risk that PSPC will not continue to have the modern and reliable systems, expertise and cyber safeguards needed to effectively operate and deliver services in a predominantly digital environment, which now includes a much increased full-time and department-wide reliance on telework. To mitigate this risk, the department has implemented new virtual team environments and collaborative tools, including Teams and other Microsoft 365 applications. PSPC also created the Cloud Competency Centre, and is currently engaging with the private sector in order to establish delivery systems that will enable the department to acquire the in-house expertise needed to improve cloud readiness. PSPC will also implement the recently developed Digital Services Human Resources Strategy, the information technology (IT) Project Management Framework, and a cybersecurity management action plan to adapt to the changing digital environment.

Recruitment and retention

There is a risk that PSPC will not be able to attract and retain the specialized, skilled and diverse workforce needed to deliver timely and quality services to its clients. To mitigate this risk, PSPC has implemented a cohesive, department-wide People Management Plan that is aligned with the department's integrated planning processes. This plan is helping to prioritize human resources programs and strategies, and to integrate leadership development and succession planning. Maintaining and refreshing the People Management Plan, as well as continuing the implementation of other staffing and talent management modernization initiatives, will enable PSPC to attract and retain the specialized and diverse staff required to deliver on its plans and priorities. These initiatives, along with ongoing efforts by the Office of the Mental Health Ombudsman as well as regular check-ins with staff, seek to mitigate impacts of a work environment currently experiencing rapid and frequent changes. PSPC continues to take steps to address challenges around workload management and promote work/life balance.

Planned budgetary financial resources for internal services

The decrease in net planned spending is mainly due to the completion of information technology projects and a decrease in spending for some projects in subsequent years such as the Government of Canada trusted platform project and the digital convergence project. The net decrease is also due to the end of incremental funding for human resources services to employees for the pay administration initiative. Funding will be adjusted should future approvals be received.

Financial, human resources and performance information for Public Services and Procurement Canada's program inventory is available in the Government of Canada InfoBase .

Planned human resources for internal services

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Integrated business and human resources planning enables the management of talent that organizations need to successfully deliver programs and services to Canadians. This online self-paced course presents the principles and concepts behind integrated business and human resources planning (IBHRP) in the federal public service. Participants will learn about the benefits of human resources planning, key considerations for integrated planning, and workforce management strategies that can help achieve business objectives.

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• defining IBHRP
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• reviewing the legal accountabilities, roles and responsibilities of key players
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• reviewing the legislative framework

Legacy course code: H300

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Integrated Business Planning

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Audit of the Management of Procurement Services

Presented to the Departmental Audit Committee (DAC) July 11, 2022

Table of Contents

Introduction, areas for improvement, internal audit conclusion and opinion, statement of conformance, audit purpose and objectives, audit considerations, approach and methodology, governance and compliance, procurement processes.

• Human Resource Planning and Training

Transition to the new Directive on the Management of Procurement

Appendix a – audit criteria, executive summary.

The procurement function serves as a mechanism for organizations to acquire the goods and/or services they require to advance organizational needs and priorities. Procurement methods include: sole-source contracting, competitive contracting, supply arrangements and standing offers, purchase orders, and acquisition cards.

Natural Resources Canada (NRCan) is subject to a suite of procurement-related instruments that include legislative, policy, and regulatory instruments, which are managed by the Treasury Board of Canada Secretariat (TBS) and its central purchasing agents, Public Services and Procurement Canada (PSPC) and Shared Services Canada (SSC). These instruments outline the responsibilities for managing and executing procurement activities. Of note is the ongoing departmental transition to a new overarching Treasury Board (TB) policy and associated directives that cover the management of procurement. Fully effective May 13, 2022, the new Policy on the Planning and Management of Investments and the Directive on the Management of Procurement serves as the main procurement related policy suite.

Within NRCan, the Assistant Deputy Minister (ADM) of the Corporate Management and Services Sector (CMSS) is the Senior Designated Official (SDO) with authority and functional responsibility for procurement related activities. The SDO is responsible for supporting the Deputy Minister’s accountability for all requirements detailed within the TB Policy and Directive on the Management of Procurement.

Within CMSS, the Finance and Procurement Branch (FPB) is responsible for the core operations of the procurement function. All managers across all sectors have delegated contracting authority; however, it is restricted. The Lands and Minerals Sector (LMS) through the Surveyor General Branch and the Polar Continental Shelf Program, and the Communications and Portfolio Sector (CPS) hold increased procurement-related delegated authorities for specific purposes, such as procuring land surveys and printing services. While the FPB holds primary responsibility for procurement oversight and activities, all sector business owners are responsible for planning their procurement activities and ensuring that requests are submitted for action.

The objective of this audit was to assess the effectiveness and efficiency of management processes related to the procurement function, and the adequacy of governance over procurement operations, as it relates to meeting the needs of the Department.

Overall, FPB has established oversight mechanisms for procurement activities at the operational level to facilitate compliance with policy requirements, and procurement activities and processes generally comply with government policy requirements. The Department has also made progress in implementing action plans to address the recommendations from the recent Office of the Procurement Ombudsman (OPO) Review. In addition, FPB has made significant efforts to implement the COVID-19 Vaccination Policy for Supplier Personnel, which came into effect in November 2021.

The Department has also designed and implemented processes and procedures in support of procurement activities, and this information is readily available to sectors/business owners. Despite delays in processing, business owners conveyed their overall satisfaction once their procurement requests were actioned.

As part of the transition to the new TBS Directive on the Management of Procurement, the Department has developed a Procurement Management Framework.

There is a need to enhance governance for strategic and integrated procurement planning and to encourage active participation by the sectors. Improvements are needed to better define the roles and responsibilities of the Procurement Policy, Analysis and Reporting Unit (PPAR) and the Procurement Services Unit (PSU), to enhance communication and collaboration.

In addition, changes are required to ensure that procurement-related guidance is regularly reviewed and updated, constraints in the current procurement processes are examined, and service standards are evaluated for relevance and potential data gaps to address any performance challenges. Further, there is a need for FPB to improve and strengthen its communication mechanisms with sectors.

Additional work is required to document FPB’s human resources (HR) and succession planning and monitoring processes; to enhance staff training requirements; and to strengthen processes for knowledge transfer and sharing. These actions would support resourcing needs, enhance the staff training complement, and ensure that potential knowledge disparities between staff members are reduced.

In my opinion, the Department has elements of an effective procurement function and some adequate oversight mechanisms but a number of improvements are required to enhance the efficiency and effectiveness of management processes. Additional opportunities exist to formalize and strengthen HR and succession planning processes, and training initiatives.

In my professional judgement as Chief Audit Executive, the audit conforms with the Institute of Internal Auditors' International Standards for the Professional Practice of Internal Auditing and the Government of Canada’s Policy on Internal Audit, as supported by the results of the Quality Assurance and Improvement Program.

Michel Gould, MBA, CPA, CIA Chief Audit and Evaluation Executive July 11, 2022

Acknowledgements

The audit team would like to thank those individuals who contributed to this project and particularly employees who provided insights and comments as part of this audit.

The procurement function serves as a mechanism for organizations to acquire the goods and/or services they require to advance organizational needs and priorities. Procurement methods include: sole-source contracting, competitive contracting, supply arrangements and standing offers, purchase orders, acquisition cards, and temporary help services.

Within the Government of Canada, procurement activities are governed by a complex series of legislative, policy, and regulatory instruments, managed by the Treasury Board of Canada Secretariat (TBS) and its central purchasing agent, Public Services and Procurement Canada (PSPC). Integral instruments for financial management and procurement activities include: the Financial Administration Act (FAA), Government Contracts Regulations, and the Treasury Board (TB) Contracting Policy. Additional policies and directives support these instruments, such as the TB Policy on Green Procurement, the TB Directive on Government Contracts, including Real Property Leases, in the Nunavut Settlement Area, and requirements defined to ensure that legal obligations are adhered to in modern treaties (Comprehensive Land Claim Agreements) relating to procurement activities. These instruments serve to provide direction, and when in compliance with these instruments, procurement activities would be conducted in a fair and transparent manner, provide value for money, and demonstrate sound stewardship.

Natural Resources Canada (NRCan) is subject to these instruments, including the TB Contracting Policy.  Fully effective May 13, 2022, a new overarching policy, the Policy on the Planning and Management of Investments and its associated directives covers the management of procurement, investment planning, real property, and materiel management. This new policy suite and associated directives replace the TB Contracting Policy, and previous policy coverage in the listed areas.  They serve as the main procurement related policy suite. Currently, NRCan is in the process of transitioning to the new policy suite and its associated directives, which includes designating a senior official (termed the Senior Designated Official - SDO) to be responsible for supporting the Deputy Minister’s accountability for all requirements under the new Policy, and developing and implementing a departmental Procurement Management Framework (PMF).

NRCan has designated the Assistant Deputy Minister (ADM) of the Corporate Management and Services Sector (CMSS) as the SDO with authority and functional responsibility for procurement related activities. These activities are managed by the Finance and Procurement Branch (FPB) and its functional units, the Procurement Services Unit (PSU) and the Procurement Policy Analysis and Reporting Unit (PPAR). Outside of FPB, the Lands and Minerals Sector (LMS) through the Surveyor General Branch and the Polar Continental Shelf Program, and the Communications and Portfolio Sector (CPS) hold additional procurement related delegated authorities beyond those held by other sectors. These delegated authorities are held for specific purposes, such as procuring land surveys and printing services. While the FPB holds primary responsibility for procurement oversight and activities, all sectors are responsible for planning their procurement activities and ensuring that requests are submitted to PSU for action.

Generally, items below a monetary threshold of $5,000 can be acquired through the use of an acquisition card. As of May 24, 2022, this limit was increased to $10,000. All other procurement requests must be submitted to FPB through the eProcurement contracting system, except for those initiated and managed by sectors with special procurement delegations for specific purposes as stated above. The eProcurement system is a request intake system used by CMSS that interfaces with the AMI system to track and assign requests to procurement officers. NRCan’s delegated authority for procuring goods, services, and construction internally, without the support of PSPC, is $3.75M for services sourced competitively ($200K sole source), $750K for construction sourced competitively ($100K sole source), and for contractual arrangements, $500K for services and $25K for goods. Requests exceeding these thresholds are processed by PSPC unless specific authorities are obtained through a TB Submission.

The Office of the Procurement Ombudsman (OPO), an independent office within PSPC that assesses whether procurement practices support the principles of fairness, openness, and transparency, recently completed an external review of NRCan’s procurement practices as part of its five year review process that includes 20 federal departments. This external review assessed NRCan’s procurement activities and compliance, in particular for areas in evaluation criteria and selection plans, solicitation documents, and evaluation of bids and contract award, for contracts awarded between January 1, 2018 and December 31, 2019. Given this recent review, the audit took into account the review results, including recommendations and actions taken by CMSS, in order to avoid duplicated efforts in these areas.

During the audit’s scope period (January 1, 2020 to March 31, 2022), 13,849 procurement requests were submitted through the eProcurement system; 8,972 requests were completed; 273 requests were in progress; 1,263 requests were recalled by the originator; 188 were not yet assigned; 136 were pending IT review. This totals $218,104,928.18 in completed requests for this period. This excluded contract amendments and task authorizations, which do not normally go through eProcurement.

Table 1 – Procurement Requests

The audit team recognizes that this scope period coincided with the COVID-19 pandemic, which impacted the regular operations of the procurement function. However, this did not impact the ability to carry out the audit within the planned timeframe.

This audit was included in the 2021-2026 Integrated Audit and Evaluation Plan, approved by the Deputy Minister on May 5, 2021.

The objective of the audit was to assess the overall adequacy of governance, management processes and controls supporting the implementation of a department-wide plan to fulfill the Department’s Open Government obligations and further facilitate the delivery of its broader mandate.

Specifically, the audit assessed whether:

• Adequate governance and oversight mechanisms exist to provide strategic and operational guidance, enable the transition to the new policy suite, and facilitate compliance with GOC policies and guidance;
• Effective and efficient business processes and communications mechanisms are in place, and are operating effectively to support NRCan’s procurement needs and activities; and
• Effective resource planning, succession planning, and capacity building processes and mechanisms exist, and that they are operating effectively to support NRCan’s procurement function.

A risk-based approach was used in establishing the objectives, scope, and approach for this audit engagement. A summary of the key underlying potential risks that may impact the effective management of NRCan’s procurement services include:

• Adequate governance structures and efficient business processes to manage the Department’s procurement function and activities in compliance with relevant government policy instruments;
• Effective processes and mechanisms to transition to the new TB policy suite;
• Clearly defined roles, responsibilities, and accountabilities pertaining to procurement processes and activities;
• Effective mechanisms that enable frequent and timely two-way communication between sectors and the procurement function;
• Effective human resource planning, including succession planning, capacity building, and training to ensure that the Department’s procurement activities are well supported; and
• Effective knowledge transfer processes to ensure that pertinent information is retained within the procurement function. 

The scope of the audit focused primarily on FPB/CMSS procurement processes and activities in compliance with existing government policy requirements, their capacity to advance departmental procurement priorities and needs, and their ability to support sectors in delivering on their objectives through procurement activities. The audit also included the procurement activities managed by sectors who hold special procurement related delegations. Further, the audit examined FPB’s activities for transitioning to the new Directive on the Management of Procurement.

The audit examined procurement activities from January 1, 2020 to March 31, 2022, in order to include the most recent activities and processes. The audit did not assess or provide an opinion on procurement evaluation results as this was assessed in the OPO external review, and did not include construction contracts or procurement activities that fall outside of the scope of NRCan’s authorities, such as those procured through PSPC or Shared Services Canada (SSC). However, the audit examined the advice provided to sector clients and internal processes that are used for requests sent to PSPC and SSC.

The scope of the audit did not examine acquisition cards and related processes, due to recent and ongoing continuous audit coverage in this area, nor did the audit examine the directives within the new TB policy that do not pertain to procurement. 

In addition, the audit considered the methodology and results of recent internal control assessments conducted by the Financial Policy, Reporting and Internal Controls Division within CMSS.

The results of other previous advisory, audit, and evaluation projects on related topics were also considered where deemed relevant in order to inform the audit and reduce duplication of efforts.

The approach and methodology used in this audit followed the Institute of Internal Auditors' International Standards for the Professional Practice of Internal Auditing (IIA Standards) and the TB Policy on Internal Audit. These standards require that the audit be planned and performed in such a way as to obtain reasonable assurance that audit objectives are achieved. The audit included tests considered necessary to provide such assurance. Internal auditors performed the audit with independence and objectivity as defined by the IIA Standards.

The audit approach included the following key tasks:

• Interviews with key FPB personnel and sector representatives;
• A review of selected key documents, business processes, and communication materials;
• File review of a sample of procurement requests and completed files - a judgmental sample of 25 procurement files (10 sole source contracts for goods under $25K and services under $40K, 15 competitive) was reviewed and assessed for appropriate levels of financial signing authority, sufficient documentation on sole source contracts, evidence of solicitation for competitive contracts, completion of security requirements where applicable, and proactive disclosure where applicable; and
• Walkthroughs of key procurement processes, such as the contracting process and the quality assurance process.

The criteria were developed based on key controls set out in the Treasury Board of Canada’s Audit Criteria related to the Management Accountability Framework – A Tool for Internal Auditors, in conjunction with the TBS Directive on Procurement, and relevant associated policies, procedures, and directives. The criteria guided the fieldwork and formed the basis for the overall audit conclusion.

Appendix A summarizes the detailed audit criteria.

The conduct phase of this audit was substantially completed in March 2022.

Please refer to Appendix A for the detailed audit criteria. The criteria guided the audit fieldwork and formed the basis for the overall audit conclusion.

Findings and Recommendations

Summary finding.

Overall, FPB has established oversight for procurement activities at the operational level to facilitate compliance with policy requirements. While governance structures and mechanisms to manage the Department’s procurement activities are in place, they are not adequate to provide strategic and operational guidance, and are not being leveraged or used consistently. There are also opportunities to enhance the annual procurement planning process to ensure that procurement priorities are communicated and utilized to support strategic and integrated procurement planning.

Roles, responsibilities and accountabilities related to the procurement process are clearly defined, documented, and communicated; however, they are not all up-to-date. In addition, PPAR and PSU have an opportunity to better define their internal roles and responsibilities in order to improve communication and collaboration.

Procurement activities and processes generally comply with government procurement policy requirements. In addition, FPB has made progress in implementing action plans to address the recommendations from the recent OPO Review, and is on track to meet most timelines. FPB has also made significant efforts to implement the COVID-19 Vaccination Policy for Supplier Personnel, which came into effect November 2021.

Supporting Observations

Effective governance and oversight mechanisms should be in place to provide strategic direction and to ensure compliance with Government of Canada policies and guidance. The audit examined whether governance structures and mechanisms for procurement activities are clearly defined, provide strategic and operational direction, and provide oversight for the Department’s procurement activities, including compliance with relevant government policy instruments. Further, the audit examined whether roles, responsibilities, and accountabilities related to the procurement process are clearly defined, documented, and communicated to relevant parties.

Governance and Oversight

At the operational level, the primary oversight mechanism over procurement activities is the quality assurance (QA) function conducted by PPAR. Procurement files are reviewed and assessed to ensure compliance with government policy instruments. Deficiencies in the processing of procurement files are identified and efforts are made to correct issues through training and awareness. Files are generally reviewed and assessed after completion; however, there are instances where PPAR conducts QAs prior to tendering to ensure that required elements are included when processing the procurement requests. PPAR also monitors and reports on departmental procurement activities; this includes mandatory reporting such as on procurement activities related to Comprehensive Land Claim Agreements and other modern treaties to Indigenous Services Canada, and discretionary reporting.

There is currently no designated governance committee being used for strategic procurement planning. Previously, the ADM-level Procurement Review Board (PRB) served as the governance body for reviewing and providing recommendations or direction on complex and high risk procurement activities, with the ADM CMSS/ Chief Financial Officer (CFO) making the final decisions. As the number of decisions being brought to PRB declined, and as the committee was mainly being used for secretarial approval of procurement activities, it was dissolved in 2020.

The ADM-level Departmental Operations Committee (DOC) was identified as the appropriate forum for the ADM CMSS/CFO to bring forward procurement issues for discussion as needed, at their discretion. Since the DOC’s inception in April 2021, there have been no specific discussions on procurement issues. The audit team noted that procurement issues have been discussed at the DG-level Finance and Real Property Committee (FRPC). This includes an update on procurement, such as completed, ongoing, and planned actions for addressing the high volume of unassigned requests and workload. Procurement issues are also discussed as part of CMSS’ sector management committee meetings, and at a recent Senior Management Committee meeting held in early 2022. These efforts provide a degree of oversight over procurement activities; however, they are not sufficient to provide strategic direction for the function.

Strategic Procurement Planning

FPB leads an annual procurement planning exercise in consultation with most of the sectors. Requests for information (call-outs) and a procurement planning template are sent to Directors General at the beginning of the fiscal year to solicit information about anticipated complex procurement requirements. The template contains information on required procurement, anticipated contracts with former public servants, and information on anticipated procurement in the Nunavut Settlement Area. This information is intended to enable the PSU to plan, prioritize, and manage their requests by ensuring capacity, managing workload, and optimizing bulk purchases or standing offers for efficiencies, and to support PPAR with their various reporting requirements. Guidance information on the planning exercise is provided to employees on the departmental intranet, The Source.

Although there is a documented procurement planning process, the exercise has not been leveraged or used consistently, and procurement planning information is not effectively solicited/or received from sectors. FPB indicated that many sectors do not respond to the request for procurement requirements, and those that are returned to FPB often do not contain a complete list of planned procurement requirements. Ideally, these plans would allow PSU to inform sectors’ needs and priorities into their own activities and allow them to assess internal capacity requirements. Without a collaborative approach and sector participation to gather information for procurement planning, this may limit procurement planning at the strategic level, and procurement prioritization at the operational level.

Sectors indicated that procurement planning happens at the working level within sectors and is not well integrated with other planning functions in the Department. Over the past year, FPB has made efforts to meet with sectors to acknowledge and to address the backlog of procurement requests by holding engagement sessions at sectors’ management committee meetings. These discussions include prioritization of unassigned requests, the state of procurement, and a broader discussion about the results of the Department’s integrated business planning exercise.

As per the TB Policy on the Management and Planning of Investments, departments are required to ensure that departmental investment planning is integrated with other functions, including procurement, real property, and materiel management. NRCan has been making progress towards developing an investment plan management framework that includes procurement considerations and alignment with department's integrated business planning activities. These actions are in response to the findings and recommendations from the recent Audit of Strategic and Operational Planning Process (2019) and the internal controls assessment on investment planning (2020). As part of implementation of the framework, the Department will be initiating a pilot approach to investment planning, which includes an enhanced and more integrated procurement planning exercise.

Roles and Responsibilities

The key participants in the procurement process are the sectors/business owners and the contracting authorities. A business owner (or sector client who uses FPB’s procurement services) is an individual who is responsible for the business or program area for which the project, procurement, or program is established. A contracting authority is a person who has delegated contracting authority to enter into a contract or contractual arrangement on behalf of a department or agency. The procurement officers within the PSU are all contracting authorities. Programs with special delegations for procurement are also contracting authorities. PPAR provides policy guidance on the operations of the procurement function.

Roles, responsibilities, and accountabilities related to the procurement process are clearly defined documented and communicated to relevant parties via the departmental intranet, The Source. However, this information has not been updated since 2020, with some documents last updated in 2015 and 2018. Business owners interviewed during the course of the audit indicated that they are aware of their roles, responsibilities, and accountabilities relating to procurement, but they expressed a need to be informed of any relevant changes.

Within the procurement function, PPAR and PSU have an opportunity to better define expectations of their internal roles and responsibilities in order to improve communication and collaboration, especially with the changes to procurement procedures resulting from the implementation of the new Directive. This includes a disparity in expectations regarding updating and maintaining procedural and guidance documents (e.g., desktop procedures), and for engagement with business owners on changing procedures.

Procurement activities and processes tested as part of the audit generally comply with government procurement policy requirements. Specifically, testing included: verification of a valid Section 32 approval; security requirements checklists on file; Contract Planning and/or Advance Approval (CPAA) on file; verification of sole source justifications (where applicable); and proactive disclosure requirements. This testing did not duplicate the efforts of the OPO external review, which focused on procurement activities and compliance with government policy requirements, in particular for areas in evaluation criteria and selection plans, solicitation documents, evaluation of bids, and contract award. In addition, the oversight provided by PPAR, through the QA review function and the monitoring and reporting of procurement activities helped facilitate compliance. There were no significant deficiencies or noncompliance identified in the sample files reviewed for the audit.

FPB has established an internal working group and distributed tasks to procurement officers for implementing action plans in response to the eight recommendations from the recent OPO external review. At the end of March 2022, two recommendations regarding clarity on Indigenous requirements and updating Desktop Procedures were self-assessed by FPB as complete and the other six were in various stages of implementation. The outstanding recommendations include:

• establishing a quality control process to ensure mandatory criteria for bids are defined and communicated;
• updating internal guidance for the development of bid evaluation criteria and bid selection methodologies;
• establishing a process for and documenting communication to suppliers for prior to bid closing, for contract aware notices, and for sending regret letters;
• establishing processes to ensure consistent instructions for bid evaluators; non-compliant bids are disqualified and not further assessed; and technical evaluations adhere strictly to the evaluation criteria and scoring grids in solicitations;
• establishing processes to ensure bid evaluations and procurement files are appropriately documented; and
• establishing a process to review planned procurements to ensure aggregate requirements are not inappropriately divided to circumvent controls and / or existing agreements.

The implementation of all action plans related to the OPO Review, such as updating internal guidance for the development of evaluation criteria, establishing processes to ensure that evaluations are appropriately documented, and updating Contracting Desktop Procedures, will allow FPB to continually assess its operations and maintain updated documentation for compliance and alignment with government policy instruments. FPB has indicated that they are on track to meet most implementation timelines.

In November 2021, the COVID-19 Vaccination Policy for Supplier Personnel (the Vaccination Policy) came into effect. Under this policy, departments are required to ensure that solicitation and contracts for new procurement requirements include appropriate clauses regarding vaccination certification; that solicitation documents for active procurements (not yet closed) be amended to include the clauses related to vaccination certification; and that suppliers of existing contracts within the scope of the Vaccination Policy be issued letters regarding the new requirements. Guidance from TBS and PSPC continually changed as departments were responding to these requirements. NRCan’s FPB took immediate steps to address the Vaccination Policy by communicating the requirements and implications to business owners and contracting authorities on how to apply the policy; revising and updating existing templates for bid solicitation; notifying suppliers from existing contracts to obtain signed certification if applicable; and verifying and tracking bidder responses in a central repository for monitoring and reporting purposes. FPB has, therefore, made significant efforts to implement the Vaccination Policy, in light of short timelines and changing requirements. This was done while managing existing operational requirements for procurement and while preparing for the transition to the new Directive on the Management of Procurement.

Risk and Impact

In the absence of a clearly defined governance mechanism for procurement, a collaborative approach and sector participation to gather sector information for procurement planning, departmental procurement activities may not be integrated and aligned with overall sector and departmental objectives and strategies.

A lack of clarity on roles and responsibilities within FPB for updating information, guidance, and templates, and for engagement with business owners may result in inaccurate and/or outdated information being utilized by procurement staff throughout the process, and business owners not receiving the support and guidance they require.

Recommendation

Recommendation 1: It is recommended that the ADM of CMSS:

• Define and implement a governance mechanism for strategic procurement planning, including leveraging the pre-existing committees for oversight and direction;
• Establish a mechanism to solicit sector input to enhance strategic and integrated procurement planning; and
• Define and clarify roles and responsibilities between FPB’s PPAR and PSU.

Management Response and Action Plan

Management agrees with Recommendation #1 .

A: The NRCan Procurement Management Framework (PMF) will identify the existing Finance and Real Property Committee (FRPC) as the primary governance body that can provide strategic oversight and direction; as well as the Departmental Operations Committee (OC) where FRPC or the Senior Designated Officer (CMSS ADM/Chief Financial Officer) may present high-risk procurements, as needed, for consideration. The PMF and FRPC Terms of Reference will be presented to FRPC and the SDO for endorsement by September 2022.

Position responsible : Senior Director, Finance and Procurement Services

Timing: September 2022 for the NRCan PMF to be completed and the FRPC Terms of Reference updated and endorsed.

B: In June 2022, FPB launched a new comprehensive Annual Procurement Plan exercise, including soliciting and considering sector input, that both supports how the Department plans and manages investments while reflecting a strategic approach to departmental procurements. It is part of the implementation of the TBS Directive on the Management of Procurement and is also consistent with the messages shared during the Integrated Business Plan (IBP) exercise that information gathered would be broadened to enhance planning. Procurement Planning processes for FY 22/23 are aligned with Financial Situation Reports (FSRs) and will continue to be aligned with the FSR exercise going forward. In preparation for the next IBP cycle (FY 23/24), FPB will work collaboratively with the Planning and Operations Branch, leverage the same tool and advance planning further.

Timing : Completed June 2022. The mechanism to solicit sector input to enhance strategic and integrated procurement planning (i.e., Annual Procurement Plan) was developed and launched on June 8, 2022. The process is ongoing and aligns with FSRs.

C: The NRCan PMF will outline the roles and responsibilities between PPAR and PSU as well as those of Business Owners.

Timing : September 2022 for the NRCan PMF to be completed and endorsed.

Overall, documented processes and procedures have been established in support of procurement activities; however, certain elements are not working efficiently or effectively to support the timely execution of activities, resulting in significant delays within the process that impact business owners’ ability to meet their needs and attain their objectives.

In addition, opportunities exist to ensure that guidance (including procedural documentation, flowcharts, and templates in support of procurement activities) is regularly reviewed and updated to ensure that business owners are leveraging the most current materials in support of their activities. There is also an opportunity to evaluate service standards for relevance, address potential gaps in the data collected, and leverage this information to address performance challenges.

FPB has established mechanisms and processes in order to communicate with business owners; however, there is an opportunity for FPB to improve and strengthen its communication mechanisms and to provide business owners with more consistent and timely communications.

Efficient and effective business processes should be in place to support the management of procurement needs and activities. The audit examined whether planning, prioritization, and communication processes and mechanisms existed, and whether these were being effectively utilized to address and manage business owners’ procurement needs and activities. Further, the audit examined whether processes existed to address procurement requests and conduct procurement related activities to support business owners in delivering on their objectives.

Documentation of Procurement Processes

FPB has defined and documented both internal procurement procedures to be utilized by staff members, and external processes to be leveraged by all business owners with procurement needs. Internal procedures include the PSU desktop procedures, the PPAR reporting standards, QA procedures, and a QA template tool. Internal procedures are sufficient and enable FPB staff to effectively execute their procurement-related responsibilities.

External procurement processes are in place for planning, purchasing goods and services with CMSS’ support, and contract amendments. Further, FPB has developed templates in support of processes, and visual process flowcharts depicting business owner and other party involvement, such as IT, vendors etc. Information available on the departmental intranet, The Source, provides guidance and expected service standards for processing requests to business owners to support them with their procurement needs and activities, and adequately highlights their roles and responsibilities throughout the process. This information is communicated to all sectors via The Source, however, this information is not regularly reviewed or updated to ensure its continued accuracy and relevance. In some instances, FPB has provided guidance to sectors with special delegations, however, there is no specific and updated guidance readily available on The Source or through other information sharing forums.

Procurement Planning and Prioritization

During the audit scope period, the procurement planning process was not regularly conducted or operating as intended, and was subsequently impacting PSU’s ability to adequately plan, prioritize, and manage procurement related needs and activities. This has resulted in procedural ‘bottlenecks’ that are occurring before procurement tickets are assigned to officers for processing. Further, it was indicated by PSU that the information yielded from this exercise is not adequate to allow for the effective management of procurement requests and planning of resourcing needs. As a result, the eProcurement system is the primary mechanism leveraged by FPB to plan, manage, and manually assign tickets to staff. Ticket assignment is based on a first in, first out process, the complexity of the ticket, and staff availability. Staff further prioritize their requests based on workload and ticket urgency. In light of the increased procurement request volume and internal FPB capacity issues, FPB engaged with senior management to proactively prioritize their procurement needs, including needs relating to new programming.

FPB does not regularly solicit the procurement plans and priorities from business owners, apart from the annual planning exercise with limited sector participation. Most business owners interviewed for the audit indicated that the planning process does not meet their needs. Some business owners indicated that they are proactive in sharing their needs with PSU. In the absence of effective planning processes, some business owners will attempt to bypass the system used by PSU in order to escalate the priority of their requests, through direct inquiries to PSU management. This is not a sustainable model, as it ultimately impacts and causes further delays in the processing time for other sector requests.

PPAR is seeking to implement additional planning-related enhancements, such as holding quarterly meetings with business owners to reconfirm their priorities and to set procurement expectations that are feasible. Implementation timelines for this initiative have not yet been established.

Procurement Processes for Requests and Activities

The procurement process involves sectors submitting their procurement needs to PSU via the eProcurement system. PSU will then review requests, seek additional information and documentation, and assign requests to procurement officers for processing. The end result includes a contract awarded for the delivery of services or goods being procured. Although there are sector procurement advisors assigned to provide support, business owners indicated that their need for guidance and direction are not always met. Prior to request submission, the advisors act as a point of contact between business owners and the procurement function, and help answer general procurement questions. The advisors are not regularly involved or invited to sector procurement planning discussions.

Although the established process is being followed, based on the audit process walkthrough and for sampled files, there are delays and ‘bottlenecks’ that impact the efficiency and effectiveness of certain elements of the process. Delays occur within the process at two main points: during the procurement planning process (detailed above), and at the outset of the procurement process, specifically, the time lapsed between sector request submission to PSU and request assignment, and the time required for PSU to obtain all relevant documentation from sectors. FPB management indicated that internal capacity issues impact their ability to assign requests to available procurement officers. Delays within these main process points result in additional time expended at the outset of the process, ultimately impacting and impeding the timely completion of the entire process. On April 26, 2022, updates were implemented to the eProcurement system, which require relevant information and documentation to be included when a request is submitted, instead of afterwards. These enhancements are intended to improve the efficiency of the process by eliminating the time required to obtain outstanding documentation.

Diagram 1 – High-level Procurement Process

Diagram 1 – High-Level Procurement Process This colour-coded diagram outlines the Natural Resources Canada procurement process at a very high level. The objective of this table is to visually display the process, outline who is involved in the process and when, and to highlight where delays are occurring within the process.

A colour-coded legend is provided that defines what parties are included in a given step of the process. The colour orange indicates PSU involvement; the colour green indicates Business Owner Involvement; the colour blue indicates both PSU and Business Owner involvement; and the colour red indicates where delays are occurring within the process.

Each row represents a step within the process. There are a total of nine rows. The steps of the process include:

• Consult with PSU if required – Business Owner involvement;
• Submit requests into the eProcurement System – Business Owner involvement;
• Obtain S. 32 approvals – Business Owner involvement;
• PSU to verify completeness and sufficiency of documents – PSU involvement (delays are occurring within this step);
• PSU to assign and prioritize requests – PSU involvement (delays are occurring within this step);
• Verify with IT and assets management, if required – PSU involvement;
• Select procurement vehicle and send to PSPC or SSC if required – PSU involvement;
• Bid solicitation and evaluation, if required – PSU and Business Owners involvement; and
• Obtain good and / or issue contract – PSU and Business Owners involvement.

Finally, between steps four and eight defined above, there are ongoing discussions between PSU and Business Owners.

FPB has implemented procurement service standards, tracks and monitors this information, and reports quarterly to CMSS management on whether standards were met. Some of the information tracked internally by FPB, however, is not relevant to and does not align with the standards shared with business owners. Information shared and tracked differs based on the number of categories tracked, monetary thresholds used, and days for completion (see table below).

Table 2 – Service Standards

The target for meeting the service standard is 75%; this means that if requests are processed within the specified time frame 75% of the time, the standard has been met. During the audit scope period, service standards for all categories were met, with the exception of contracts under $25,000 for Q4 of 2020-21 (37%), and Q2 for 2021-22 (39%) and Q3 for 2021-22 (13%). This was reflected in the audit sample testing, where there were four instances where service standards were not met within the twenty-five procurement requests tested. Interviews with PSU attributed these low scores to a lack of resourcing within PSU and the challenges with the volume of requests submitted for home office and IT equipment. The audit team found that service standards information is currently used for reporting purposes, however, it has yet to be meaningfully used to address performance gaps and improve processes.

Audit interviews with business owners highlighted that the procurement process does not meet their needs due to the delays within the process. They indicated that these delays have had corresponding impacts on the achievement of business objectives and priorities. Despite the delays, overall satisfaction with the procurement process increased from 2017 to 2021, per the results of the PSU satisfaction surveys for these periods. Business owners proposed the following improvements to the procurement process during audit interviews: sharing pertinent information of outstanding procurement requests; better communicating changes to the process that have an impact on business owners and ensuring that available information is up to date; and revising guidance to ensure that it is current.

Communications in the Procurement Process

FPB utilizes a variety of mechanisms to communicate with business owners regarding procurement processes and activities, including: information on The Source; sectors engaging with their assigned sector procurement advisors; sectors completing client satisfaction surveys; business owners contacting PSU to enquire about the overall status of their requests; and business owners and the procurement officer meeting to discuss the next steps for processing their requests. The primary mechanism for communicating with sectors is The Source; however, this information is outdated and, in some cases, does not provide accurate information on procurement activities. For example, flowcharts depicting procurement processes are dated 2015, and some of the information on the procurement planning process was last updated in 2018.

The communication mechanisms utilized by FPB largely promoted one-way communication with business owners, and there are limited proactive actions taken by PSU to inform sectors of the status of their requests. Business owners interviewed indicated that often no communication with PSU will occur after request submission until the request has been assigned to a procurement officer for action. Some business owners indicated that they will proactively communicate with PSU in order to receive status updates on their procurement requests prior to request assignment.

Two-way communication primarily occurs after tickets are assigned to procurement officers for processing, and this was confirmed through audit testing. Business owners indicated that communication between them and procurement officers occurs to discuss requests, obtain missing and/or incomplete documentation, and to respond to general questions about the process. This communication provides sectors with additional information on their requests, and an understanding of file progression and expected completion.

While FPB has established mechanisms and processes in order to communicate with business owners, there is an opportunity for FPB to improve and strengthen these mechanisms and to provide all business owners with more consistent and timely communications.

When processes are not reviewed and updated regularly, there is a risk that business owners may not be equipped to efficiently and effectively execute their procurement duties, affecting the overall processing of requests and timelines, and ultimately impacting the achievement of business owner priorities and objectives.

A lack of efficient and effective procurement processes, including request prioritization, may result in delays, affecting the overall processing time and limiting the achievement of business owner priorities and objectives.

Without accurate and precise data collected and used to support the monitoring and tracking of procurement service standards, insufficient information may limit the ability to detect and remediate issues and performance gaps.

Without a consistent approach to inform business owners of the status of their requests before they are assigned and throughout the procurement process, there is a risk that the expectations for file initiation and processing time may not be clear, resulting in business owners not having the required information to make informed decisions to meet their needs and objectives.

Recommendations

Recommendation 2: It is recommended that the ADM of CMSS:

• Develop and implement a prioritization process for procurement requests, including engaging with business owners;
• Review current procurement processes to identify and analyze any procedural constraints, and devise mechanisms to promote continuous process improvement;
• Review service standards for relevance, address potential gaps in the data collected, and leverage this information to address any performance challenges; and
• Enhance communications mechanisms between contracting authorities and business owners, including assessing the feasibility of an automated mechanism to provide regular status updates throughout the procurement process and to clarify timelines.

Recommendation 3: It is recommended that the ADM of CMSS review, update, and communicate guidance to business owners, including flexibilities in procurement approaches offered in the new TB Directive, to ensure that information available is current, clear, and provides sufficient information to enable business owners to execute their duties.

Management agrees with Recommendation #2.

A: Prioritization and engagement  

• FPB is working with the Financial Systems division to enhance the reporting capability within the AMI system and enhancements to eProcurement to better support and communicate to Business Owners to allow them to regularly review requests, clarify timelines, and confirm sector priorities; and to determine if additional flexibility can be built-in to improve functionality and reporting.
• FPB is developing criteria to prioritize procurement requests; i.e., prioritization amongst all the requests received from the various sectors.
• FPB has enhanced engagement between programs and procurement, for meaningful discussion and integration of procurement considerations into the planning of programs, projects and service delivery; e.g., via recurring attendance at senior management meetings and program specific discussions. Furthermore, FPB has included within the Annual Procurement Plan exercise the opportunity for sectors to prioritize their requirements. The Procurement Plan will be reviewed and updated by Business Owners at the same time as the FSRs. In addition, presentations to OC and FRPC on procurement status and progress have also occurred.

Timing : A (i) November 2022 for system, e-request and reporting enhancements; A (ii) October 2022 for prioritization criteria and recommendation process; A (iii) initiated during fourth quarter of FY 21/22 and ongoing.

B: Continuous process improvement

• FPB will be reviewing its triage/internal assignment process to find efficiencies and implement them, where feasible and will examine whether client-recalled procurements are occurring due to constraints in the process and whether an enhancement of the e-procurement system could address this issue.
• Training and awareness sessions will be developed and delivered to provide education to Business Owners on the end-to-end procurement process and legislative constraints that guide the process.
• FPB will review and streamline procurement processes as new initiatives brought forth by Central Agencies are implemented.

Timing : B (i) December 2022 for triage pilot; B (ii) May 2023 for the delivery of training; B (iii) ongoing.

C: In May 2022, a comparative analysis was undertaken to benchmark how NRCan measures against Other Government Departments (OGDs) Service Standards (e.g., GAC, PSPC, Transport, RCMP and others). This information will be leveraged to address any performance gaps and challenges. NRCan remains in line with OGD processing times based on existing analytics. While it has been challenging to consistently meet Services Standards this past FY, initiatives brought forth by Central Agencies could impact processing times (e.g., social procurement and new security requirements); as such, NRCan Procurement Service Standards will remain the same in FY 22/23, pending further assessment.

A new Service Standards Review will be conducted in September FY 23/24.

Timing : Completed and shared with senior management (via email) and FRPC members on June 7, 2022. The new Service Standards Review will be conducted in September FY 23/24. D: Enhance communications mechanisms to provide regular status updates throughout the procurement process and to clarify timelines - 

• FPB has enhanced engagement between programs and procurement, for meaningful discussion and integration of procurement considerations into the planning of programs, projects and service delivery; e.g., via recurring attendance at senior management meetings and program specific discussions. In addition, FPB has included within the Annual Procurement Plan exercise the opportunity for Sectors to prioritize their requirements. The Procurement Plan will be reviewed and updated by Business Owners at the same time as the FSRs.

Timing : D (i) November 2022 for system, e-request and reporting enhancements; D (ii) completed initiated during fourth quarter of FY 21/22 and ongoing.

Management agrees with Recommendation #3.

To evolve the suite of documents already available on NRCan intranet, a client-centric web-based collaborative platform (such as SharePoint) will be developed that will house procurement guidance information, relevant notices from central agencies, required forms, service standards etc., which should provide current, clear and sufficient information to enable business owners to execute their duties. Notifications to Business Owners for updates and changes will be explored.

Timing : April 2023 for a client-centric web-based collaborative platform.

Human Resources Planning and Training

Overall, opportunities exist to formally document and strengthen HR and succession planning mechanisms for the procurement function, and associated monitoring processes. These processes are largely informal and monitoring is conducted on an ad hoc basis.

Training and guidance provided to staff are sufficient and enable staff to adequately execute their duties. However, there are opportunities to strengthen training and awareness through the addition of fraud-related and other complementary topics, and monitoring of attendance/training completion to reduce potential knowledge disparities among FPB staff.

With respect to knowledge sharing and transference in support of capacity building, there is an opportunity to ensure that mechanisms are strengthened and regularly utilized for information sharing purposes.

Effective HR and succession planning processes should be in place to support the management of procurement activities. The audit examined whether the procurement function had articulated and planned for current and future human resources needs, including the required skills, knowledge and competencies, and whether these needs were effectively implemented and monitored. Additionally, the audit examined whether those with procurement related responsibilities were equipped with adequate training, knowledge, tools and guidance necessary to fulfill their roles.

HR Planning and Succession Planning Processes

FPB leverages formal and informal processes to meet their current HR needs. Processes and mechanisms leveraged to support HR-related needs included word of mouth initiatives, utilizing pre-established resourcing pools, the Federal Internship Program for Persons with Disabilities, Student Bridging, and formally launching HR processes to seek required resources. Management indicated these processes were utilized on an ongoing basis during the audit scope period to address capacity challenges; however, in FY 2020-21 staffing processes were typically initiated once resource departures were known versus conducting them in advance. Further, management indicated that they utilize the Financial Situation Reports (FSRs) to plan for known departures and planned staffing as part of their salary forecasts.

FPB does not have formally documented succession plans in place that articulate key positions, required skills, competencies and knowledge in support of medium to long-term HR-related needs. Processes that are in place are largely informal. In addition, monitoring processes and mechanisms over HR and succession planning are conducted on an ad hoc, as needed basis.

Within PSU, formal and informal HR processes are leveraged to support and meet current HR-related needs. In this unit, there are no formally documented HR and succession plans in place. During the audit scope period, PSU indicated that there was significant turn-over within their unit; however, throughout the course of the audit, PSU was able to enhance existing resource levels by hiring 18 new full-time equivalents (FTEs). Obtaining qualified resources at the appropriate levels and having a full staff complement was noted as a challenge for PSU, who further indicated that the labour pool for procurement officers is competitive and limited. In addition, PSU recently conducted a review and revision of their Statements of Merit and Criteria (SOMCs) to ensure that defined job requirements align with current needs and activities.

Within PPAR, a formally documented HR plan exists; however, this plan is dated November 2016, and does not reflect PPAR’s current HR-related needs. A formally documented succession plan is also not in place; however, informally, PPAR has identified a successor for the PPAR Manager position. In addition, PPAR’s SOMCs are outdated; however, they indicated that there will soon be an initiative to review and update these SOMCs to reflect current needs and activities.

There is an opportunity for FPB to formalize and operationalize HR and succession plans that identify short and long-term resourcing needs. Ideally, these plans should identify key positions, and define the required skills, knowledge, and competencies required. Further, there is an opportunity for FPB to regularly monitor and review these plans to ensure that they are updated and/or actioned where required.

Training, Guidance, and Knowledge for Procurement

Training and guidance for FPB staff is provided through a variety of formal and informal mechanisms and processes that support staff in the execution of their duties. PSU and PPAR have each developed lists detailing relevant training that new staff members are required to complete. Documented guidance is also readily available to staff through the PSU Desktop Procedures and the PPAR Reporting Standards and associated tools. In addition to formal training and guidance, PSU and PPAR provide informal training and guidance through on-the-job learning, job shadowing, and mentoring opportunities. PSU and PPAR staff indicated that both formal and informal training and guidance received has equipped them with sufficient knowledge to execute their duties. Going forward, PSU is seeking to formalize and strengthen mentoring opportunities for their staff at all levels. These efforts should support and aid with knowledge retention and transfer, and capacity building, which is especially important during periods of high staff turnover.

Training and awareness pertaining to procurement fraud is important for ensuring that procurement staff are sufficiently equipped to identify potential procurement related red flags and fraudulent schemes. Both the PSU and PPAR training requirements for new staff members do not specifically incorporate this type of training. In addition, PSU and PPAR staff training requirements are not the same. A lack of consistent training may result in knowledge disparities between the two units, which are intended to work in tandem in support of the procurement function and operations. This may also hinder PPAR’s ability to provide appropriate advice and guidance to PSU, which may impact PSU's ability to make procurement decisions. Further, completion of training requirements is not formally tracked and monitored, resulting in the potential for greater knowledge disparities between the two units.

Processes and mechanisms for sharing additional knowledge, such as procurement needs of the sectors, new programming requirements, and specific information on sector requests, is mostly conducted on an ad hoc basis. Information of this nature may be shared by sectors through sector procurement advisors or the PSU manager, who may not always share pertinent information with the procurement officer responsible for processing the request. PSU indicated that sectors will sometimes request a specific procurement officer with previous knowledge of the program/sector to process their requests. Program/sector information sharing is important for knowledge retention and transfer, and capacity building purposes, and enables staff to have a stronger understanding of the context surrounding procurement requests and activities. Further, this is important to ensure that sectors’ needs are well understood and to avoid repetition of previously shared knowledge.

Without sufficiently documented HR and succession plans, there is a risk that FPB may not be able to attain their current and future HR objectives, limiting their ability to adequately identify and acquire necessary skills and competencies, and potentially impacting their capacity to support procurement needs and activities.

Without complementary training and awareness sessions on procurement related topics, there is a risk that FPB staff are not sufficiently equipped to identify potential risks, fraud indicators, and red flags, and potentially resulting in fraudulent activities going undetected and unnoticed.  

A lack of monitoring and tracking of the completion of FPB staff training may result in knowledge disparities in the team, and potentially result in different information being disseminated to sectors.

In the absence of regularly utilized knowledge sharing and transfer processes, there is risk that staff will not have a consistent understanding of sector activities, needs, new programs, and requests. Further, without consistent knowledge within the team, there is risk that valuable corporate knowledge will be lost during periods of high-turnover.

Recommendation 4: It is recommended that the ADM of CMSS:

• Develop and implement HR and succession plans for FPB, and regularly monitor and update these plans as needed;
• Require that FPB staff participate in consistent training and awareness activities, including fraud, bid-rigging, green procurement, Indigenous considerations in procurement and other complementary topics, and monitor attendance and completion of training; and
• Strengthen and use knowledge sharing practices within FPB.

Management agrees with Recommendation #4.

A: While informal resource and succession planning successfully occurs on an ongoing basis, and both PSU and PPAR units have design structures that allow for talent management and succession, FPB will work with HR to brainstorm on recruitment, retention and PG development programs, formally documenting these plans and strategies as appropriate. Of note, the PMF will be updated to recognize HR staffing, training and succession planning initiatives.

Timing :  September 2022 for the NRCan PMF to be completed and endorsed; May 2023 and ongoing for formally documenting HR, succession plans and strategies as needed.

B: PSU and PPAR staff will be encouraged to participate in consistent training and awareness activities for all of the areas indicated in the audit recommendation on an ongoing basis, including events offered by the Canadian Institute for Procurement and Material Management, the Canada School of Public Service (CSPS) and other fora. This is in addition to the mandatory procurement courses required for them to receive functional procurement authority as per the Delegation of Procurement Authority Instrument and mandatory training found on the HR Learning Platform Mandatory Training | The Source (nrcan.gc.ca) (Accessible only on the Natural Resources Canada network). The tracking of completed training is currently housed in PeopleSoft and monitored by HR. FPB will also monitor PeopleSoft entries to ensure appropriate attendance and training completion.

Complementary awareness sessions will be delivered on an ad hoc basis, such as Recognizing Bid Rigging, an information session offered by the Competition Bureau.

Since March 2022, FPB has had a membership with the Canadian Public Procurement Council (CPPC) , a municipal-provincial-federal council that supports the sharing of best practices, staffing processes, industry trends/challenges, networking opportunities, etc. and this membership will be promoted to PSU and PPAR staff.

Timing : Ongoing, mandatory training for procurement employees will be updated as it is completed and HR PeopleSoft entries will be monitored by FPB; ongoing for information/awareness sessions.

C: Strengthen and use knowledge sharing practices -

• To evolve the suite of documents already available on the Intranet, a client-centric web-based collaborative platform (such as SharePoint) will be developed that will house procurement guidance information, relevant notices from central agencies, required forms, service standards etc. which will provide another forum for knowledge sharing and to access to up-to-date information.
• The bi-weekly Procurement All Staff meeting will be the main forum for the sharing of best practices between PPAR and PSU and for knowledge download to Buyers. Meeting Minutes will be kept in GCDocs. The collaboration space in MS Teams will be promoted within both divisions as a tool to further enable knowledge sharing. 

Timing : C (i) April 2023 for a client-centric web-based collaborative platform; C (ii) July 2022/ongoing.

As part of the transition to the new TB Directive on the Management of Procurement, the Department has developed a Procurement Management Framework (PMF) and an updated set of roles and responsibilities for sectors. Additional work is required to ensure that sectors are aware of and understand how the new requirements will impact their procurement activities.

The audit examined whether NRCan had developed and implemented an approach to transition to the new TB Directive on procurement. The new Directive is less prescriptive and encourages departments to consider collaborative, innovative, iterative, and outcomes-based procurement approaches where appropriate. Additionally, the new Directive requires departments to identify a senior designated official (SDO) responsible for implementing the requirements of the new Directive, including the development, implementation, and maintenance of a PMF for the Department's procurement function and activities. TBS has been providing guidance to departments on how to implement the new Directive, and will continue to do so through the SDO Council and the interdepartmental platform GCpedia.

The latest draft of NRCan’s PMF (March 2022) is generally in alignment with the requirements of the new Directive. The PMF explains and describes existing NRCan activities and processes that demonstrate compliance with the new Directive. It also explains new initiatives that will be put in place to ensure alignment and compliance. These include the SDO endorsement of high risk procurements (in lieu of the dissolved Procurement Review Board), an integrated approach to procurement and investment planning, and additional reporting requirements per the new Directive (e.g. 5% target for procurement with Indigenous businesses). Essential elements to meet the needs of business owners are outlined in the new Directive, such as workforce capacity, departmental procurement planning, and requirements for contracting authorities and business owners. At the completion of the audit, limited work has been done to date by FPB to address these elements. TBS released guidance on the transition to the new Directive in February 2022. Additional guidance is expected to be provided in the summer and fall of 2022.

Workforce capacity for the procurement function is included in the PMF. This aligns with the Directive's requirement for SDOs to identify and address the Department’s needs with respect to the necessary competencies, capacity, and professional development for procurement management. However, the ability to implement this requirement may be impacted by the challenges with HR and succession planning identified earlier in the audit. The annual procurement planning exercise is also included in the PMF for resource allocation and procurement strategy planning. However, as was indicated, this exercise has not been leveraged, and there are challenges with soliciting information from sectors.

Efforts have been made to engage and consult with sectors on the changes for contracting authorities and business owners as outlined in the new TB Directive. This includes additional requirements for contracting authorities’ regarding contractual arrangements; limitation of liability; and an outcomes-based approach for procurement. FPB has developed and indicated that they will communicate revised roles and responsibilities to sectors. Additional work is required in order to ensure that sectors are aware of and understand how the requirements impact their procurement activities. Business owners and contracting authorities will benefit from training and / or awareness activities in order to understand and adopt the new flexibilities in the Directive for procurement approaches. Based on information provided by CMSS and documents reviewed by the audit team, the focus has been on other departmental procurement priorities, and NRCan has not yet fully transitioned to the new Directive.

The objective of this audit was to assess the effectiveness and efficiency of management processes related to the procurement function, and the adequacy of governance over procurement operations, as it related to meeting the needs of the Department.

The following audit criteria were used to conduct the audit:

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Everyone deserves to succeed. But today, for too many Canadians, especially Millennials and Gen Z, your hard work isn’t paying off like it did for previous generations. Your paycheque doesn’t go as far as costs go up, and saving enough seems harder and harder. It doesn’t have to be this way. Every generation should get a fair chance to get ahead.

One of the biggest pressures on people right now is housing. Young Canadians are renting more than ever and being priced out of their communities. Families are finding it difficult to get a good place to settle down. The cost to build homes is too high, and the time it takes to finish projects is too long. We need to build more homes in Canada, and we need to build them by the millions.

The Prime Minister, Justin Trudeau, the Deputy Prime Minister and Minister of Finance, Chrystia Freeland, and the Minister of Housing, Infrastructure and Communities, Sean Fraser, today unveiled the federal government’s ambitious housing plan, Solving the housing crisis: Canada’s Housing Plan , supported by new investments from the upcoming Budget 2024. At the heart of this plan lies a commitment to make housing affordable. No hard-working Canadian should have to spend more than 30 per cent of their income on housing costs. No Canadian should have to live without knowing they have a safe and affordable place to live.

The plan lays out a bold strategy to unlock 3.87 million new homes by 2031. This includes a minimum of 2 million net new homes, on top of the Canada Mortgage and Housing Corporation’s forecast of 1.87 million being built anyway by 2031. Federal actions in this plan, in Budget 2024, and taken in fall 2023 will support at least 1.2 million new homes, and we call on all orders of government to build at least 800,000 more homes by 2031.

Here’s what we’re doing:

Building more homes by bringing down the costs of homebuilding, helping cities make it easier to build homes at a faster pace, changing the way Canadian homebuilders manufacture homes, and growing the workforce to ensure we get the job done. This includes:

• A Public Lands for Homes Plan to lead a national effort to build affordable housing on federal, provincial, territorial, and municipal lands across the country. We will partner with homebuilders and housing providers to build homes on every possible site across the public portfolio and ensure long-term affordability.
• $15 billion in additional loans for the Apartment Construction Loan Program to build a minimum of 30,000 new rental apartments, in big cities, small towns, and rural communities alike, will be proposed in Budget 2024. With this additional financing, the program is on track to build over 131,000 new apartments by 2031-32.
• Launching Canada Builds, a Team Canada approach to building affordable homes for the middle class on under-utilized lands across the country. Canada Builds combines federal low-cost loans with provincial and territorial investments to scale up construction on rental homes for the middle class, from coast to coast to coast.
• Supporting Indigenous Peoples in urban, rural, and northern areas . We will also provide additional distinctions-based investments for Indigenous housing to be delivered by Indigenous governments, organizations, housing, and service providers.

Making it easier to own or rent a home by ensuring that every renter or homeowner has a home that suits their needs, and the stability to retain it. We’re putting measures to protect tenants against unfairly rising rent payments, leverage rental payment history to improve credit scores, increase the Home Buyers’ Plan withdrawal limit, extend mortgage amortizations for first-time home buyers buying newly built homes, and more:

• Launching a Tenant Protection Fund to provide funding to legal services and tenants’ rights advocacy organizations to better protect tenants against unfairly rising rent payments, renovictions, or bad landlords.
• Leveraging rental payment history to improve credit scores, helping you qualify for a mortgage and better rates.
• Increasing the Home Buyers’ Plan withdrawal limit by $25,000 and extending the grace period to repay by an additional three years.
• Extending mortgage amortizations for first-time buyers buying newly built homes . Mortgage insurance rules will be amended to allow 30-year mortgage amortizations exclusively for first-time home buyers purchasing new builds.

Helping Canadians who can’t afford a home by creating more affordable and rental housing – including for students, seniors, persons with disabilities, and equity-deserving communities – and eliminating chronic homelessness in Canada. This includes:

• Providing $1 billion for the Affordable Housing Fund to build affordable homes and launching a permanent Rapid Housing Stream to build on the success of the previous three rounds of the Rapid Housing Initiative.
• Launching a $1.5 billion Canada Rental Protection Fund to protect and expand affordable housing.

The Prime Minister also announced new measures included in Canada’s Housing Plan to attract, train, and hire the skilled-trade workers Canada needs to build more homes.

• $90 million for the Apprenticeship Service , creating apprenticeship opportunities to train and recruit the next generation of skilled trades workers.
• $10 million for the Skilled Trades Awareness and Readiness program to encourage high school students to enter the skilled trades – creating more jobs and opportunities for the next generation of workers to build Canada up.
• $50 million in the Foreign Credential Recognition Program , with a focus on residential construction to help skilled trades workers get more homes built. Like our previous $115 million investment, this funding will remove barriers to credential recognition, so workers spend less time dealing with red-tape and more time getting shovels in the ground.

Transforming our housing system and solving the housing crisis will take a Team Canada effort. No one level of government, home builder, not-for-profit, or community can do it alone. We need every partner pulling in the same direction to build the homes Canadians need.

This is about realizing Canada’s promise of affordable housing for every generation – and it’s just one of the things that we are going to be doing in Budget 2024. Alongside these measures, we’re getting healthy food on kids’ plates, delivering stronger public health care, making life more affordable, and creating good jobs to make sure every generation can get ahead.

“We are changing the way we build homes in Canada. In our housing plan and Budget 2024, we are delivering ambitious action and investments to build more homes, make it easier to rent or own, and help the most vulnerable with stable housing. This is about restoring fairness for every generation, and housing is at the heart of that.” The Rt. Hon. Justin Trudeau, Prime Minister of Canada

“We are announcing today real, tangible measures that are going to help more younger Canadians get those first keys of their own. We are using every tool at our disposal to deliver housing without delay – because we want to make the dream of homeownership a reality for younger Canadians.” The Hon. Chrystia Freeland, Deputy Prime Minister and Minister of Finance

“Canada can and will solve the housing crisis, and we’re going to do it by getting every home builder, not-for-profit, mayor, city councillor, and premier pulling in the same direction to build the homes Canadians need.” The Hon. Sean Fraser, Minister of Housing, Infrastructure and Communities

Quick Facts

• The Prime Minister today also announced the creation of a new Deputy Minister of Public Lands and Housing position within the Privy Council Office. The Deputy Minister will oversee and report on federal efforts to build more homes for Canadians through the use of public lands, providing a single point of accountability within the public service. An appointment to this position will be announced later today.
• Since 2015, the federal government has helped almost two million Canadians find a place to call home.
• Restore generational fairness for renters, particularly Millennials and Gen Z, by taking new action to protect renters’ rights and unlock pathways for them to become homeowners. Learn more .
• Launch a new $6 billion Canada Housing Infrastructure Fund to accelerate the construction or upgrade of essential infrastructure across the country and get more homes built for Canadians. Learn more .
• Top-up the Apartment Construction Loan Program with $15 billion, make new reforms so it is easier to access, and launch Canada Builds to call on all provinces and territories to join a Team Canada effort to build more homes, faster. Learn more .
• Support renters by launching a new $1.5 billion Canada Rental Protection Fund to preserve more rental homes and make sure they stay affordable. Learn more .
• Change the way we build homes in Canada by announcing over $600 million to make it easier and cheaper to build more homes, faster, including through a new Homebuilding Technology and Innovation Fund and a new Housing Design Catalogue. Learn more .
• The Apartment Construction Loan Program , a $40 billion initiative that will be topped up with an additional $15 billion in Budget 2024 to boost the construction of new rental homes by providing low-cost financing to homebuilders. Since 2017, the Apartment Construction Loan Program has committed over $18 billion in loans to support the creation of more than 48,000 new rental homes. With our recently announced measures , the Apartment Construction Loan Program is now on track to help build over 131,000 new rental homes across Canada by 2031-32.
• The  Affordable Housing Fund , a $14+ billion initiative that supports the creation of new market and below-market rental housing and the repair and renewal of existing housing. It is designed to attract partnerships and investments to develop projects that meet a broad spectrum of housing needs, from shelters to affordable homeownership. As of December 31, 2023, the Fund has committed $8+ billion to repair or renew over 150,000 homes and support the construction of more than 32,000 new homes.
• The Housing Accelerator Fund , a $4 billion initiative that will be topped up with an additional $400 million in Budget 2024 to encourage municipalities to incentivize building by making transformative changes, such as removing prohibitive zoning barriers. To date, the federal government has signed 179 Housing Accelerator Fund agreements which, combined, will fast-track an estimated total of over 750,000 housing units across the country over the next decade.
• The Rapid Housing Initiative , a $4 billion fund that is fast-tracking the construction of 15,500 new affordable homes for people experiencing homelessness or in severe housing need by 2026. The Rapid Housing Initiative also supports the acquisition of existing buildings for the purpose of rehabilitation or conversion to permanent affordable housing units, focusing on the housing needs of the most vulnerable, including people experiencing or at risk of homelessness, women fleeing domestic violence, seniors, Indigenous Peoples, and persons with disabilities.
• Progress on these and other programs and initiatives under Canada’s National Housing Strategy are updated quarterly at  www.placetocallhome.ca . The Housing Funding Initiatives Map  shows housing projects that have been developed.
• On November 9, 2023, we signed a historic Housing Accelerator Fund agreement with the Province of Quebec.
• Building on the success of the 2023 agreement, the federal government will continue to work closely with Quebec to build more homes for Quebecers, including by delivering additional funding through the Housing Accelerator Fund and the new Canada Housing Infrastructure Fund.
• The Government of Canada’s Budget 2024 will be tabled in the House of Commons by the Deputy Prime Minister and Minister of Finance on Tuesday, April 16, 2024.
• Save more young families money and help more moms return to their careers by building more affordable child care spaces and training more early childhood educators across Canada. Learn more .
• Create a National School Food Program to provide meals to about 400,000 kids every year and help ensure every child has the best start in life, no matter their circumstances. Learn more .
• Secure Canada’s AI advantage through a $2.4 billion package of measures that will accelerate job growth in Canada’s AI sector, boost productivity by helping researchers and businesses develop and adopt AI, and ensure this is done responsibly. Learn more .
• Provide the Canadian Armed Forces with the tools and capacity they need to defend Canada and protect North America, advance Canada’s interests and values around the world, and support its members with an overall investment of $8.1 billion over five years and $73 billion over 20 years. Learn more .

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2024 Federal Budget analysis

On April 16, 2024, the Deputy Prime Minister and Minister of Finance, Chrystia Freeland, presented the government’s budget. The budget:

• increases the capital gains inclusion rate from 1/2 to 2/3, effective June 25, 2024 (up to $250,000 of annual gains for individuals will continue to benefit from the 1/2 inclusion rate)
• raises the lifetime capital gains exemption to $1.25 million and introduces a new 1/3 inclusion rate for up to $2 million of certain capital gains realized by entrepreneurs
• confirms previously announced alternative minimum tax proposals effective January 1, 2024, but softens the impact of these proposals on charitable donations
• provides design and implementation details for the clean electricity investment tax credit
• introduces accelerated capital cost allowance (CCA) for, and relief from interest deductibility limitations for debt incurred to fund the construction of, certain purpose-built rental housing
• provides immediate expensing for the cost of certain patents and computer equipment and software
• gives the Canada Revenue Agency (CRA) additional information gathering powers

This Tax Insights discusses these and other tax initiatives proposed in the budget.

Tax measures

Capital gains inclusion rate.

• Lifetime Capital Gains Exemption

Canadian Entrepreneurs’ Incentive

• Alternative Minimum Tax

Employee Ownership Trust Tax Exemption

Volunteer firefighters tax credit and search and rescue volunteers tax credit, mineral exploration tax credit for flow-through share investors.

• Canada Child Benefit

Disability Supports Deduction

Charities and qualified donees.

• Home Buyers’ Plan

Qualified Investments for Registered Plans

Deduction for tradespeople’s travel expenses, indigenous child and family services settlement, clean electricity investment tax credit, ev supply chain investment tax credit, clean technology manufacturing investment tax credit.

• Accelerated Capital Cost Allowance

Interest Deductions and Purpose-Built Rental Housing

Taxing vacant lands to incentivize construction, confronting the financialization of housing, halal mortgages, non-compliance with information requests, synthetic equity arrangements, mutual fund corporations, canada carbon rebate for small business, avoidance of tax debts, reportable and notifiable transactions penalty, manipulation of bankrupt status.

• Scientific Research and Experimental Development

International

Crypto-asset reporting, withholding for non-resident service providers, international tax reform.

• Extending GST Relief to Student Residences

GST/HST on Face Masks and Face Shields

Previously announced, personal tax measures.

The budget proposes to increase the capital gains inclusion rate from 1/2 to:

• 2/3 for dispositions after June 24, 2024 for corporations and trusts, and
• 2/3 for the portion of capital gains realized after June 24, 2024 in excess of an annual $250,000 threshold for individuals

The $250,000 annual threshold would apply to capital gains realized by an individual, either directly or indirectly via a partnership or trust, net of:

• current year capital losses
• capital losses of other years applied to reduce current year capital gains, and
• capital gains in respect of which the Lifetime Capital Gains Exemption (LCGE), the proposed Employee Ownership Trust Exemption or the proposed Canadian Entrepreneurs’ Incentive is claimed

As a result, the following rates will apply to capital gains earned by individuals in excess of the $250,000 threshold who are subject to the top marginal income tax rate (i.e. on taxable income exceeding: $355,845 in Alberta, $252,752 in British Columbia, $1,103,478 in Newfoundland and Labrador, $500,000 in the Yukon and $246,752 in all other jurisdictions).

The budget also proposes to decrease the stock option deduction to 1/3 to align with the new capital gains inclusion rate.  Individuals would continue to benefit from a deduction of 1/2 of the taxable benefit up to a combined $250,000 for both employee stock options and capital gains.

The inclusion rate for net capital losses carried forward and applied against capital gains will be adjusted to reflect the inclusion rate of the capital gains being offset.   

Transitional rules will apply to taxation years that begin before June 25, 2024 and end after June 24, 2024 such that capital gains realized before June 25, 2024 would be subject to the 1/2 inclusion rate and capital gains realized after June 24, 2024 (net of any losses) would be subject to a 2/3 inclusion rate. The $250,000 threshold will not be prorated for individuals in 2024 and will apply only against capital gains incurred after June 24, 2024.

Additional details will be provided in the coming months.   

Earning capital gains through a Canadian-controlled private corporation (CCPC)

In most jurisdictions, the increase in the capital gains inclusion rate makes it less attractive for individuals to earn capital gains in excess of $250,000 through a CCPC instead of directly. The  Appendix shows the resulting income tax deferral (prepayment) and the tax cost for an individual who realizes capital gains in excess of $250,000 and pays tax at the top tax rate.

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Lifetime Capital Gains Exemption (LCGE)

The budget proposes to increase the LCGE on eligible capital gains from $1,016,836 to $1,250,000 for dispositions that occur after June 24, 2024. The indexing of the LCGE to inflation will resume in 2026.

The budget introduces the Canadian Entrepreneurs’ Incentive, which will reduce the taxes on capital gains from the disposition of shares by eligible individuals which meet the following conditions:

• at the time of the sale the share was a share of a small business corporation owned directly by an individual
• used principally in an active business carried on primarily in Canada by the CCPC or a related corporation
• certain shares or debts of connected corporations, or
• a combination of these assets
• the individual was a founding investor and the individual held the share for a period of five years prior to the disposition
• at all times since the share subscription until the time immediately before the sale, the individual directly owned shares with a fair market value (FMV) of more than 10% of the FMV of all of the issued and outstanding shares of the corporation and shares entitling the individual to more than 10% of the votes
• throughout the five year period before the disposition the individual was actively engaged in a regular, continuous and substantial basis in the activities of the business
• the share does not represent a direct or indirect interest in a professional corporation, a corporation whose principal asset is the reputation or skill of one or more employees, or a corporation that carries on certain types of businesses including a business operating in the financial, insurance, real estate, food and accommodation, arts, recreation, or entertainment sector, or providing consulting or personal care services
• the share must have been obtained for fair market value consideration

The incentive would provide a capital gains inclusion rate of one half of the prevailing inclusion rate on up to $2 million in capital gains per individual during their lifetime. The $2 million limit will be phased in over 10 years by increments of $200,000 per year reaching $2 million by January 1, 2034.  

Applying the proposed 2/3 inclusion rate would result in an inclusion rate of 1/3 for qualifying dispositions.  This will apply in addition to the LCGE.

This measure would apply to dispositions that occur after December 31, 2024.

Alternative Minimum Tax (AMT)

The 2023 budget announced amendments to change the calculation of the AMT. Draft legislative proposals were released for consultation in the summer of 2023. (For more information, see our Tax Insights “ Proposed changes to the alternative minimum tax: How will it affect individuals and trusts ”.)

The budget proposes to revise the proposed charitable donation tax credit claim to allow individuals to claim 80% when calculating AMT (as opposed to the previously proposed 50%).

The budget also proposes additional amendments to the AMT proposals including:

• allowing deductions for the Guaranteed Income Supplement, social assistance and workers compensation payments
• fully exempting employee ownership trusts (EOTs) from the AMT, and
• allowing certain disallowed credits under the AMT to be eligible for the AMT carry-forward (i.e. the federal political contribution tax credit, investment tax credits (ITCs), and labour-sponsored funds tax credit)

The amendments would apply to taxation years that begin after December 31, 2023.

The budget also proposes certain technical amendments to the AMT legislative proposals to exempt certain trusts for the benefit of Indigenous groups.

The 2023 budget proposed tax rules to create EOTs. The 2023 Fall Economic Statement proposed to exempt $10 million of capital gains on the sale of a business to an EOT subject to certain conditions.

The budget introduces the conditions for this exemption. The exemption will be available to an individual (other than a trust) on the sale of a business to an EOT where the following conditions are met:

• the individual, a personal trust of which the individual is a beneficiary, or a partnership in which the individual is a member, disposes of shares of a corporation that is not a professional corporation
• the transaction is a qualifying business transfer (as defined in the proposed rules for EOTs) in which the trust acquiring the shares is not already an EOT or a similar trust with employee beneficiaries
• throughout the 24 months immediately prior to the qualifying business transfer, the transferred shares were exclusively owned by the individual claiming the exemption, a related person, or a partnership in which the individual is a member; and over 50% of the FMV of the corporation’s assets were used principally in an active business
• at any time prior to the qualifying business transfer, the individual (or their spouse or common-law partner) has been actively engaged in the qualifying business on a regular and continuous basis for a minimum period of 24 months
• immediately after the qualifying business transfer, at least 90% of the beneficiaries of the EOT are resident in Canada

Where multiple individuals dispose of shares to an EOT as part of a qualifying transfer and meet the conditions above, they may each claim an exemption, however the total exemption in respect of the sale cannot exceed $10 million. The individuals would have to agree on the allocation of the exemption.

If an EOT has a disqualifying event within 36 months of the transfer, the exemption claim will be retroactively denied. If this occurs more than 36 months after a transfer the EOT will be deemed to realize a capital gain equal to the total exempt capital gains. A disqualifying event would result where an EOT loses its status as an EOT or if less than 50% of the FMV of the qualifying business shares is attributable to assets used principally in an active business at the beginning of two consecutive years of the corporation.

The EOT, any corporation owned by the EOT that acquired the transferred shares, and the individual will need to elect to be jointly and severally, or solitarily liable for any tax payable by the individual as a result of an exemption being denied due to a disqualifying event occurring during the first 36 months.  

For the purposes of the AMT calculation the capital gain on the transfer would be subject to an inclusion rate of 30% (consistent with the inclusion rate for capital gains eligible for the LCGE).            

An individual’s normal reassessment period as it relates to this exemption is proposed to be extended by an additional three years.

The budget also proposes to expand qualifying business transfers to include the sale of shares to a workers cooperative corporation, provided it meets certain conditions.

These measures will apply to qualifying dispositions of shares that occur between January 1, 2024 through December 31, 2026.

The budget proposes to double the volunteer firefighters tax credit and the search and rescue volunteers tax credit to $6,000 for the 2024 and subsequent taxation years; this increases the maximum annual tax savings to $900.

The budget proposes to extend the eligibility for this credit for an additional year, so that it will apply to flow-through share agreements entered into before April 1, 2025.

Canada Child Benefit (CCB)

A CCB recipient is no longer eligible to claim the CCB in respect of a child in the month following the child’s death. The budget proposes to extend eligibility for the CCB to six months after the child’s death, provided the individual continued to be eligible for the CCB.

The budget proposes to extend the list of expenses recognized for the disability supports deduction.

It also provides that expenses for service animals, as defined under the medical expense tax credit (METC) rules, will be recognized under the disability supports deduction. The individual will choose whether to claim under the METC or the disability supports deduction.

A foreign charity may register as a qualified donee for a 24-month period where it received a gift from His Majesty in right of Canada and it is pursuing certain activities in the national interest of Canada.  The budget proposes to extend the eligibility of a foreign charity to be considered a qualified donee from 24 months to 36 months.  The foreign charity would also be required to submit an annual information return to the CRA that would be made publicly available. The extension will apply to foreign charities registered after April 16, 2024. The reporting requirements will apply to taxation years beginning after April 16, 2024.        

The budget also proposes to simplify the issuance of official donation receipts by removing certain requirements.

Home Buyers’ Plan (HBP)

To help first-time home buyers, the budget proposes to:

• increase, from $35,000 to $60,000, the amount that an eligible home buyer can withdraw from their Registered Retirement Savings Plan (RRSP) under the HBP, without subjecting the withdrawal to tax, to buy or build a qualifying home (i.e. a first home or a home for a specified disabled individual), effective for the 2024 and subsequent calendar years, for withdrawals made after April 16, 2024
• temporarily extend the repayment grace period by three years, to five years, under the HBP, so that eligible home buyers who withdraw from their RRSP between January 1, 2022 and December 31, 2025 will have up to five years before they need to start repayments to their RRSP

Registered plans (RRSPs, Registered Retirement Income Funds, Tax-Free Savings Accounts, Registered Education Savings Plans, Registered Disability Savings Plans, First Home Savings Accounts, and Deferred Profit Sharing Plans) can invest only in qualified investments for those plans. Qualified investments include mutual funds, publicly traded securities, government and corporate bonds and guaranteed investment certificates. Over the years the qualified investment rules have been expanded to include additional investments for certain plans and to reflect the introduction of new types of plans, but there are inconsistencies and the qualified investment rules are difficult to understand in some cases.

Specific issues are currently under consideration. Stakeholders are invited to submit comments by July 15, 2024 as to how the qualified investment rules can be modernized on a prospective basis to improve the clarity and coherence of the registered plans regime.

Eligible tradespeople and apprentices in the construction industry are currently able to deduct up to $4,000 in eligible travel and relocation expenses per year by claiming the labour mobility deduction for tradespeople. A private member’s bill (Bill C-241) was introduced to enact an alternative deduction for certain travel expenses of tradespeople in the construction industry, with no cap on expenses, retroactive to the 2022 taxation year.

The budget announces that the government will consider bringing forward amendments to the Income Tax Act (ITA) to provide a single, harmonized deduction for tradespeople’s travel that respects the intent of Bill C-241.

The budget proposes to amend the ITA to exclude from taxation the income of the trusts established under the First Nations Child and Family Services, Jordan’s Principle, and Trout Class Settlement Agreement. This will also ensure that payments received by class members as beneficiaries of the trusts will not be included when computing income for federal income tax purposes.

This measure will apply to the 2024 and subsequent taxation years.

Business tax measures

The 2023 budget proposed a refundable ITC for clean electricity, equal to 15% of the capital cost of eligible property. The 2024 budget provides the design and implementation details of the ITC, including the eligibility criteria. It also includes special rules for property that generates electricity from natural gas with carbon capture and property used to transmit electrical energy between provinces or territories, as well as details of the compliance and recovery process.

The ITC will be available only to eligible Canadian corporations, which are defined as:

• taxable Canadian corporations and pension investment corporations
• provincial and territorial Crown corporations (subject to additional requirements)
• corporations owned by municipalities or Indigenous communities

Property eligible for the ITC includes equipment used to generate electricity from:

• solar, wind or water energy (certain class 43.1 property, but hydroelectric installations would not be subject to a capacity limit)
• concentrated solar energy (as defined for the purposes of the proposed clean technology ITC)
• nuclear fission, including heat generating equipment (as defined for the purposes of the proposed clean technology ITC, without the generating capacity limits and other certain requirements of that credit)
• geothermal energy, including heat generating equipment, if it is used exclusively for that purpose (excluding equipment that is part of a system that extracts fossil fuel for sale)
• specified waste materials, as part of a system

Eligible property also includes equipment that is:

• stationary electricity storage equipment and equipment used for pumped hydroelectric energy storage (excluding any that uses a fossil fuel in operation)
• part of an eligible natural gas energy system (special rules apply)
• used for transmission of electricity between provinces and territories (special rules apply)

Previously proposed labour requirements must be met to qualify for the 15% ITC, otherwise a 5% ITC is available. The ITC will be subject to potential repayment obligations, repayable in proportion to the FMV of the particular property when it has been converted to an ineligible use, exported from Canada, or disposed of.

The ITC will be available for new eligible property (i.e. has not been used for any purposes before its acquisition) that is acquired and becomes available for use after April 15, 2024 and before 2035 in respect of projects that did not begin construction before March 28, 2023.

The budget introduces the EV supply chain ITC, equal to 10% of the cost of buildings used in Canada in the following electric vehicle supply chain segments:

• electric vehicle assembly
• electric vehicle battery production
• cathode active material production

To qualify for the ITC, the taxpayer (or member of a group of related taxpayers) must claim the clean technology manufacturing ITC (CTMITC) in all three of the segments (or must claim the CTMITC in two of the three segments and hold at least a qualifying minority interest in an unrelated corporation that claims the CTMITC in the third segment – the building costs of the unrelated corporation would also qualify for the new ITC).

The ITC is effective for property that is acquired and becomes available for use after December 31, 2023. The ITC will be reduced to 5% for 2033 and 2034 and 0% after 2034. Design and implementation details of the ITC will be provided in the 2024 Fall Economic Statement.

The 2023 budget proposed a clean technology manufacturing ITC, and draft legislative proposals were released in December 2023. The 2024 budget proposes to update the clean technology manufacturing ITC for production of qualifying minerals (such as copper, nickel, cobalt, lithium, graphite and rate earth elements) that occur at polymetallic projects (i.e. projects engaged in the production of multiple minerals) by:

• clarifying that the value of qualifying materials will be used as the appropriate output metric when assessing the extent to which property is used (or expected to be used) for qualifying mineral activities producing qualifying materials
• modifying eligible expenditures to include investments in eligible property used in qualifying mineral activities that are expected to produce primarily qualifying materials at mine or well sites, including tailing ponds and mills located at these sites (50% or more of the financial value of the output comes from qualifying materials)

A safe harbour rule will apply to the recapture rule for all qualifying mineral activities, to mitigate against the effects of mineral price volatility on the potential recapture of the ITC, the details of which will be provided at a later date.

Accelerated Capital Cost Allowance (CCA)

Purpose-built rental housing.

The budget provides an accelerated CCA of 10% for new eligible purpose-built rental projects that begin construction after April 15, 2024 and before January 1, 2031, and are available for use before January 1, 2036.

Eligible property will be new purpose-built rental housing that is a residential complex:

• with at least four private apartment units, or 10 private rooms or suites, and
• in which at least 90% of residential units are held for long-term rental

The Accelerated Investment Incentive (AII), which suspends the half-year rule, will continue to apply to eligible property put in use before 2028. The accelerated CCA will not apply to renovations of existing residential complexes, but new additions to an existing structure will be eligible. Projects that convert existing non-residential real estate into a residential complex will be eligible.

Productivity-enhancing assets

The budget provides immediate expensing (i.e. a 100% first-year CCA deduction) for property that is acquired after April 15, 2024 and becomes available for use before January 1, 2027, for the following CCA classes of assets:

• class 44 (patents or rights to use patented information for a limited or unlimited period)
• class 46 (data network infrastructure equipment and related systems software)
• class 50 (general-purpose electronic data-processing equipment and systems software)

The accelerated CCA will be available only for the year in which the property becomes available for use. For a short taxation year, the accelerated CCA must be prorated and will not be available in the following taxation year. Property that becomes available for use after 2026 and before 2028 will continue to benefit from the AII.

Property that has been used (or acquired for use) for any purpose before it is acquired by the taxpayer will be eligible for the accelerated CCA only if both of the following conditions are met:

• neither the taxpayer nor a non-arm’s length person previously owned the property, and
• the property has not been transferred to the taxpayer on a tax-deferred “rollover” basis

The excessive interest and financing expenses limitation (EIFEL) rules restrict a Canadian taxpayer’s deductions for interest and financing expenses, based upon a percentage of its “tax-EBITDA” (i.e. its taxable income, adjusted for items such as interest expenses, depreciation and amortization). For a discussion of the EIFEL rules, see our  Tax Insights “ Bill C-59 ─ Excessive interest and financing expenses limitation (EIFEL) regime .” The EIFEL rules currently include a single sector-specific exemption, for certain interest and financing expenses relating to public-private partnership (P3) infrastructure projects. The budget proposes to extend this election, on an elective basis, for certain interest and financing expenses relating to arm’s length financing that is used to build or acquire certain purpose-built rental housing located in Canada. This exemption will be effective for taxation years beginning after September 30, 2023, consistent with the EIFEL rules more generally. However, this exemption will be available only for expenses incurred before January 1, 2036.

The government is concerned that some landowners are holding residentially zoned vacant land as a speculative investment. The budget announces that the government will consider introducing a new tax on residentially zoned vacant land to spur development. The government will launch consultations later this year.

In March 2024, the government began consultations on how federal policies can better support the needs of all Canadians seeking to become homeowners. The government will provide an update in the 2024 Fall Economic Statement.

The budget announces the government’s intention to restrict the acquisition of existing single-family homes by very large corporate investors. The government will consult in the coming months and provide further details in the 2024 Fall Economic Statement.

The budget announces that the government is exploring new measures to expand access to alternative financing products for home purchasers, such as halal mortgages. These measures could include changes in the tax treatment of these products or a new regulatory regime for financial service providers, while ensuring adequate consumer protections are in place.

The budget proposes several amendments to the CRA’s information gathering provisions in the ITA, with the intent of enhancing the efficiency and effectiveness of tax audits and facilitating the collection of tax revenues on a timelier basis. These changes include:

• allowing the CRA to issue a new type of notice, referred to as a “notice of non-compliance” and to levy a monetary penalty
• permitting the CRA to specify that any required information (oral or written) or documents be provided under oath or affirmation
• imposing a penalty when the CRA obtains a compliance order against a taxpayer, and
• extending the stop the clock rules (which suspend the counting of days in the assessment limitation period), so that these rules apply when a taxpayer seeks judicial review of any requirement or notice issued to the taxpayer by the CRA in relation to the audit and enforcement process, and during any period that a notice of non-compliance is outstanding

Analogous amendments are also proposed to other federal tax statutes administered by the CRA. The budget also proposes certain technical amendments to ensure the rules meet their policy objectives.

These amendments would come into force upon royal assent of the enacting legislation.

The ITA allows a corporation to deduct the amount of any dividends received on a share of a corporation resident in Canada, subject to certain limitations.

One of these limitations is an anti-avoidance rule that denies the dividend received deduction in connection with synthetic equity arrangements. Synthetic equity arrangements include arrangements in which a person receives a dividend on a share, but all or substantially all of the risk of loss and opportunity for gain or profit (the “economic exposure”) in respect of the share are provided to another person.

Where a taxpayer enters into a synthetic equity arrangement in respect of a share, the taxpayer is generally obligated to compensate the other person for the amount of any dividends paid on the share. This compensation payment may result in a tax deduction for the taxpayer in addition to the dividend received deduction. Unless the anti-avoidance rule applies to deny the dividend received deduction, a tax loss would generally arise as a result of the two deductions.

The anti-avoidance rule incorporates certain exceptions, including where the taxpayer establishes that no tax-indifferent investor has all or substantially all of the economic exposure in respect of the share. An associated exception is also available for synthetic equity arrangements traded on a derivatives exchange.

The budget proposes to remove the tax-indifferent investor exception (including the exchange traded exception) to the anti-avoidance rule. This measure would prevent taxpayers from claiming the dividend received deduction for dividends received on a share in respect of which there is a synthetic equity arrangement.

This measure would apply to dividends received after December 31, 2024.

A mutual fund is a type of investment vehicle that allows investors to pool their money and invest in a portfolio of investments without purchasing the investments directly. A mutual fund corporation is a mutual fund organized as a corporation that meets certain conditions set out in the ITA.

The ITA includes special rules for mutual fund corporations that facilitate conduit treatment for investors (shareholders). For example, these rules generally allow capital gains realized by a mutual fund corporation to be treated as capital gains realized by its investors. In addition, a mutual fund corporation is not subject to mark-to-market taxation and can elect capital gains treatment on the disposition of Canadian securities.

To qualify as a mutual fund corporation under the ITA, a corporation must satisfy several conditions, including that it must be a “public corporation”. A corporation can meet this condition if a class of its shares is listed on a designated stock exchange in Canada. A corporation that is controlled by a corporate group may satisfy this condition, and qualify as a mutual fund corporation, even though it is not widely held. The government is concerned that this could allow a corporate group to use a mutual fund corporation to benefit from the special rules available to these corporations in an unintended manner.

Although the government believes this planning can be challenged based on existing rules in the ITA, the budget proposes specific amendments to the ITA to preclude a corporation from qualifying as a mutual fund corporation where it is controlled by or for the benefit of a corporate group (including a corporate group that consists of any combination of corporations, individuals, trusts, and partnerships that do not deal with each other at arm’s length). Exceptions would be provided to ensure that the measure does not adversely affect mutual fund corporations that are widely held pooled investment vehicles.

This measure would apply to taxation years that begin after 2024.

The budget introduces the Canada Carbon Rebate for Small Business, to return a portion of the federal backstop pollution pricing fuel charge proceeds collected from a province. This will be an automatic refundable tax credit for CCPCs with less than 500 employees in Canada in the calendar year in which the fuel charge begins. The tax credit in respect of the 2019-20 to 2023-24 fuel charge years will be available to a CCPC that files a tax return for its 2023 taxation year by July 15, 2024 (with similar timelines for future fuel charge years).

The tax credit amount:

• is determined for each applicable province in which the eligible corporation had employees in the calendar year in which the fuel charge year begins; and
• is equal to the number of persons employed by the eligible corporation in the province in that calendar year multiplied by a payment rate specified by the Minister of Finance for the province for the corresponding fuel charge year

The ITA includes an anti-avoidance rule that is intended to prevent taxpayers from avoiding payment of their tax liabilities by transferring their assets to non-arm’s length persons. The effect of this tax debt avoidance rule is to make the transferee jointly and severally, or solidarily, liable with the transferor for the transferor’s tax debts, to the extent that the value of the property transferred exceeds the amount of consideration given by the transferee for the property.

The ITA contains a number of rules that address various planning techniques employed by taxpayers attempting to circumvent the tax debt avoidance rule, as well as a penalty for those who engage in, participate in, assent to, or acquiesce in planning activity that they know, or would reasonably be expected to know, is tax debt avoidance planning.

The budget includes a new specific measure to address tax debt avoidance planning (although the government believes this planning can also be challenged based on existing rules in the ITA). The measure would apply in the following circumstances:

• there has been a transfer of property from a tax debtor to another person
• as part of the same transaction or series of transactions, there has been a separate transfer of property from a person other than the tax debtor to a transferee that does not deal at arm’s length with the tax debtor, and
• one of the purposes of the transaction or series is to avoid joint and several, or solidary, liability

Where these conditions are met, the property transferred by the tax debtor would be deemed to have been transferred to the transferee for the purposes of the tax debt avoidance rule. This would ensure that the tax debt avoidance rule applies in situations where property has been transferred from a tax debtor to a person and, as part of the same transaction or series, property has been received by a non-arm’s length person. The penalty applicable to those who participate in tax debt avoidance planning would also be extended to this proposed new rule.

In many cases, tax debt avoidance planning is facilitated by a planner who receives a significant fee, which is effectively funded by a portion of the avoided tax debt. The courts have held that a taxpayer who engages in tax debt avoidance planning is normally not jointly and severally, or solidarily, liable for the portion of the tax debt that has effectively been retained by the planner as a fee. The budget proposes that taxpayers who participate in tax debt avoidance planning be jointly and severally, or solidarily, liable for the full amount of the avoided tax debt, including any portion that has effectively been retained by the planner.

Similar amendments would be made to comparable provisions in other federal statutes.

These measures would apply to transactions or series of transactions that occur after April 15, 2024.

The ITA includes a general rule providing that a person who fails to file or make a return or comply with certain specified rules is guilty of an offence, and liable to penalties of up to $25,000 and imprisonment for up to a year. The mandatory disclosure rules in the ITA also include specific penalties that apply in these circumstances, making the application of this general penalty provision unnecessary.

The budget therefore proposes to remove from the scope of the general penalty provision the failure to file an information return in respect of a reportable or notifiable transaction under the mandatory disclosure rules.

This amendment would be deemed to have come into force on June 22, 2023, which is the day the enhanced mandatory disclosure rules received royal assent.

Under the ITA, losses and other tax attributes that arise from expenditures for which a taxpayer did not ultimately bear the cost are generally not recognized. The ITA contains a set of debt forgiveness rules that apply where a commercial debt is settled for less than its principal amount. These rules generally reduce tax attributes by the amount of debt that is forgiven and, where tax attributes have been fully reduced, the rules cause an income inclusion equal to half of the remaining forgiven amount. The ITA also contains a rule that entitles an insolvent corporation to a corresponding deduction to offset all or part of an income inclusion from the debt forgiveness rules.

Bankrupt taxpayers are generally excluded from these debt forgiveness rules. Instead, a separate loss restriction rule applies to extinguish the losses of bankrupt corporations that have received an absolute order of discharge.

The government is concerned that some taxpayers have sought to manipulate the bankrupt status of an insolvent corporation, with a view to benefiting from the exception in the debt forgiveness rules while also avoiding the loss restriction rule applicable to bankrupt corporations. This planning seeks to preserve the losses and other tax attributes of the insolvent corporation (which would otherwise be eliminated upon the forgiveness of its debts), so that these attributes can be acquired and used by a profitable corporation. This planning is the subject of a designated transaction under the notifiable transactions element of the mandatory disclosure rules.

Although the government believes that manipulation of bankrupt status can be challenged based on existing rules in the ITA, the budget proposes a specific legislative measure to address this issue: repealing the exception to the debt forgiveness rules for bankrupt corporations and the loss restriction rule applicable to bankrupt corporations. This change would subject bankrupt corporations to the general rules that apply to other corporations whose commercial debts are forgiven. The bankruptcy exception to the debt forgiveness rules would remain in place for individuals. While bankrupt corporations would be subject to the reduction of their loss carryforward balances and other tax attributes upon debt forgiveness, as insolvent corporations they could qualify for relief from the debt forgiveness income inclusion rule provided under the existing deduction for insolvent corporations.

These proposals would apply to bankruptcy proceedings that are commenced on or after April 16, 2024.

Scientific Research and Experimental Development (SR&ED)

The government launched a consultation on the existing SR&ED tax incentives on January 31, 2024, which closed on April 15, 2024. The budget announces a second phase of consultations, to focus on specific policy parameters, explore how Canadian public companies could become eligible for the enhanced SR&ED ITC and inform how additional funding announced by the budget can support future enhancements to the SR&ED program. Further details of the consultation will be released on the Department of Finance Canada website at a later date.

International tax measures

The Organisation for Economic Co-operation and Development (OECD) has developed a framework for the automatic exchange of tax information relating to transactions in crypto-assets, the Crypto-Asset Reporting Framework (CARF). The budget proposes to implement the CARF in Canada. The new reporting rules will apply to crypto-asset service providers that are resident in Canada, or carry on business in Canada, and that provide services effectuating exchange transactions in crypto-assets. These service providers will need to report certain information regarding their customers and crypto-asset transactions. The budget also includes proposed amendments to the Canadian rules implementing the OECD’s Common Reporting Standard, including changes relating to electronic money products and central bank digital currencies. These measures will apply to 2026 and subsequent calendar years.

A person who makes a payment to a non-resident for services rendered in Canada is currently required to withhold 15% of the payment and remit that amount to the CRA. This is intended to serve as a prepayment of tax that the non-resident may ultimately owe in Canada. Certain non-residents do not owe Canadian tax for these services, e.g. due to exemptions in tax treaties, or exemptions for specific activities like international shipping. In these circumstances, the CRA may provide an advance waiver from the withholding obligation for specific transactions, or the non-residents may apply for refunds of amounts that have already been withheld. The budget proposes to give the CRA legislative authority to grant single waivers that cover multiple transactions occurring over a specific time period, where certain conditions are satisfied. This measure will take effect upon royal assent of the enacting legislation.

The OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting has developed a two-pillar plan to reform the international tax system, as part of the “BEPS 2.0” initiative. On October 8, 2021, Canada and 135 other countries in the Inclusive Framework committed to adopt this plan (for a discussion on that commitment, see our  Tax Insights  “ The new international tax framework and Canada’s digital services tax ”). The budget provides an update on the two pillars of this international tax reform initiative.

Pillar One will introduce new rules for allocating taxing rights between countries to address challenges raised by the digital economy. These rules will generally apply to multinational enterprises (MNEs) with annual revenue above €20 billion and profit margins above 10%. The right to tax a portion of these MNEs’ profits will be reallocated to market countries (i.e. the countries where the MNEs’ users and customers are located).

The budget reaffirms Canada’s commitment to bringing Pillar One into effect as soon as a critical mass of countries is willing to participate. In the meantime, Canada is moving ahead with its plan to enact the Digital Services Tax (DST). Implementing legislation for the DST is currently before Parliament in Bill C-59. The DST will take effect beginning in calendar year 2024, with the first year covering taxable revenues earned since January 1, 2022. (For a discussion of the DST, see our  Tax Insights  “ Digital Services Tax: One step closer to becoming a reality .”)

Pillar Two will introduce a 15% global minimum tax. This tax will generally apply to MNEs with global revenues of at least €750 million. These MNEs will be required to compute their effective tax rate (ETR) in each country where they operate. If the ETR for a particular country is below 15%, a top-up tax will be imposed, to raise that ETR to 15% (this top-up tax may be reduced by a substance-based income exclusion, which is computed based on the payroll costs and net book value of tangible assets located in the jurisdiction). Draft legislative proposals for a Global Minimum Tax Act to implement the Pillar Two regime in Canada were released for public comment in August 2023 (for a discussion of those proposals, see our  Tax Insights  “ Canada releases draft Global Minimum Tax Act ”). The budget states that Canada is moving forward with this implementing legislation and intends to introduce it in Parliament soon.

Sales tax measures

Extending goods and services tax (gst) relief to student residences.

On September 14, 2023, the government announced that it would temporarily remove the GST from new purpose-built rental housing projects (i.e. apartment buildings, student housing and senior residences built specifically for long-term rental accommodation) by implementing an Enhanced (100%) GST Rental Rebate for new qualifying purpose-built rental housing projects (for more information, see our  Tax Insights  “ Enhanced GST rental rebate for rental apartments that begin construction after September 13, 2023 ").

To ensure that universities, public colleges and school authorities can also claim the Enhanced (100%) GST Rental Rebate for student residences that are built for short-term use, the budget proposes to amend the  Excise Tax Act  to allow them to apply the normal GST/Harmonized sales tax (HST) rules that apply to other builders (i.e. paying GST/HST on the final value of the building) in respect of new student housing projects.

The budget also proposes to relax the rebate conditions so that universities, public colleges and school authorities that operate on a not-for-profit basis (i.e. those that would currently qualify for the Public Service Body rebates under the GST/HST) can claim the 100% rebate in respect of any new student residence that they acquire or construct provided it is primarily for the purpose of providing a place of residence for their students.

The proposed measures would apply to student residences that begin construction after September 13, 2023 and before 2031, and that complete construction before 2036.

The budget proposes to repeal the temporary zero rating of certain face masks or respirators and certain face shields under the GST/HST for supplies made after April 30, 2024.

Previously Announced Measures

The budget confirms that the government will proceed with the following previously announced measures, as modified to take into account consultations, deliberations and legislative developments since their announcement or release:

• legislative proposals released on December 20, 2023, which include measures relating to the clean hydrogen ITC, the clean technology manufacturing ITC, concessional loans and short-term rentals
• legislative and regulatory proposals announced in the 2023 Fall Economic Statement, which include measures relating to the Canadian journalism labour tax credit, the expansion of eligibility for the clean technology and clean electricity ITC, the GST/HST joint venture election rules and the Underused Housing Tax
• legislative and regulatory amendments to implement the Enhanced (100%) GST Rental Rebate for purpose-built rental housing announced on September 14, 2023
• the carbon capture, utilization and storage and the clean technology ITCs and labour requirements related to certain “clean economy” ITCs
• enhancing the reduced tax rates for zero-emission technology manufacturers
• flow-through shares and the critical mineral exploration tax credit – lithium from brines
• Retirement Compensation Arrangements
• strengthening the Intergenerational Business Transfer framework
• the income tax and GST/HST treatment of credit unions
• a tax on repurchases of equity
• modernizing the General Anti-Avoidance Rule
• global minimum tax and DST
• technical amendments to GST/HST rules for financial institutions
• providing relief in relation to the GST/HST treatment of payment card clearing services
• extending the quarterly duty remittance option to all licensed cannabis producers
• revised Luxury Tax draft regulations to provide greater clarity on the tax treatment of luxury items
• technical tax amendments to the ITA and the Income Tax Regulations
• legislative amendments to implement changes discussed in the transfer pricing consultation paper released on June 6, 2023
• tax measures announced in the 2023 budget, including the dividend received deduction by financial institutions
• substantive CCPCs
• technical amendments to the ITA and Income Tax Regulations
• legislative amendments to implement the hybrid mismatch arrangements rules announced in the 2021 budget

The budget also reaffirms the government’s commitment to move forward, as required, with technical amendments to improve the certainty and integrity of the tax system.

Integration – Capital gains ($)

(taxation year ended December 31, 2024, and $10,000 of capital gains earned after June 24, 2024)

This table shows:

• the income tax deferral (prepayment) if capital gains in excess of $250,000 are earned and retained in a corporation as opposed to being earned directly by an individual
• the tax (cost) if the after-tax corporate income is paid out as a dividend to the shareholder in 2024

The table assumes:

• the individual is in the top marginal tax rate
• no capital gains deductions are available
• the non-taxable portion of the capital gain is distributed as a tax-free capital dividend
• the taxable dividend paid is sufficient to generate a full refund of refundable tax 

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Tax Insights: 2024 Federal budget ─ Supporting housing, raising taxes

Dean Landry

National Tax Leader, PwC Canada

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Annex 3: Legislative Measures

This annex includes a number of measures (other than tax-related measures) that would be implemented through legislation.

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Integrated human resources and business plan. : Fs151-20E-PDF

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Your questions answered about the proposed capital gains tax changes

2024 federal budget proposes tax hike for large profits on asset sales.

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The federal government's 2024 budget includes significant new spending on projects and programs — and it's relying on revenue from a change to the capital gains inclusion rate to help pay for it.

So what is this inclusion rate and how does the change affect taxpayers? Here's what you need to know.

What are capital gains?

A capital gain is the difference between an asset's cost and its total sale price. An asset could be a cottage, an investment property, a stock or a mutual fund.

For example, if someone purchased a cottage for $750,000 and later sold it for $850,000, they would have a capital gain of $100,000.

• Are you concerned about how the new capital gains tax changes might affect you? We want to talk to you for an upcoming story. Send an email to [email protected] .

Does the tax on capital gains include the family home?

There are some situations that don't trigger a taxable capital gain. If you sell your primary residence for more than you paid, or earn profits through tax-sheltered vehicles like RRSPs or RESPs, those gains are not taxed.

So if you're selling your primary home, this change won't affect you.

How are capital gains taxed and what's changing?

Right now, only 50 per cent of capital gains are taxable. That person who sold a cottage for $100,000 more than they paid for it is taxed only on $50,000 of the profit.

How could capital gains tax increases impact Canadian small businesses? | Power & Politics

The 2024 budget would increase the "inclusion rate" from one-half to two-thirds on capital gains above $250,000 for individuals.

So for the first $250,000 in capital gains, an individual taxpayer would continue to pay tax on 50 per cent of the gain. For every dollar beyond $250,000, two-thirds would be taxable.

• Freeland's new federal budget hikes taxes on the rich to cover billions in new spending
• 2024 federal budget's key takeaways: Housing and carbon rebates, students and sin taxes

The budget proposes to tax all capital gains earned by corporations and trusts at the two-thirds rate.

If adopted, the tax changes would take effect on June 25.

Why set the lower tax limit at $250K for individuals?

According to federal government data, 28.5 million Canadians are not expected to have any capital gains income at all. Three million are expected to earn capital gains below the $250,000 annual threshold.

The data also indicates only 0.13 per cent of Canadians — people with an average income of about $1.4 million a year — are expected to pay more in personal income tax on their capital gains as a result of the change.

What does the change mean for property sales?

The 2024 budget maintains the existing exemption for capital gains from selling a principal residence. 

It also retains an existing lifetime capital gains tax exemption on the sale of small business shares, and farming and fishing property.

The new budget proposes to increase that exemption to $1.25 million, and to index that figure to inflation thereafter.

Taxpayers who are gifted a property — or inherit one from their family — and then sell the property could face the higher capital gains tax rate. But that can change, depending on the size of the profit and whether the property becomes a primary residence.

What's in the new federal budget?

Sahir Khan, executive vice president of the University of Ottawa Institute of Fiscal Studies and Democracy, said this scenario is "not uncommon in the generational transfer of wealth."

"They give you a house, you're a little worse off, but not a lot worse off," Khan said, citing the new capital gains inclusion rate.

Khan said an estate planner or an estate lawyer likely would advise transferring the property differently to ease the tax hit.

ABOUT THE AUTHOR

Benjamin Lopez Steven is a reporter and part-time writer for CBC News Network. He's also a recent journalism graduate from Carleton University. You can reach him at [email protected] or find him on Twitter at @bensteven_s.

With files from John Paul Tasker

Health Advocate Applauds Federal Budget 2024 in providing costing on a National Pharmacare Plan; a milestone in universal free access to contraceptives

OTTAWA, April 16, 2024 (GLOBE NEWSWIRE) -- The Society of Obstetricians and Gynaecologists of Canada (SOGC) applauds the federal government’s announcement of $1.5 billion in funding over five years to support the launch of the National Pharmacare Plan which will include universal access to contraceptives in Budget 2024. By removing the financial barriers to all contraceptives options, nine million women in Canada will soon have the tools to better control their futures and as a result, improve economic prosperity for the country.

This represents a generational shift when it comes to women’s health care in Canada. Access to contraception is not only a matter of reproductive rights but also a fundamental aspect of public health and equity.

As the national voice on women’s health care, the SOGC has long been advocating for coverage for a full range of contraceptives, including: the pill; the patch; the ring; IUDs; the shot and the implant. By ensuring that all options are available, women will no longer make this decision based on their income.

We urge the government to work with provinces and territories urgently to begin negotiations because it is never soon enough for those in difficult economic circumstances trying to make decisions to pay the rent, or to pay for their prescription. And we also call on the provinces and territories to ensure that all contraceptive options are included in their final negotiations. Time is of the essence here in Canada, but also when reflecting on the threats to women’s health care globally.

Additionally, we were pleased to learn that to make essential menstrual products more accessible, the government is continuing the work of the Menstrual Equity Fund pilot project, which helps community organizations ensure women have the menstrual products they need. We look forward to hearing more in the 2024 Fall Economic Statement.

“The SOGC is pleased with today’s funding commitments in Budget 2024- an important milestone toward universal free access to contraception to all Canadian women. This policy will help ensure that women are empowered with the tools to better control their futures including family planning, educational pursuits and workforce entry and re-entry. We know that income and address should never be barriers to a woman’s ability to control her own future!” – Dr. Diane Francoeur, Chief Executive Officer of the Society of Obstetricians and Gynaecologists of Canada

Media Inquiries:

Kelsey MacDonald Director of Communications and Public Affairs Society of Obstetricians and Gynaecologists of Canada [email protected] 613-730-4192 x 228

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Audit of Integrated Planning and Risk Management

Executive summary.

Integrated planning is an important building block in continuously improving and building the capacity of the Public Service to deliver services to Canadians. Corporate Planning and Management Directorate ( CPMD ), Strategic Policy and Research Branch ( SPRB ), has the mandate to contribute to and support departmental managers through its leadership in areas such as integrated business planning and priority-setting, management accountability initiatives, performance measurement and integrated risk management. Planning personnel in each branch are responsible for supporting their respective organizations and the departmental planning cycles. Service Management Branch ( SMB ), Business Planning and Governance Unit leads Service Canada’s integrated corporate priority-setting, planning and governance activities.

Audit objective

The objective of this engagement was to provide assurance that the integrated planning and risk management processes are timely Footnote 1 , useful Footnote 2 , and cost effective Footnote 3 to develop multi-year risk-based Integrated Business Plans ( IBP ).

Summary of key findings

• There is confusion over the use of the word ‘priority’. There is consensus that mandated work has first call on branch resources but this is not characterized as a priority in the context of corporate-level discussions or reporting about the annual plans.
• The branches with a mature planning culture have developed tools and processes to help in the creation of risk-based plans. Multi-year planning was not required in the guidance for plans created for fiscal year 2012–13 although some branch plans had elements of multiyear planning.
• The guidance from CPMD is used by planning staff in all branches to respond to requests for input to corporate planning processes. The guidance and templates examined asked for information that was limited to the branch itself. Information provided to CPMD was only in relation to established departmental priorities.
• Requests for information often have tight timelines which can affect the quality of the information received.
• Enabling services do not consistently participate in planning at the branch level.

Audit conclusion

The audit team concludes that the processes in place for 2012–13 did not facilitate the preparation of fully integrated multi-year business plans. However, there is a foundation of good guidance and good practices scattered through the Department which can be built upon.

Risk information is created at many levels but is not always available to the right level of management to inform risk-based decision making. Multi-year plans were prepared by some branches for the 2012–13 fiscal year but guidance for that year did not require multi-year plans.

The planning and risk management processes used by branches are useful for managing the core mandate of the Department assigned to that branch. There are opportunities to improve the timeliness of the process at all levels and to improve the completeness of risk information provided to senior management through CPMD . The cost effectiveness of the process can be improved by clarifying expectations and minimizing the amount of rework.

The improvements recommended will not be a quick fix. The branches with the most mature planning and risk management cultures began to develop their tools more than six years ago and did not see any marked improvement until the ground work was finished three years later.

Recommendations

The Senior Assistant Deputy Minister ( SADM ) SPRB should, in consultation with:

• The various departmental planning networks, develop a common department-wide planning process to produce multi-year integrated business plans that links to standardized calendars, tools, risk registers, templates and guidance.
• The Assistant Deputy Ministers ( ADM s) responsible for enabling services, develop a protocol for these services to be integrated into each branch’s business planning cycle to facilitate a greater understanding of the Department’s core business.

1.0 Background

1.1 context.

Integrated planning is an important building block in continuously improving and building the capacity of the Public Service to deliver services to Canadians. Integrated, formalized and rigorous planning can mitigate risks associated with an aging workforce, tight labour markets, technological change, and so on. Integrated planning can help identify optimal strategies and activities for such important human resources ( HR ) management components as recruitment, retention, learning, development, employee engagement, promotion, succession, employment equity and official languages.

Note: Guidance on business planning and HR planning

In 2008, Treasury Board Secretariat ( TBS ) issued guidance outlining a five step process to integrate business planning with HR planning.

CPMD has the mandate to contribute to and support departmental managers through its leadership in areas such as integrated business planning and priority-setting, management accountability initiatives, performance measurement and integrated risk management. CPMD also serves as a focal point for the departmental planning community, information sharing and providing guidance.

Note: Business planning and risk management process

In 2009 , TBS outlined the responsibilities of deputy heads with respect to compliance with government rules while encouraging innovation and informed risk-taking to achieve results.

Planning personnel in each branch are responsible for supporting their respective organizations and the departmental planning cycles. In accordance with the guidance provided by CPMD , they ensure the effective implementation and coordination of the business planning and risk management process.

SMB coordinates the integrated planning process for Service Canada. The Business Planning and Governance Unit leads Service Canada’s integrated corporate priority-setting, planning and governance activities. Their work involves coordinating and developing Service Canada’s input to the departmental planning activities.

1.2 Audit objective

The objective of this engagement was to provide assurance that the integrated planning and risk management processes are timely Footnote 4 , useful Footnote 5 , and cost effective Footnote 6 to develop multi-year risk-based IBP .

The scope of this audit included the processes and controls related to the development of the Corporate Risk Profile ( CRP ), IBP and related products for the latest completed planning cycle, which was fiscal year 2012–13. Guidance for 2013–14 was also examined. The integrated planning process includes the following components: resource planning, HR planning, risk management and performance measurement. The audit only confirmed the existence of performance measures. The audit did not examine the processes used to define the Program Alignment Architecture or the Performance Measurement Framework.

1.4 Methodology

This audit used a number of methodologies including document review and interviews. Representatives from Income Security and Social Development Branch ( ISSDB ), Innovation, Information and Technology Branch ( IITB ), SPRB , Citizen Service Branch, Integrity Services Branch ( ISB ), SMB and Ontario and Quebec regions were interviewed in order to have a comprehensive view of the operational environment. Travel to regional offices located in Toronto and Montreal took place in October 2013.

2.0 Audit findings

Planning is a management process to define goals for the organization's future direction and to allocate the tasks and resources needed to achieve those goals. In the context of the Department, much of our direction is established by Parliament and answers the question “What are our goals?”. This still leaves the Department significant latitude in planning for how to achieve those goals in both the short term and the long term.

Keeping those goals in mind, integrated business planning is a continuous exercise to deliver quality services to clients on time at the lowest cost in an environment that seeks continual improvement. Rigorous risk management permits managers at all levels to make informed decisions when choosing among competing priorities and investment opportunities.

2.1 A single comprehensive department-wide planning process needs to be established

The various framework documents published by the TBS indicate that there are five phases to integrated business planning with risk management principles built into the entire cycle. The phases are:

• Validation of business objectives or mandate
• Environmental scan, including re-assessment of current tools, practices and guidance
• Identification and analysis of risks to the accomplishment of business objectives
• Development of detailed plans to accomplish work, mitigate known risks and set priorities
• Establishing performance measures to enable management for success

It is important to note that management owns the plans that result from an integrated business planning and risk management process. Planners and planning networks provide guidance and support and can improve the quality of risk information by challenging assumptions and facilitating rigorous risk analysis. However, the usefulness of any plan is decided by the manager and business unit that execute it.

Mandated responsibilities

At the branch level, mandated responsibilities were fully taken into account. These mandated responsibilities are called ‘activities’, ‘run’, or ‘responsibilities’ by the managers interviewed by the audit team. For the period under audit, CPMD did not ask branches to report on plans against mandated activities, although key performance indicators and targets were incorporated into both the Report on Plans and Priorities ( RPP ) and the Departmental Performance Report ( DPR ). Both the RPP and DPR contain multi-year elements but the RPP focus is on the current fiscal year.

At the corporate level, information collected was primarily aimed at informing the priorities for investment decisions or to draft the Department’s response to Government of Canada priorities.

Risk analysis and identification

Branches, with varying degrees of rigour, perform an environmental scan and risk analysis exercise. Departmental and government priorities also provide lenses for examining risks in a different fashion. Branches with well-established sources of risk information treat this phase of the process as a validation exercise and a way to brainstorm and identify emerging risks. Branches that are lower on the maturity model informed the audit team that they often feel that the risk analysis phase of the process is rushed.

The output from the risk analysis phase becomes the Branch Risk Register. Some branches have an evergreen process to document the risks for validation in the next iteration. The majority of the branches examined start fresh each year, treating each phase of the planning cycle as a stand-alone event rather than the next phase in a continuous cycle.

Branch registers form the basis of the risk information used in the development of the CRP . The risk information reported to CPMD is a limited set of key risks that apply only to the risks under that branch’s control. The relative ranking of the risks were self-identified by the branch in relation to corporate priorities. Risks relating to on-going business or to dependencies on other stakeholders were incompletely reported to senior management through this process.

Templates provided to branches focussed on reporting risks under their control. The templates and associated guidance did not provide a formal opportunity to discuss known risks posed by dependencies on enabling services. Therefore, there is an opportunity to improve the identification of horizontal risks. Such gaps in risk knowledge at the corporate level could result in poor recommendations or significant delays in taking decisions due to last minute objections or requests for clarification made at the corporate planning tables.

Call letters from CPMD for the corporate risk register process often contained quick turnaround times. Several managers interviewed were not comfortable with their ability to provide robust, reliable risk analysis in the times allowed. These timelines were further compressed for branches operating under the Service Canada umbrella. To mitigate this deadline pressure, CPMD and the SMB have made concerted efforts to provide advance warning through the various planning networks prior to the issuance of the official request. Despite this, the highest performing branches informed the audit team that the timelines were still very tight and CPMD and SMB confirmed that deadlines were frequently not respected. Clearer expectations and guidance would be useful.

Enterprise risk management in a high performing organization requires detailed information about business objectives and risks to achieving those objectives. The business intelligence gathered by the Department during the strategic and operating review initiated by Budget 2011 could provide a good foundation for a detailed corporate-wide risk register.

The third phase of the integrated planning cycle is where management sets priorities and allocates resources to various activities and investments. It is during this phase that the Business Planning Tables ( BPT s) and other formal committees discussed resource allocation to the various activities within the Department. We were informed that the BPT s were primarily concerned with planning for departmental priorities.

We were also informed that ‘priorities’ are the transformational initiatives and improvement projects identified by the government and senior management of the Department. However, all branches developed their plans with delivery of core and mandated services as their highest priority. Only Ontario Region included ‘Service to Canadians’ as a formal priority in their plan.

At the branch level, planning was focussed on achieving core and mandated service objectives while preserving enough free resources to implement the improvement projects that address the government and departmental priorities. At the corporate level, the focus was on deciding which of the many recommended improvement projects and investment opportunities were worth funding and which ones must be funded to address government-wide priorities.

Most of the information collected by CPMD was designed to help senior management make informed decisions about investment priorities. This shift of focus from the branch level to the corporate level can be confusing for middle managers and front line staff. Service delivery personnel are proud of the work they do to serve Canadians and found it difficult to connect their service delivery priorities with the priorities enumerated in the RPP .

Resource allocation

The Department allocates resources to accomplish its routine work in advance of the fiscal year start. However, resource allocation for priority improvement projects is often not completed prior to the beginning of the fiscal year. The audit team was informed that this has affected the start date of projects and activities related to discretionary funding.

The available guidance from CPMD addresses priority setting and resource allocation in a comprehensive way.

Performance measures

The last phase of the planning exercise is to establish or confirm performance measures so that managers can monitor performance against business objectives and make course corrections. All managers confirmed the existence of performance measures against business objectives and indicated those measures were embedded in their performance management agreements.

2.2 User-friendly guidance for managers is needed

Planning calendar.

At the time of the audit the standard planning calendar was not used by departmental managers. Several branches have developed detailed planning calendars with reference to available guidance for each phase or step in the planning cycle. A frequent suggestion for improvement from managers interviewed was for a planning calendar that takes lead times for approval and the potential for rework into account.

Deadlines for corporate reports to Treasury Board and Parliament are consistent from year to year but details of the content change. In order to meet the deadlines, branches either create their own planning calendar and tools or wait until the official requests arrive from CPMD or SMB . Where there are established tools, branches can, with minimal effort, rework existing material to satisfy the request. In branches without established tools, material is prepared quickly and is often returned to the affected branch by SMB or CPMD for rework and clarification. In either case, the resource cost of preparing the plan increases.

Harmonization of the planning cycles and information requests was suggested as a way to reduce the effort needed to respond to multiple planning requests. The current calendars and templates are not fully synchronized and extra work is required to provide information in different formats and to confirm that available information is sufficient or to compile the additional information requested.

Ontario Region has a stable predetermined planning cycle with a detailed calendar showing start and finish dates. Each section of the calendar has a brief description of the activity or report to be completed along with a pointer to guidance relating to that step or phase. This calendar could be used as a model for a corporate calendar.

The SADM SPRB should, in consultation with the various departmental planning networks, develop a common department-wide planning process to produce multi-year integrated business plans that links to standardized calendars, tools, risk registers, templates and guidance.

Management response

Management agrees. SPRB will develop a common department-wide planning process, in consultation with the various branches, that will produce multi-year integrated business plans. Once this planning process has been developed, SPRB will prepare an implementation plan for this process that will be presented to the Corporate Management Committee for approval to ensure related accountabilities for implementing this integrated process are clear and supported.

SPRB will also lead, in consultation with the departmental planning community, the development of an on-line planning process map that will contain links to required calendars, tools, risk registers, templates and other guidance. The estimated completion date for implementation is June 2014 with a formal review to be completed by September 2015.

Corporate planning and branch planning

The audit team found that the guidance provided by CPMD for 2012–13 was not complete enough to be useful to managers in the branches examined. The expected results of the corporate planning process for that year were twofold: identification of projects for continuous improvement, which was business as usual, and responding to the Treasury Board’s deficit reduction initiatives, which was not. With respect to the planning process, CPMD issued formal guidance and requests for information only in relation to continuous improvement and investment projects. Plans produced using only that guidance would not have been useful for managing the business units. Additionally, the plan requested was not multi-year in nature.

The guidance issued for 2012–13 was considered good advice by the planning network. Managers, however, needed to plan for their mandated activities before proposing projects that would address known areas for improvement or established Government priorities. Five of the eight branches examined during the audit established processes to supplement the 2012–13 CPMD guidance, such as additional tools and templates to create comprehensive branch plans. The three remaining branches used the CPMD guidance and templates only to respond to corporate calls for information. These branches had planning processes that, in the audit team’s opinion, were ad hoc in nature.

CPMD updated its planning guidance for fiscal year 2013–14. This guidance was well received by the various planning networks. Planning staff interviewed were satisfied but line managers found that the guidance was not structured in a useful manner. Most managers interviewed obtained their guidance and information from working sessions at the branch level. Responsibility Centre ( RC ) managers understood their responsibilities with respect to their own RC but did not always connect their planning role with the branch or corporate planning cycle.

The guidance issued by CPMD for 2013–14 did not include an explicit validation of mandate as a separate step. Risk assessment is described as part of the environmental scan but is not highlighted as a key step. CPMD ’s guidance correctly recognizes that plans are intended to be used by managers to assist them in accomplishing assigned responsibilities and that managers must be held accountable for the planned work by reporting performance against the plans.

Planning tools

Planning tools are primarily developed and used at the branch level. ISSDB Integrated Planning Assistant has been used to good effect for a number of years and its use is being expanded to other branches. Proposals have been made by CPMD to develop or obtain database solutions for a detailed corporate risk register.

The audit team was informed that all Executives are introduced to planning, risk management and performance measurement in the standard courses. However, there is no mandated supplementary training for managers or planning support staff. When asked about available training there were no consistent recommendations from those interviewed.

2.3 Enabling services need to be fully integrated into the planning cycle

The Department has a number of branches (Chief Financial Officer Branch ( CFOB ), Human Resources Services Branch ( HRSB ), IITB , and ISB ) that enable program delivery. These enabling services touch on all programs that the Department delivers to Canadians. This support is available to managers on request throughout the planning process.

Horizontal integration of the Department’s enabling services is not present throughout the planning cycle. We were informed that CFOB personnel routinely join the planning process at the resource allocation and forecasting phase. Other enabling services only participate when invited to provide particular expertise and most managers do not think to invite them. Enablers, therefore, are not present during the phases of the planning cycle where their clients’ mandate is validated, the environmental scan is conducted, and the risks to the business objectives are assessed. The first chance that the enablers have to comment constructively on branch plans is at the BPTs.

The exception to this is Ontario Region. Representatives of all enabling services are present during all phases of the planning cycle. While this benefits line managers in Ontario Region, it provides a greater benefit to the enabling services. By being present as part of the extended management team, the enabling services acquire a greater understanding of the business of the region, which they can then use to refine their own plans. They can also contribute to and influence the design of various transformational initiatives, bringing their expertise to bear on problems facing the management team and providing a different lens through which to view the problems or challenges.

Some branches have worked around this by ensuring that the planning support team has expertise in finance, HR or information technology. This benefits only the branch in question unless the individual in that support role has good networks with the related enabling services.

Enabling branches are the best positioned to examine and identify horizontal risks within the Department. The current practice of providing services and advice on request does not facilitate the identification of horizontal risks leading to inconsistent integration of risk information into decision making at both the branch and corporate level.

The SADM SPRB should, in consultation with ADM s responsible for enabling services, develop a protocol for these services to be integrated into each branch’s business planning cycle to facilitate a greater understanding of the Department’s core business.

Management agrees. SPRB will modify business planning guidelines to more explicitly identify the requirement to involve enabling areas such as CFOB , IITB , HRSB and ISB in branch and regional business planning processes, and to ensure that required support from these areas and associated risks regarding this support are reflected in branch and regional business plans. The planning schedule will also be modified to allow time for enabling services, as appropriate, to review support requirements within business plans, prior to final ADM and Executive Heads Service Management approval. The estimated completion date is December 2014.

3.0 Conclusion

4.0 statement of assurance.

In our professional judgement, sufficient and appropriate audit procedures were performed and evidence gathered to support the accuracy of the conclusions reached and contained in this report. The conclusions were based on observations and analyses at the time of our audit. The conclusions are applicable only for the assessment of integrated planning and risk management processes. The evidence was gathered in accordance with the Internal Auditing Standards for the Government of Canada and the International Standards for the Professional Practice of Internal Auditing .

Appendix A: Audit criteria assessment

Appendix b: glossary, page details.