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Office of the Comptroller
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Audit and Consulting Services
~! l'Jovember
2010
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 Revjc~' of Inf{Jrmatwn Systems Operntj{Jlls Final Reporl
2010

1.0 Introduction
During the courseof assignmentsin the Depw"tmentof Health, circumstance
were broughtLothe attentionof Office of the ComptfolJer(DoC) staff regardin,
potentia] conflicts of interest, concerns around the procurement process fo
professionalser\'icesandpossibledeficienciesin conU"actmanagementpractices.

Specifically, concerns were raised with

within the depm"tmentas wel1 as consultants ha,'ing access to
proprietary information of other consulting firn1s. Issues brought foJ"wardwith
contI"actmanagement involved lack of specific deliverablesin COJltI"acts,
as v.lell
as inadequate accountabilityandmonitoring.

The issuesraised were centel"edin tile lrulovatiol1, E-Health and Office of

Sustainabilitybranch and the h1formationTechnology Services branch of the
Departmentof Health. The Deputy Minister of Health was made aware of the
concernsraisedprior to the commencementof thereview.

The objectives of this re,'iew were to:

1. determine if employees and contractors ~1orking in the Innovation, E-Health
and Office of Sustainabilit)1and the Infoffi1ation Technolog)' Ser,'ices sections
of 'the Department of Health are made aWal"eand signoff on the Pro,'ince's
Conflict of Interest Polic)1;
2. determine if there aloeconflicts of interest in the lImovation, E-Health and
Office of Sustainability branch and the lIliormation Technolog)' Ser,'ices
branch of theDepartment of Health;
3. determine if recognized contract management practices are being followed;
I and
4. determine if Pro,'incial purchasing guidelines (Public Purchasing Act and
D Regulation) are being follo~1ed for the acquisition of personal and
. professionalservices.
P
t
. 3.0 ~~~
- --
, The review was conducted on the opel"ations of the Innovation, E-Health and
. Office of Sustainability branch and on the Infoffi1ation Technology Services
branch of the Department of Health. The review examined contracts which were
. in place at April, 2009. Some of these contracts represent renewals ofpreviousJy
expired contI"acts and as a l"esult,expired contI'actsthat were extendedwilJ also be
subject to review.
Revie\\ of Information SystemsOperations Final Report /r
2010 ...
'I""
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The revjew will focus on contracts for information technology professional '-4
;
serVIces.
.--
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We reviewed the organizationalstructureof the Innovation, E-Health and Office ,-
of Sustainabilitybranchas well asthe Information TechnologyServicesbranchof '~
the Departmentof Health. (~
-
~
We interviewed the
as well asthe
and the ~
~
was also interviewed

We reviewed 15 of the 40 IT Professional Service contracts in place in April c-

2009. To ensure compliance with relevant legislation and contract management
~
practices, we reviewed:

The procurement process to ascertain compliance with the Pubic -,.

...

PurchasingAct (PPA); ?
-
Contracts to ensure tirnelines, deliverables and rates were clearly
..-
specified;
Invoicesto ensureproper approvalswere obtainedand rates chargedwere
consistentwith the contracttermsand;

Contract extensions/amendments
to ensure deliverables and costs are
adequatelysupported
We consultedwith the Departmentof Supply and Servjcesto ensureour accurate "-
-
understandingand interpretatjon of the PPA. As well, we consulted with the "-
-
Offjce of Human Resourcesregarding the conflict of interest policy and its
application. The Office of Human resources obtained ~
-
...

...
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"
Criteria were developedto respond to review objecti'fes. These criteria were
reviewedandsignedoff by seniormanagementof the department.
.
..
..

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Audit & Co/lsu/ting Service!
 ~
Re,'ie\l' of Informati()]] SystemsOperations 'inal T{cport
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5.0 Conclusion {J
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Based on the findings of the review perfoffi1ed,OoC feels that the concerns -.
broughtforwardby DOH staff aloevalidated. 'c...

e
OW' study revealedthat in general, employeeswere not aWaI"eand were not .-,
requu'edto sign off on PNB's Conflict of Interest Policy. The re,'iew revealed
conflicts of interestexisted in the branchesof the Departmentof Health under t;..
re,'iew, Theseconflicts included ProjectManagershavingaccessto information e
of competitorsand contractorsbeing in positions which could afford them the L
opportunityto influence decisionswhich would impact their firm 0]' competitor
e:.
firn1s,
t:::
During the review of contract managementprocesses,exceptionswere noted t:.
where su"ongcontract managementpractices were not enforced. Large cost
overrunsand the delayedsigning of agreedstatementsof work were amongthe t..
issuesnoted c:..

The review alsouncovered

One contract re,'iewed had been signed f01"a period r..
exceeding what was app1"0,'edduring the purchasing p1"ocessas well, another
contract was J

It hasbeenshownin law and in policy that an appm"ent conflict of interestin the

public servicecan-iesthe sameweight as an actual conflict where benefits aJ'e
receivedby partieswhich are not in the public interest.The Treasul")'Bom'd of
CalladaSecretariatwrites in their "Apparent Conflict of Interest" documenttl1at
t
"in cauying outtheir official duties,public servantsshouldmTangetheir affairs in
a mannerthat will _pl'event real, apparent, or potentia]conflicts of interestfrom
arising,"

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 Rcvic\\' of Inform~ltiol1 Systems Oper~ltjol1s Filial J{cporl
2/Jl/J

6.0 Findings

6.1 Conflict of Interest Policy A ~'areness

rhe Conflict of 111terest Policy, AD-2915, applies to alJ employee: as wel] as
:ontractorsof PartsI, II andIII of the Public Serviceandstates:

The rel1}Ol/alof col~flicts ~r interest by public officials is central tl th.e

maintenance~f )Jublic tnlsf and colifidence in gollernmenf

Employeesshall not engage in any busl:nesstransactionC?f a .fz'nancialor

personal nature that woz,tld compromise the fair and h.onestdischarge of
their official duties.

There mL,st not be, nor appear to be, any col1flict bernieen the private
interest of the employee and the employee's responsibili1)! to the public.

Managers and supervisors aloeresponsible for ensuring that their immediate

subordinatesare familiar witl1 the provisjons of the policy and must recommend
? any appropriateaction necessaryto ensure compliance. Under the policy, the role
, of Senior Executive Officers is to detern1inewhethe1"a conflict exists 01.is likely
to exist.
r
Discussions
withthe- I revealedthat
employees werenot familial"with AD-2915. Prior to the stroot
of this
J review,employeeswere 110trequiredto readthe policy eitheron an annua1basis
~ or at the time of hire. Ensuringcomplianceand understandingof the policy was
~
not pal"tof theemployee'sannualperformancereview processandno sign offs on
the policy wereobtainedfrom employees.The also advised
J
that wasunawarethat this policy appliedto contractors.
fi
Based on discussions with the i -.
J
some Managers in this branch require staff to read AD- 29] 5 as
I part of their annual performance review. stated that has read and
» understandsthepolicy and pays close attention to its content due to the fact that a
. - I in branch.Finally,
t
statedtl1atthey are not awaJ"eof any conflicts of interest that exist in tlleir branch.
,
Subsequentto OoC's initia1 discussions with DOH regarding the conflict of
, interestpolicy, an emai] messagewas sent to all employeesand contractors in the
, Innovation, E-Health and Office of Sustainabilitv branch and the Information

,
 I~e,'jc~' of Informiltiol! Systems Operations ji'jnal I{eport
2()lO c:.
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Technology Services branch requiring them to familiarize themselves wjth AD.
2915. As well, new employees aloerequired to sign off as proof of havjng J"eadand c
understood the conflict of inteJ"estpolicy" 1;,-"

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6.2 Existenceof Conflicts of Interest
((:,

Our review alsouncoveredsituationsthat would appeal'to violate the conflict of rc.::.

interestpolicy by conferl'ingbenefitsto contractorsbeyondtl]eir remunerationfor L
servicesprovided.
L
ContractoJ"swho aJ"eful'Jctioning as Project Managers are reviewing invoices aJ1d ~
time sheetsto ensure that hours and amounts bilJed to theiJ.pJ'ojects are con"ect.
This review process gJ"antsProject Managers access to competjtor's J"atesthus
e
--
potentialJy putting the contracted PJ"ojectManageJ"in an advantageousposition in
submitting future pJ"oposals.
r
In addition, contractorswho are membersof Project Steering Committees are
involved in discussionsand have accessto competitor's infoffi1ation.This ma)'
result in an advantageto the contractor or the contractor's employer. r
t-
~ ~ - - ... ,...
- - - - . There are severa]employeesfJ'om
contractedby the DOH to work on the project. ChangeRequestshave r
beenapprovedby the SteeringCommitteeto increasethe valueof the contracts.

Finally, review of the

- minutesindicatedthat, ..
-
1was a memberof this committee.In , a sole source
exemptionunder27.1(d) (Urgency),was requestedfrom DSS in ol"derto comply ~
Witl1 Federalfunding tilnelines. The exemptionwas for, and the
contractwasawardedto . In November2008,the "
-

replaced all the as the representatjve

of the branch.

6.3 ContractManagement
Discussjons with the DOH as wel] as review of contractor's jnvoices indicated
that adequateinterna] controls are in place to ensure that contractors are paid the
couect amountand proper approvals are obtained.

There were 110exceptions lloted by OoC whell comparing the per diem rates
specified in the contracts to the actual rates charged all the illvoices. AIl invoices

I/il It GIII/.VII/lilll! Sel

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 I{cvie," of Information SystemsOperations Final Report
20111

reviewed had proper spending authority approval and showed e\/idence that they
were reviewed by t11eproject manager to ensure t11ealJocation of hours charged to
t11eproject was correct. Timesheets were generally attached to t11ein\/oices for
support.
DoC found exceptionsaround tl1e paymentprocessfor tl1e'
- , , project.A purchase
order for this
project in the amountof $395,000plus HST wasissuedon October28th,2008 for
Phase I of the project. Paymentswere made according to tl1e terms of the
purchaseorderand by May, 2009 the $395,000plus HST had beenpaId to the
vendor,
During May/June of 2009, invoices totalling approximately $150,000 were paid to
. ~'ithout a corresponding increase in the purchase order. The
purchase order was amended on July 21, 2009 to increase its value by $1.45
million for Phase2 of tl1e project. Although billings fO1'Phase 2 of the p1'oject
began in May 2009, a Statement of '\J\70rkfO1'this phase was not signed until
November 251h, 2009. The second phase of this project spam1edapP1.oximate1y12
months (Apri12009 to March 2010), meaning the conu'l:lctorwas working without
a sigI1ed Statementof '\J\70rkfor 8 of the 12 months of the second phase of the
project.
Concernsaroundcontractmanagementwere identified relating to the
- The contractfor this project was awmoded to
throughRFP for an original amountof $3.1 million.
[
A numberof changerequestsrecommendedand appro\1ed by the ProjectSteering
r Committeeincreased
this amountby an additional$3.8million.
f
The rationale for increasesis documentedin eithe]"a sho]"tmemo from the p]"oject
r manage]" or on the Change Request fornls, Interviews with staff
f suggested that the DOH should have been mOl"eaggressive in holding
r accountable to thei]" initia] estimates, Sollie of the docu]nentation drafted by the
p]"oject]nanage]"SUppo11ing the initia] $2 million PhaseIII increase was
~ only created afte]' concerns from the ," of Contracts and Revenue we]"e
~ brouuht
b forward to the ,
f
Although the documentation justifies the increase in overalJ project costs, OoC
f
believes that the causeof some cost overruns are the responsibility of the vendor
f and should notincreasefees charged to PNB. Reasonsdocumentedon an October
~ 15, 2008 Inter-Office memo and on an ApriJ 12th,2010 Project Change Request
~ Form which were presented to the, - to support
increasesin feesinclude:
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I~e,'ie\\ of Inform!ltio)J Systems Operations li'j/lal J{cporl
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"Assumptionsmade by/ in providing tJleir initiaJ estimatesnever
materializedand/or were found to be invalid basedon the analysisv.'ol'k ~

dol1eon Pha.~e
] and2 of theproject." ~
"...
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"Loss of resources 011 development team- A few of the
development team have moved on to new opportunities outside of ~

Co

~
It appearsthat. initial1y underestimatedtIle cost of completing tIle project.
However, signeda legally binding contractto provide the servicesat an C

agreedprice. Basedon the abovefindings and interviews conducted,DoC feels ~

that the contractedamount should not have beenincreasedas the terms of tIle ~
originaJcontractdo not provide the ability fo]. to inc]Oease
negotiatedfees
~
without a changein scope.
~
In additionandof particulm"concernto DoC, is thefact that who c
- C
bas several
r-
contractswith the DOH including
. Resem"chconductedby OoC in the spring of 2010 on r-
-

website.revealedthat identified amongits I

p
! " CulTent]y, this inforn1ation no longe]' appears on their -
F
website. -
p
-

6.4 ProcurementProcess "

-
;;;
Our revjew jncluded testing of 15 contI"actsto ensurecompljance wjtb the Publjc -
~
PurchasingAcL.Where contracts selected were renewals or extensjons of prevjous -

agreements,the renev.'a]was traced back to the origjnaJ agreement. ,;.c

-

The contractsreviewedwere procuredtl11'ough lIuof1natics,RFP as well as soJe-

sourcing.In general,contractstestedappearedto be procuredin accordancewith
thePublicPurchasingAct. (PPA)

Our review did however reveal violations of the PPA, In particular, in .Tune2008,
a contract was signed witIl - for tile period July I, 2008 to .Tune30th,
2010 with 2 optional 1 year renewals, At the time of signing this contract, the /
~

Department of Health did not have proper approval from DSS, A memo from ..
.
DSS found ill tI1e contractor's file clearly states tIlat the apP]'oval is only until ,
March 31, 2009 at which time: it was felt by DSS, that the department should be r
~
in a position to ejther go to public tender, rec]'uit a qualified resou]'ce 0]' eliminate ~
the requirement for tI1e ]'esou]'ceto provide se]'vices to the Department, DSS ~
~
confirmed that the DOH did not have the authority to ]'eleasepayment beyond
Mat'ch 2009 at tile time of signing, OoC questioned tile -
~
 I{evic\\ of Information Systems OperHti(lns 'inal Rep(Jrt
20]0

who was unableto explain why a two yeal' conuacl wassigned\~'ben,at the time
of signing,approval~'as only grantedfOl'the first 9 monthsof the contract.

The pcu-ticulcu-
contI-actbegan with DOH in Janum"y2007 [OJ-a period of 3_5
months with a cost of $24,000- Cun-ently, the same original purchase ordeJ-
continuesto beextendedand is now at $463,000plus tax andset to expire in June
2011-

In addition, 5 of the 15 contI"actsreviewed were extendedseveral times beyond

the original contractperiod. This includesa situation wherea contract orjginally
acquired under Infoffi1atics for a perjod of 5 months was subsequentlyso]e-
sourcedand extendedfor a total of 13 additional months.The exemption was
obtainedfor reasonsof absenceof competitionandbecauseservicescould only be
supplied by a partjculat"vendor, Howevel', whel1the Infol'matics col1tractwas
originally acquired,only 4 vendol"swel'e contactedfor responsesof which two
vendorsproposeda resource,Basedon the linuted sem'chto acguil'e tJ1eoliginal
contI"act,DoC finds it difficult to conclude,with any degreeof certainty that the
ser\'icecould only be suppliedb)' one vendor. The contI"actwas for ~'ork on the
projectandthe ~'ork ~'asaVl'arded to

Finally, our reviewof the procurementprocessuncovered

An ernail (attached)
was found in which the
:ontractorprovides

As statedin theRegulation(94-157),

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 'icw of 111: -matiolJ S )1; Fin, J{eporl
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0 SummaryofRecommendaf1:ons
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Employee and contractor houLd s'ign off as' I/7.Cll'ing :mc! understoodI ,..-
,
291')" nn I I anmtaJ basis. r emvlo)lees. this' ,could )r]Jo/-ated as' ]Jar
G
T/1.eZraJ1.lutal peJ:formr:znce revz W. As stated 111 ALJ-L
theSeniorExecutive )fficer oj my col~f/icl ~finteres1 siluc 711il1 whic/7 the'l' llt:i C.-
themselves. Documenation shc lId be maintained ,-
'(.,...
~
Managers and directors rhould .familiarize rhemselvej' with th.e m.eaning anI
dt:finition C!fan apparen col1jLicf q[ inlcres'l , A suggestec!reading co/.uc!be th,
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ContractoJ \' sh.ould not occup management p .'itions' 111ithinthe department.
I1Th.erethe ,'ituation is unavoidt; e. th.econtracto should be stricth' limited to the f.::.
financial '~formation which acce Jarticula 11Jith
competitor s information,

VI'h.erecontractorsare members~f pr~ject steering committees,they sho Coo

takepart in any discussions S/,lrr 'Ltnding th.e contracting/outsourcing of al~ l1)orl,

for thepro.;ect.

Contractorsshould be required to disclose bl-lsinessrel tionships with other

contractorsworking in the departmentwh.ena partnershij; or joint venture t)'ve
rplntin111'lvn p1-il'tl' (px- )

If a Project Manager or member ~f c Stee; 'ing Committee is a contractoi 2nd

aZs'oa partner or principal of a cons, fi rl11 the dpnn 111011t t'J1r1r,I,-1 r" 'O""
from hirinf? other contra.c(orsfrom (h.e '11t/1

Contract manager,s'sh.ould enL\'urethat the requirem.ents

Act are ,follo\1Ied.Docum.entation sh.ou.lclbe maintain
exemptionsparticularly when th.eexemption.for Spec(fi,
i.1' used

,..
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A vurchase de,. .ShOLl be 'inedprior Ja)/menf of am' am.ount, th.e

rchase 0 lEI I1nt hp "
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7ed nl 01'\-1 h.oul all1' ,btainec hecommen, 'lent

VI'hen cant ar III ,iate signedwitr 'endors In]v cont! drafted by

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