Other Related Documents

Preface

It is important that the federal government achieve maximum economy, efficiency and effectiveness in acquiring, using and disposing of materiel resources. The large sum of money expended annually on materiel and the multibillion dollars' worth of materiel assets held by departments and agencies justify close attention to materiel management. Government policies on materiel management place less emphasis on mandated controls and more emphasis on effectiveness. This provides an opportunity for reviewers to move their examinations more directly into the realm of administrative effectiveness.

Reviews can produce valuable information on the effects of the policy. Because reviews provide an occasion for systematic consultation with the organization's staff, they are an excellent source of ideas for streamlining and improving the effectiveness of administrative policies. As well, reviews which identify particular successes and best practices are of interest to the responsible Treasury Board policy centres.

Reviewers are encouraged to provide their input regarding the materiel management policy by commenting on its appropriateness, reasonableness and fairness in their review reports.

Introduction

Background

The current materiel management policy of the Government of Canada was issued under the authority of Treasury Board in 1989. The overall objectives of the government's original 1979 materiel management policy remain unchanged: to reduce the cost of government materiel through economies from increased attention to value for money, optimised utilization of existing equipment, and reduced physical losses.

The current policy requirements are results oriented. They are not intended to impose any specific processes on departments. However, while departments are responsible for detailed implementation of materiel management practices, the government's overall policy objectives must be pursued. Reviews of materiel management should assess the extent to which the government policy objectives of value for money, optimised utilization of resources and reduced physical losses are achieved.

Purpose Of This Guide

This is a general guide to the review of the materiel management function. It provides a framework for conducting reviews of materiel management in the federal government by auditors, evaluators, materiel management specialists and program managers tasked with reviewing the materiel management function.

Chapter One examines organizational roles and responsibilities and looks at the results-oriented review.

Chapter Two introduces the life-cycle model for materiel management. It also examines planning and scoping for the review and discusses how the review approach to be used is determined.

Chapter Three provides objectives and criteria, and suggests review procedures which may be performed. It should be noted that this Chapter does not provide a detailed review checklist. The reviewer, in performing an assessment of the area to be reviewed, may establish other review objectives and criteria, and may have to perform additional review procedures to ensure that desired results are being achieved.

The review objectives covered in this Chapter include:

1. A management framework for the materiel function is in place and meets the needs of the organization;
2. Materiel requirements are assessed and planned;
3. Acquisition of materiel, whether by the organization or Public Works and Government Services Canada (PWGSC), is economical, efficient and effective;
4. The operation, utilization and storage of materiel is efficient, effective, and timely; and
5. Replacement and disposal of materiel is economic and efficient.

In addition to this guide, the reader should refer to:

The Treasury Board Manual, Materiel, Risk and Common Services Volume.

Chapter 1, Materiel Management Policy

Chapter 2, Furniture and Furnishings

Chapter 3, Motor Vehicles

Other Related Policy Areas

In a review of materiel management, reference may be made to government policies in the following areas:

The Results-Oriented Review Chapter One

Introduction

The reviewer's role is to assess whether the current materiel management function supports the needs of management, that is whether expected results are actually being achieved with economy, efficiency, and effectiveness. This chapter looks at generic roles and responsibilities for the function and at expectations for the results-oriented materiel management review.

Definitions

In order to fully appreciate the possible complexity and parameters of a materiel management review, and to ensure a common understanding of the terminology used, it is important to initially define the terms "materiel" and "materiel management".

Materiel in the Government of Canada refers to movable public property and all assets, including equipment and stores, other than money and real property. It comprises: raw materials and manufactured products; short-term consumable items such as pencils and paper; small durable items such as cameras and laboratory equipment; medium-size items such as office equipment, computers and furniture; and large items such as vehicles, ships and aircraft.

Materiel management includes a number of related functions, such as determining requirements, cataloguing, the acquisition, distribution, storage, maintenance, and disposal of materiel, and the acquisition of related services, with the purpose of achieving the greatest possible efficiency and the least cost.

Departmental Roles And Responsibilities

Departmental management, which has been given the resources to acquire materiel, is responsible for ensuring that corporate goals are achieved. The government environment makes it essential that line managers place increased emphasis on their ability to determine materiel requirements. Line managers are responsible for ensuring that materiel management needs are not only addressed but are met in the most economic, efficient, and effective way possible.

In order to carry out this role, departments must have adequate and appropriate structures, systems, and processes in place. Departments may differ in the way they structure specific materiel management responsibilities and processes within their organizations. The primary consideration is that corporate objectives are met. Generic roles and responsibilities within a department follow.

Corporate responsibility for materiel management may be handled by an executive officer at departmental corporate headquarters who is directly responsible to the deputy head for:

• departmental achievement of Treasury Board materiel policy objectives and the Guide on Financial Administration;
• providing direction on materiel policies to departmental materiel services and responsibility centre mangers; and
• evaluating performance of materiel services and responsibility centres with respect to materiel management.

Materiel services usually consists of a group headed by a Chief, Materiel Management reporting to a Director, Administration, reporting to the ADM Corporate Management. This group is supported by administrative and specialist staff and organizational units and is responsible for:

• planning, implementing, directing, controlling and evaluating materiel services organizational units within the department (materiel services administrative unit, stores depots and warehouses), as directed by corporate management;
• planning, purchasing, and managing materiel resources for the provision of materiel services to the Department; and
• providing advice to corporate management and responsibility centre managers on all aspects of materiel services.

These are organizational units (other than materiel services organizational units) in which the manager has been delegated authority to manage financial resources and to exercise spending authority against the responsibility centre's budget. Responsibility centres are the prime consumers of resources provided through materiel services. In organizations with no materiel services unit, responsibility centres perform much of the materiel services responsibilities on their own.

Within the context of materiel management, responsibility centre managers are responsible for:

• planning, requisitioning and managing materiel resources required to permit the responsibility centre to function in accordance with its assigned role in the department.

It is important to mention at this point that Public Works and Government Services Canada performs a key role in assisting departments with the determination of their materiel needs and the writing of specifications. It is responsible for assisting in the acquisition of goods above departmental delegated authority. The interface between PWGSC and departments is therefore key to ensuring that departmental needs are met in a timely and efficient way.

The Results-Oriented Review

The role and responsibilities of departmental management, including the special responsibilities given to PWGSC, have just been discussed. The primary role of the reviewer is to evaluate whether results which reflect corporate goals and priorities are being achieved efficiently and effectively.

The results-oriented review of materiel management should focus on the level of support provided to achieve results, and on whether materiel is being used as efficiently and effectively as possible. The review should also include a determination of the degree to which the materiel management function or systems, and the materiel in use in the area reviewed, serve departmental needs.

The reviewer should examine the impact of materiel management practices, including the departmental-PWGSC interface where materiel is a critical element to achieving delivery objectives. This includes any memorandums of understanding with PWGSC. The reviewer should identify the level of impact of materiel management on program support, determine to what extent materiel is used, and examine the materiel management system in place.

For example, where materiel constitutes a large component of the supporting activity to a program, such as Fisheries Management, the reviewer would consider the following: the quality and timeliness of the materiel provided to the boats or ships; the quality and location of the materiel utilized; and the effect of the materiel on the level of services provided by the boats or ships. In effect, the reviewers would seek answers to such questions as: are boats or ships available or not available for the delivery of the program on a timely basis? If not, is this because of a lack of spare parts or other identifiable cause? If due to lack of parts, why are the parts not available?

To summarize, optimum use should be made of all materiel in the department. The reviewer can evaluate the degree to which materiel supports corporate goals and objectives, including those of service delivery.

Planning the Materiel Management Review Chapter Two

Introduction

A results-oriented review of the materiel management function should be performed. The major difference between planning for a results-oriented review and a compliance review of materiel management is the emphasis which is placed on the assessment of management's achievement of corporate goals and objectives.

This chapter will cover highlights in the planning process for materiel management, including the life-cycle model, planning and scoping issues, and review approaches. It does not show the reviewer how to plan in detail for a review of the materiel management function.

Life-Cycle Model

The Treasury Board materiel management policies are based on a life-cycle model. This model captures all phases in the life of an item of materiel from determination of need for the item to its disposal. (See Exhibit 1.) This life-cycle model should be considered when planning for the materiel management review.

Each of the four phases described in the model has a hierarchy of related policy requirements. These phases, and their related policy requirements represent the basic framework for both the management of materiel and for planning and conducting a review of materiel management.

Reviews of materiel management may not necessarily examine the full materiel function at any one time. The reason for not doing so may be the large size of the materiel function within the department, or because the materiel function is highly decentralized. For example, the various tasks found in each of the four phases of the life-cycle model may be the responsibility of a number of responsibility centres, which may even be geographically dispersed. The reviewer may therefore examine, at any one time, only some of the related policy requirements found in each phase of the life-cycle model. The area to be examined should be determined while planning the review.

Planning and Scoping Issues

Planning

In preparing for a review of materiel management, the reviewer should look at the organization's general management framework for the materiel function. This may include departmental or agency organization charts, policies, systems and plans. The purpose is to identify the persons or positions responsible for specific aspects of the materiel management function.

It should be noted that departmental roles and responsibilities for each phase of the life-cycle model may differ. For example, a department or agency with a materiel services group may assign full responsibility for the acquisition phase of the model to this group. Alternatively, other departments or agencies may assign responsibilities for acquisition to branches or responsibility centres.

When examining the management framework for materiel management, the reviewer should consider whether to also cover other policy-related areas. These can be considered at the time of long-term review planning, and reconsidered in more detail at the time of specific review assignment planning.

Other policy-related areas are identified below. These are referenced to specific review procedures in Chapter 3 where appropriate.

1. Accounting for Inventories

2. All government organizations have a duty to safeguard public assets. Consequently, departments and agencies should comply with government policies concerning the maintenance of records to account for inventories of materiel. This can be considered a materiel management responsibility pursuant to Part 3 of the Treasury Board policy requirements for materiel management (see 4.1.5 in Chapter 3). This could also be considered a financial management responsibility pursuant to Treasury Board requirements in Chapter 9.5 and Appendix D of the Guide on Financial Administration. A review may or may not cover both of these sets of policy requirements.

3. Contracting for Goods

4. Part 3 of the Treasury Board materiel management policy describes administrative policy requirements for the acquisition of materiel (see 3.1 of Chapter 3 of this guide). However, further administrative policy requirements for the purchase of goods (acquisition of materiel) are found in the Treasury Board Manual, Volume on Contracting. A review may include only the general policy requirements for materiel management and/or the more detailed contracting policy requirements.

5. Departmental Corporate Planning

6. Policy requirements for the planning of materiel requirements are specified in Part 1 of the Treasury Board materiel management policy (see 2.1 in Chapter 3 of this guide). In addition, planning for materiel requirements is a significant aspect to corporate planning for purposes of the MYOP and Main Estimates. For example, departmental material management must be capable of supporting corporate planning by:

   1. forecasting changes in departmental resource requirements when departmental organization, programs and facilities are amended; and
   2. forecasting changes required in materiel management resources (FTEs and $) to meet additional workload imposed by a).

   A review may be restricted only to materiel management policy requirements or it may cover corporate planning requirements.

7. Security

8. Government organizations have a responsibility to safeguard public assets. This includes implementation of measures for the protection of assets (materiel) and detection of losses. One aspect of this responsibility is accounting for inventories, as discussed previously. A further aspect of this responsibility is security. For example, departmental management security considerations should require that facilities are designed to safeguard sensitive or valuable assets (materiel) from threats (including theft, fire, etc.). This and other considerations are described in Treasury Board policies and standards applicable to security. A review, therefore, may cover only the general requirements in Part 3 of the Treasury Board materiel management policy (see 4.1.5, 4.3.2 and 4.3.3 of Chapter 3 of this guide), or it may also include more detailed aspects of Treasury Board security policy requirements as they relate to assets or materiel (see the TBS/OCG Guide to the Audit of Security).

9. Information Systems

10. Information systems are required to gather information to be used in making decisions about materiel throughout all stages of materiel management. In addition, consistent with the results orientation of current Treasury Board policies, information systems should be reporting on measures and results which demonstrate the effectiveness of departmental management materiel. Thus a review of materiel management may examine information systems regarding their specific application to and support of departmental materiel management (see 4.1.5 and 4.1.7 of Chapter 3 of this guide).

11. Dangerous, Hazardous or Controlled Substances

12. Materiel in some organizations may include dangerous, hazardous or controlled substances. In planning a review of materiel the reviewer should determine if dangerous, hazardous or controlled substances are handled by the department. For example, research groups in many departments have various chemicals and/or radioactive substances. Organizations may also have materiel with hazardous or controlled substances such as CFCs, PCBs, halon, etc. These substances can be found in various types of equipment.

    Dangerous, hazardous and controlled substances are regulated by various policies including the Treasury Board policies on materiel management (Part 3), the Canada Labour Code (for labelling of containers of dangerous substances), the Workplace Hazardous Materials Information Systems (for WHMIS inventory and information requirements), and the Transportation of Dangerous Goods Act (for packaging and shipping). If dangerous, hazardous or controlled substances are included in the organization's materiel, the reviewer will have to decide what aspects of these regulations will be included within the scope of a review of materiel management (see 4.3.5 of Chapter 3 or this guide).

13. Capital Assets and Materiel

Materiel is by definition all movable public property, equipment and stores. Some items, however, may be considered either as materiel because they are movable or as capital assets, due to their large cost. An example which may fit into either category is aircraft. In fact, these items may be treated as capital items for departmental corporate planning purposes, and financial management or expenditure purposes.

Capital assets are regulated by various Treasury Board administrative and financial policies. If an item is considered to be a capital asset, other policy requirements apply, for example, those for major Crown projects. If capital assets are included in the organization's materiel, for example, ships, the reviewer will have to decide what aspects of other policy requirements will be included within the scope of a review of material management.

Scoping

The reviewer cannot feasibly examine every aspect of materiel management at any one time. In undertaking the risk assessment portion of the initial analysis of the materiel management universe, consideration should be given to the selection of the area(s) to be examined. Selection can be assisted by an assessment of the following factors.

Department and Corporate Priorities

It is possible that management wishes to have increased emphasis and scrutiny on a particular aspect of materiel. For example, departmental management may be concerned about inventory levels, risk of losses (security), the level and cost of controls for a certain type of materiel, and/or the possibility of a stock-out situation. Whatever the management concern(s), the reviewer should determine the current corporate priorities in planning the scope of a review of materiel, through discussion and enquiry with senior management at the outset of the review.

Significance

Some types of materiel, by virtue of their nature and/or use in an organization, provide vital support to departmental or agency operations. These types of materiel may warrant specific examination. For example, automated office equipment may be vital to a department's operations, and consequently the department may have established stringent specifications and compatibility requirements. A review might therefore specifically examine compliance to the departmental requirements in this instance.

In preparing for a review of materiel management, the reviewer may scan the organization's materiel purchases and their use in order to identify significant materiel. In addition, the reviewer may ask if the newly acquired materiel matches existing materiel in use, and/or if it is consistent or compatible with current requirements.

Materiality and Types of Expenditures

The dollar value of materiel expenditures (materiality) is an important consideration in planning a review of materiel management. Departments and agencies will vary considerably in their expenditures for different types of materiel which ranges from pencils and paper to vehicles, even aircraft. The reviewer may scan the organization's materiel purchases in order to identify expenditure volumes by type of materiel. This will aid in establishing the scope of the review in terms of the expenditures and types of materiel which are important to the organization. It will also aid in subsequent examination of whether materiel controls are cost-effective, i.e. that the cost of controls is reasonable in the circumstances.

Cost of Controls

Reviewers, during the performance of their reviews, should plan to carry out a cost-benefit analysis of the controls which are present in the reviewed entity. This would include assessing the risk of not having or of reducing the amount of control, and should include the costs of compliance with these controls. For example, departmental procedures or controls may be achieving excellent compliance levels, but these controls may be more than what is required to achieve similar levels of compliance at reduced costs.

Other

There may be other factors which are specific to a situation, such as "attractiveness" of certain inventory. Certain types of materiel are inherently "attractive" in terms of risk of theft. For example, notebook computers are highly portable, valuable (and easily stolen) items. As such they would be considered as "attractive" items. A review might specifically assess controls over such items.

Another factor is the cost of the review, which should be reasonable in relation to the value of the materiel under examination.

Review Approaches

The review approach to be used is dependent upon the determination of which approach will best achieve the review objectives, given the organizational structure of the materiel management function within the department.

There are at least three approaches to the review of materiel:

Functional Approach - an examination of the materiel management function across the department or agency;

Organizational Approach - an examination of applicable segments of the materiel life-cycle within selected organizational units; and

Commodities Approach - an examination of only certain types of materiel.

Functional Approach

The materiel management function in most departments and agencies cuts across organizational boundaries. It is possible that a single review may examine all phases of the materiel management life-cycle within the organization. Major materiel activities should also be included, as well as administrative units with significant materiel responsibilities. The results-oriented functional review would include an examination of the materiel policies which play a major role in the delivery of services and the cost of controls.

The functional approach is more practical in organizations with a centralized materiel management function. Organizations with a widely decentralized materiel management function may find that a single department-wide functional review would be difficult to apply. Nevertheless, the functional approach may still be valid and applicable if the overall review is broken into smaller assignments. For example, each phase of the life-cycle may become the basis for a separate review.

Organizational Approach

In practice there are alternatives to a full scale functional review of materiel management. This guide recognizes that reviewers may examine materiel management in the context of reviewing branches or responsibility centres. The boundaries of such reviews are often defined by organizational boundaries. For example, reviews of responsibility centres or branches may examine only those materiel management activities performed within the centre or branch. In fact, the review of materiel management may only be one of various functions which are examined in an overall review of the responsibility centre or branch. These reviews will also use the life-cycle model as the basic framework for examining the materiel management function.

The reviewer will determine which of the materiel life-cycle functions are performed in the responsibility centre or branch. Review objectives and criteria are developed accordingly.

A variation on this approach is applicable where certain material activities are large enough to warrant a separate review. These materiel activities may be performed by centralized service groups, with separate organizational unit identities. For example, some departments have central procurement and/or inventory groups. Again, the life-cycle model applies. The reviewer will determine which of the materiel life-cycle functions are performed within the organization to be reviewed. Review objectives and criteria are again derived accordingly.

Commodities Approach

Certain types of materiel, e.g., commodities, may be the focus of selected reviews. Certain commodities may represent sufficiently large expenditures, or may be deemed to be significant, such that a separate review is warranted. Often, a type of commodity has unique or special aspects to be examined. For example, it may be decided to examine only EDP items, including microcomputers, software, etc., which are subject to specific Treasury Board policies on information technology. Another example could be hazardous materiel. It may be decided that the safety risks associated with hazardous materials and the numerous applicable regulations would warrant a separate review. Reviews of commodities may be planned due to reasons of materiality, significance, corporate priorities, etc.

Again, the life-cycle model provides the basic framework for such reviews. Reviews of commodities may examine the performance of materiel responsibilities and processes across all phases of the materiel life-cycle. In addition, the objectives and scope of such reviews generally include examination of aspects particularly relevant to the commodity. For example, a review of tools and small equipment might examine allocations and entitlement, frequency of replacement, custody, and control because they are relevant to the nature of the commodity. The objective of the results-oriented commodity review should be to evaluate the adequacy of the level and the effectiveness of materiel support in the delivery of services, and the costs of controls.

Certain commodities may also require a special expertise from a review perspective. For example, the audit of EDP materiel, or hazardous materiel, may require technical experts, depending upon the nature and depth of examination.

Two commodities are subject to specific Treasury Board requirements. Office furniture and furnishings, and motor vehicles are the subjects of separate policy chapters in addition to the general Treasury Board policy on materiel management. If office furniture or motor vehicles are included within the scope of a review of materiel management, the reviewer should refer to the relevant additional policy requirements. Readers should refer to the appendices of this document for further guidance in the review of furniture and furnishings, and motor vehicles.

Summary

The review of materiel management should be results-oriented. The review of the materiel management life-cycle within the department, the planning and scoping which is done, and the review approach chosen should all assist the reviewer in assessing whether the materiel management function in place meets the needs of the organization.

Performing the Review Chapter Three

Introduction

The following objectives, criteria and review procedures are presented for information and guidance. The objectives and criteria are based primarily on Treasury Board materiel management policy and good management practices. Departmental policies may be more detailed and specific than the Treasury Board policy.

The text should be used selectively depending upon which review approach is used. For example, a department-wide functional review of materiel management should include examination of Corporate Management of the Materiel Function as outlined in Part 1 of this chapter. Alternatively, an organizational review of a line branch would not include Part 1, but would include selected segments of Parts 2 through 5, depending upon the applicability of these materiel management functions within the line branch.

The Treasury Board Policy places emphasis on effectiveness. Therefore, in a review of materiel management, the reviewer should focus attention on whether the department or agency is receiving best value for the monies expended. This means ensuring that due regard for economy, efficiency and effectiveness has been considered in each aspect of the materiel management function examined.

Objectives, Criteria and Review Procedures

Part 1 Corporate Management of the Materiel Function

Objective

Criterion

1.1 Responsibility, authority, and adequate training for materiel management has been clearly established within the department or agency.

Review Procedures

1.1.1 Determine whether departmental responsibility, authority, and training for materiel management have been clearly assigned by the deputy head by:

• examining the departmental administrative manual, if any, or other relevant manuals, to see if it (they) gives adequate information for key personnel to discharge their responsibilities;
• interviewing key personnel on their understanding of the materiel management requirements of their positions (refer also to 1.2.3, 1.3.3, and 4.3.2);
• determining how the roles and responsibilities relate to the organization's objectives, including consideration for efficiency and effectiveness.

1.1.2 Determine whether the corporate official(s) responsible for materiel management have established adequate policy direction, have set goals and objectives, have provided for adequate training of personnel, and for the evaluation of performance of the materiel functions throughout the organization.

1.1.3 Determine whether materiel managers:

1. have assessed whether staff have the appropriate level of skills;
2. have developed an action plan to meet staff training needs;
3. have implemented the staff training plan; and
4. have evaluated staff training results.

1.1.4 Determine whether linkages exist between the materiel function and other administrative functions (such as financial management, information management, contracts management, security and EDP services) to ensure that plans and activities regarding materiel management are co-ordinated.

1.1.5 Determine whether there is a corporate strategy and plan for the distribution of materiel which considers the following:

• the use of external services, such as PWGSC or private sector agents;
• stakeholders or users of materiel in significant projects; and
• warehousing, transportation, and all other related costs for various categories of materiel.

Criterion

1.2 A senior official has been appointed and given responsibility to co-ordinate and direct the implementation of the government Materiel Management Policy.

Review Procedures

1.2.1 Examine the organization chart for the position in the department or agency.

1.2.2 Review the position descriptions for duties and responsibilities.

1.2.3 Review the position descriptions to ensure they are consistent with information or evidence obtained from 1.1.l.

Criterion

1.3 The department or agency uses the Treasury Board Manual and/or has developed its own materiel management manual and/or set of procedures.

Review Procedures

1.3.1 If a department uses its own manual rather than the Treasury Board manual, examine the department's materiel management manual or set of procedures to determine whether it covers all the components of the life-cycle model found in Chapter 2 of this guide.

1.3.2 Determine whether the departmental manual or set of procedures has been formally approved and communicated to all key personnel.

1.3.3 Determine the distribution of the Treasury Board or the departmental manual or set of procedures and assess whether it ensures timely communication of understanding of materiel management requirements to relevant persons across the organizations. (Review evidence for consistency with 1.1.1.)

Criterion

1.4 The performance of the materiel function is evaluated.

Review Procedures

1.4.1 Determine whether standards have been developed in order to evaluate the materiel function in terms of departmental and government objectives. (The government objectives are: to reduce the cost of government materiel through economies from increased attention to value for money, optimized utilization of existing equipment, and reduced physical losses.)

1.4.2 Determine whether there are written plans and procedures for measuring and evaluating the materiel function.

1.4.3 Determine whether there are written, useful measures for all four life-cycle phases of the materiel function. Assess whether the measures include coverage of all significant outputs and costs.

1.4.4 Assess whether the information system reports on measures and results which demonstrate the effectiveness of departmental management of materiel.

1.4.5 Determine whether managers measure and evaluate performance of the materiel function in a timely manner and whether procedures used are reliable.

1.4.6 Assess whether deviations between actual and planned expenditures and outputs is recorded and acted upon by management.

1.4.7 Determine whether management evaluates and has information available to ensure that the appropriate quality and quantity of resources are available in a timely manner to perform all materiel services at minimum costs.

1.4.8 Determine if information is provided to the senior official responsible to co-ordinate and direct the implementation of the government Materiel Management Policy (refer to Criterion 1.2).

Part 2 Assessment and Planning

Objective

Criteria (T.B. Materiel Management Policy)

2.1 (a) Materiel needs are assessed in relation to program administration and operational requirements.

Review Procedures

2.1.1 Determine whether written procedures exist which ensure that:

2.1.2 Examine a sample of materiel procurement transactions to ensure the procedures per 2.1.1 are in place and are working. Assess the procedures for completeness, efficiency and effectiveness.

2.1.3 Assess the cost-benefit of the procedures and controls in use. Determine whether the level and costs of controls are reasonable in the context of the value and type of materiel.

Criterion (T.B. Materiel Management Policy)

2.2 Use of materiel resources is forecast, and major items are assessed and ranked in terms of program and operational requirements.

Review Procedures

2.2.1 Determine whether a process and procedures exist to forecast the use of materiel resources. Assess the effectiveness of these procedures (eg. consider the historical accuracy of forecasts, frequency of changes, etc.).

2.2.2 Determine whether the acquisition and replacement of equipment and other major items is assessed and ranked in relation to program, operational, and government-wide priorities. Review the criteria and methods used for ranking. Consider whether they are comprehensive, i.e. are all important factors included, including maintenance, refer to 4.2.3.

2.2.3 Examine documentation regarding 2.2.1 and 2.2.2 and assess whether all materiel requirements (types) are covered.

2.2.4 Determine whether linkages exist between materiel requirements forecasting and the corporate planning function. Assess whether responsibilities for preparation, submission and approval of materiel management budgets are clear and are being exercised.

Part 3 Acquisition

Objective

Criteria (T.B. Materiel Management Policy)

3.1 (a) Selection of materiel to be acquired is based on requirements assessments and performance specifications;

Review Procedures

3.1.1 Determine whether procedures exist to ensure that:

3.1.2 Examine a sample of materiel procurement transactions to ensure the procedures per 3.1.1 are in place and are working. Assess the efficiency and effectiveness of these procedures.

3.1.3 Assess the effectiveness of the interface between the department and PWGSC for non-delegated procurement authority.

3.1.4 Determine whether life-cycle costing techniques have been used, where appropriate, in selecting from alternative options for acquisition of major assets or classes of assets. Determine if commercially available items have been acquired unless it is absolutely essential to have items customs made.

3.1.5 Assess the cost-benefit of the procedures and controls in use and the level and costs of controls in the context of the value and type of materiel.

3.1.6 Determine if effectiveness of service to users is monitored and reviewed. Assess the user satisfaction with the materiel services being provided by the department and PWGSC.

Part 4 Operation, Utilization and Storage

Objective

Criteria (T.B. Materiel Management Policy)

4.1 (a) The allocation, distribution, and scheduled use of materiel is based on program or operational needs and requirements assessment, and reallocations are made in cases of under-utilization;

Review Procedures

4.1.1 Determine whether there is a linkage between materiel on hand and the actual delivery or service of a program or an operation by:

4.1.2 Determine whether procedures exist to allocate, distribute, and schedule the use of materiel based on requirements assessments. Assess the efficiency and effectiveness of these procedures, eg. is consideration given to reducing the number of varieties of an item to permit more efficient allocation and/or scheduling?

4.1.3 Determine whether materiel consumption and rates of use are monitored and reviewed. Assess whether this information is used in order to effect improvements. Assess whether the monitoring includes measures such as feasibility studies to examine the potential for pooling and reallocation possibilities.

4.1.4 Determine whether cost-effective reallocations are made if under-utilization takes place.

4.1.5 Determine whether records are maintained to track inventory and to monitor costs, utilization, losses, and equipment performance.

4.1.6 Determine whether financial records accurately reflect materiel inventories.

4.1.7 Determine whether information systems identify complete carrying costs of inventory, whether carrying costs exceed potential benefits, and whether adequate reports are made to senior management.

4.1.8 Determine whether the use of automated information systems has been considered for materiel records, including general materiel management performance information.

4.1.9 Examine the materiel records per 4.1.5 and test selected data to ensure the records are complete, accurate and up-to-date. Assess whether the information provided by such records satisfies the requirements and level of service required by departmental managers, eg. is the information considered useful?

4.1.10 Determine whether person(s) have been assigned responsibility for reviewing materiel

records, materiel consumption and rates of use, and determine whether the authority of such person(s) to effect corrective actions is appropriate.

4.1.11 Examine a sample of records to ensure that all goods which should have been reallocated

have in fact been reallocated.

4.1.12 Determine whether there is a linkage between the requirements assessment (per Review

Objective #2) and the actual use of materiel. Determine whether the use of materiel is consistent with the requirements assessment.

Criterion (T.B. Materiel Management Policy)

4.2 Equipment is kept in good working order by planning and scheduling equipment inspection, testing and maintenance, and retaining maintenance records.

Review Procedures

4.2.1 Determine whether procedures exist for the planning and scheduling of equipment inspection, testing and maintenance.

4.2.2 Determine whether equipment maintenance records are maintained, and whether information contained therein includes:

• planned inspection, testing and maintenance;

• actual inspection, testing and maintenance;
• maintenance costs; and
• details of equipment performance and time lost, if any, awaiting repairs.

4.2.3 Determine who, if anyone, has been given responsibility for reviewing maintenance records, and that this information is used effectively. Determine whether there is a linkage of this information to the materiel forecasting process. (Refer to Review Procedures 2.2.2.)

4.2.4 Determine whether maintenance records are analyzed for purposes of assessing economies and efficiencies. For example, are maintenance records examined for suggestions of possible improvements in equipment or its utilization? Further, are costs of maintenance contracts compared to the actual costs of repairs in order to determine economical approaches to maintenance?

Criteria (T.B. Materiel Management Policy)

4.3 (a) Inventory levels are optimum in relation to service and program delivery requirements and to the cost inherent in holding inventory;

Review Procedures

4.3.1 Determine whether inventories have been analyzed as to the levels necessary to sustain program delivery and operational efficiency, in comparison to the costs inherent in holding inventory, eg. by cost-benefit analysis. Assess whether the analysis is reasonable. Determine if commercially available items have to be kept in inventory.

4.3.2 Examine procedures and documentation ensuring that users assume responsibility for the proper operation and safekeeping of materiel that has been assigned to them. Review the procedures and documentation with a sample of users to ensure the responsibilities for operation and safekeeping are understood (refer also to 1.1.1).

4.3.3 Determine whether a departmental security plan has been established for the safeguarding of materiel including provision for periodic verifications of inventories. Assess the reasonableness of security measures, eg. are the costs of security controls reasonable in relation to the nature and value of the materiel?

4.3.4 Determine whether procedures for reporting damages or losses exist and have been followed, including the procedures for reporting of the losses in the Public Accounts. Also determine whether instances of damage or loss of materiel have been investigated. Assess whether information on the volume and value of damages or losses has been used to initiate corrective actions.

4.3.5 Examine procedures for the safeguarding and handling of dangerous, hazardous or controlled substances to ensure compliance to applicable regulations. (Refer to discussion in Chapter Two under Planning.)

4.3.6 Examine policies procedures and documentation on the loan of materiel to ensure compliance with statutes or regulations, eg. Personal Property Loan Regulations.

4.3.7 Determine whether the absence of materiel which is out on loan interferes with or impedes the delivery of government services.

4.3.8 Determine whether all costs associated with loans, including any refurbishing of the assets, are paid by the borrower, except in the case of loans of materiel for use in the performance of government contracts.

Part 5 Replacement and Disposal

Objective

Criterion (T.B. Materiel Management Policy)

5.1 Opportunities are identified for the reallocation or disposal of excess materiel.

Review Procedures

5.1.1 Determine whether information systems exist to identify and determine excess materiel. Determine whether there are procedures for identifying opportunities for the reallocation or disposal of excess materiel, and assess the adequacy of such procedures in relation to their frequency, completeness of coverage, and costs.

5.1.2 Determine if mechanisms are in place to identify the status of materiel (eg. in use or in storage) and to specifically identify materiel which is at the disposal stage of its life-cycle. Determine how the organization knows what surplus materiel it holds and where it is held.

5.1.3 Determine if authorities under the Surplus Crown Assets Act are delegated to responsibility centres and decision-makers such that incentives are provided for sound disposal management. Identify the overall incentives in place in the organization for effective management of the disposal activity, eg. are returns from disposal going back to decision-makers.

5.1.4 Examine disposal practices for due regard to environmental responsibilities. Determine if environmental management considerations are included in the identification of opportunities for disposal of excess materiel. For example, environmental regulation of some controlled substances such as ozone depleting CFCs and halons make it increasingly costly to use and to service some equipment. Determine if life-cycle analysis of such equipment, e.g. refrigeration units (CFCs) or fire suppression systems (halons), includes costs of environmental compliance, as well as determining optimal time of disposal for optimal return to the Crown.

5.1.5 Determine what information is available to responsibility centre managers and decision-makers on key performance aspects of the disposal activity, such as:

• analysis of the cost of disposing of materiel;
• comparisons between alternative disposal methods;
• actual performance versus targets for reduction of surplus materiel;
• actual returns versus targets from proceeds of disposals;
• nalysis of impact of disposal of surplus materiel on other costs (eg. warehousing,
• overhead) as well as on service delivery; and
• identification of environmental considerations and costs.

Assess whether responsibility centre managers and decision-makers have information available to identify and analyze opportunities for disposal in terms of achieving best overall value to the organization.

5.1.6 Identify whether the organization has procedures in place to manage the disposal of surplus materiel through trade-ins and interdepartmental transfers, and if so whether these procedures conform to appropriate departmental and Treasury Board requirements.

Criterion (T.B. Materiel Management Policy)

5.2 Surplus materiel which is no longer needed is disposed, as well as the storage space that becomes redundant.

Review Procedures

5.2.1 Determine if processes are in place that accurately track and report on the status of surplus materiel, along with the status of surplus materiel sent for disposal.

5.2.2 Determine if processes are in place to identify and report on the storage space that is vacated as a result of disposals. Identify whether analysis is made of unnecessary warehouse or storage space and determine if unnecessary storage space is not retained. Examine whether any warehouse or storage space has been eliminated due to more efficient disposal of materiel.

5.2.3 Examine some disposal cases to identify the time and costs associated with storing surplus materiel before it was disposed. Assess whether disposals are timely, and whether storage costs are minimized.

5.2.4 Determine if the organization is using efficient disposal alternatives. Assess the efficiency of disposal practices and/or services used from disposal agents. Determine if the organization assesses whether it is receiving best service from its own practices and/or disposal agents.

5.2.5 Determine whether there are procedures for the write-off and write-down of materiel, including appropriate approvals, and whether these procedures are followed. Determine whether materiel which has been written-off is disposed of through the proper channels.

Criterion (T.B. Materiel Management Policy)

5.3 Materiel is disposed and replaced at optimum time in the life-cycle to ensure that maximum benefits are achieved.

Review Procedures

5.3.1 Determine whether procedures exist and are used to assess the optimum time to replace and dispose materiel that is no longer economic to operate, and determine whether a cost-benefit analysis is performed. Assess whether the analysis is reasonable.

5.3.2 Determine whether current disposal practices respond to the requirements of the organization in an efficient and effective manner. Determine if and how disposal practices are evaluated. For example, are there mechanisms for:

• determining target levels of surplus assets;

• defining target returns to the Crown from disposals; and

• comparing actual disposal results (elapsed time, proceeds, costs) against disposal

• strategies and targets.

5.3.3 Determine if there are effective practices in place for:

• determining fair market value of surplus assets;

• calculating the return to the Crown from disposals; and

• calculating meaningful analysis of optimum time for disposal to achieve maximum benefits.

5.3.4 Examine some disposals to determine if they have been supported by analysis to maximize returns to the Crown. Assess whether the organization is disposing of assets at the right time in order to get a good return. Determine how the organization knows that it is getting a good return (best value).

5.3.5 Determine if the manager responsible for disposing of surplus assets is provided with an incentive to encourage timely disposal by being permitted to expend from the Consolidated Revenue Fund(CRF) an amount equivalent to the proceeds of disposal.

5.3.6 Determine how the organization identifies the degree of public awareness and satisfaction regarding its disposal activities. Examine the mechanisms in place to gauge public satisfaction, with emphasis on due regard to fairness and honesty by the organization in its disposal activities.

5.3.7 Determine if there are evaluations of disposals in order to provide information for future disposal analyses and decisions.

Appendix A - Glossary

The following listing is only partial and does not attempt to include all terms applicable to materiel management. The intent is to provide an alphabetical glossary of the more frequently-used materiel management terms.

Appendix B - Furniture and Furnishings

The following list provides additional issues that may be addressed in a review of furniture and furnishings:

Is there a framework supported by appropriate guidelines, and performance standards for procurement, use and disposal of furniture and furnishings? Do staff understand what is expected of them?

Are current and future organizational needs and changes translated into requirements and are these requirements further defined specifically for furniture and furnishings. Is there a linkage of the requirements to employee productivity and performance?

Do requirements for furniture and furnishings consider factors such as:

• functionality and contribution to productivity
• ergonomic principles
• equitable distribution
• space and cost savings
• compatibility and adaptability
• reuse, recycle and repair
• avoidance and reduction in moving costs.

Are there standards in place to guide the procurement of furniture and furnishings? Do these standards assess the performance, quality, safety and life-cycle costs of the furniture and furnishings? Are these requirements further translated into a purchasing strategy for furniture and furnishings? Are purchases consistent with the procurement strategy?

Is there appropriate training provided to staff on the use of the furniture and furnishings? Are objectives such as functionality, cost avoidance, compatibility, etc. clearly communicated to staff?

Are there mechanisms in place to monitor the impact of furniture and furnishings on the performance of employees, level of service, sick leave and illnesses?

Are there processes which maintain an account of surplus furniture and furnishings and initiates the transfer of such materiel when appropriate requirements exist?

Is there an equitable distribution of furniture and furnishings in accordance with departmental policies and directives, and is there an appropriate balance of equity and functionality?

Appendix C - Motor Vehicles

The following list provides additional issues to be considered in a review of motor vehicles:

Are the policies and procedures in place sufficient to manage the fleet in accordance with the life-cycle approach to materiel management and generally accepted fleet management practices? Are there mechanisms in place to assess compliance? Are the policies results-oriented?

Is there a long-term and short-term strategy for the motor vehicle fleet and is this strategy linked into current and future organizational and program requirements? Does the planning of the motor vehicle fleet take into account operational requirements such as:

• duties to be performed by the employee;
• the modifications of these duties over the short and long-term;
• the quantity and type of motor vehicles;
• the resources and equipment required to maintain the fleet;
• administration costs of fleet management; and
• use of alternative modes of transportation.

Are procurement practices based on appropriate cost/benefit analysis and consistent with generally accepted fleet management practices? Does the cost/benefit analysis include due regard for alternatives, including use of other modes of transportation?

Are there information systems in place which allow for fleet cost analysis and the development of customized analysis that shows the costs of various methods of financing motor vehicles (eg. purchase, lease, rental)?

Is lease versus buy analysis properly prepared including factors such as the cost of support services and maintenance contracts, obsolescence, organizational and program changes and their impact on future requirements?

Do vehicle procurement decisions include due regard to alternatives? Has the organization assessed the appropriate alternative means of transport, eg. buy, lease, employee use of own vehicle, public transit, and commercial air, rail or bus?

Are there adequate procedures in place to monitor the following:

• use of government vehicles for purposes of calculating the taxable benefits to the employee;
• use of private motor vehicles for government business and using that information in acquisition decisions;
• locating and tracking of vehicles within the fleet throughout a geographical area;
• fuel costs over time and cost-benefit analysis of alternative forms of energy;
• impact of the fleet on environmental, health and safety issues;
• level of utilization of vehicles and comparison to standards;
• relationships between usage patterns and function of fleet maintenance, repairs and placements; and
• the full life-cycle costs?

Is management controlling the costs of every life-cycle stage of fleet management and is the cost information reported accurate, timely and useful? Are mechanisms in place to monitor the use and costs of departmental vehicles and to use this information as part of the acquisition decisions as well as decisions for disposal of vehicles?

Is there adequate physical security over the fleet and is access to the fleet restricted to authorized users only? Does unauthorized use of government motor vehicles result in disciplinary action?

Are there vehicles which are under/over utilized? Does the department track and follow up on utilization information? Is utilization information compared to norms or expectations and is it used in decisions on fleet composition? Is "pooling" of vehicles maximized?

Is there room for greater standardization in the fleets to take advantage of reduced acquisition, operating and administration costs and provide consistent and simplified monitoring of the fleet? Are relationships and trends such as function and usage patterns, maintenance and repairs monitored?

Are surplus vehicles disposed of in a manner that maximizes return to the Crown, eg. vehicles are disposed of in a timely manner and at the right time in the vehicle life cycle and the model year.

Is there compliance with provincial regulations for licensing and other requirements, eg. for safety, environment, etc.?

Has the impact of vehicle use on travel expenses been analyzed? For example, where vehicle use and costs have changed, has there been an opposite, counterbalancing change in travel transportation expenses?

Is the department following the Federal Identity Program requirements, eg. use of the Canada wordmark? Do all departmental vehicles have decals advising against unauthorized use? What is the infrastructure cost to support vehicles?

Appendix D - Use of Acquisition Cards

Commercial acquisition cards are a quick and convenient way to make local purchases. Treasury Board Policy encourages the use of acquisition cards where this streamlines the acquisition process, while keeping sufficient controls to ensure prudence and probity in their use by federal government staff.

The policy for the use of acquisition cards is governed by:

Treasury Board Manual
Financial Management Volume
Chapter 3-9

The following list provides additional issues that a review of the use of acquisition cards may consider.

Is there an overall framework in place for procurement through the use of acquisition cards? Is this framework supported by appropriate departmental guidelines, controls and performance standards for the use of the cards?

Is there appropriate direction on the use of acquisition cards and are the limitations (re dollar limits, travel, and motor vehicles) on their usage clearly defined and communicated to cardholder? Have all cardholder signed a completed "Employee Acknowledgement of Responsibilities and Obligations Form" (or similar document)?

Is the use of acquisition cards in compliance with departmental cash and procurement management practices as well as in compliance with departmental and Treasury Board policies?

Is there information reported to allow management to monitor and evaluate the usage of the cards to assess:

• compliance with policies and criteria for their use;
• costs and savings incurred through their use;
• trends in their use, including trends which detect possible misuse;
• overall impact on the procurement process, such as the impact on order leadtime and the impact on purchasing habits; and
• performance against standards or expectations?

Is there an appropriate degree of "spot checks" to ensure the integrity of the use of cards? Are cases of lost or stolen cards immediately followed up? Are cases of misuse of cards followed by corrective or disciplinary action, as appropriate to the circumstances?

Are there appropriate reconciliation procedures to ensure the validity of credit card charges? This would include the adequacy of documentation maintained for reconciliation and audit purposes.

Are there effective follow-up mechanisms to manage the misuse, disputes and inefficiencies in the acquisition card process?

Is the use of cards being promoted as a means to streamline purchasing? Are cards used to the maximum extent, where applicable, to achieve savings in the purchasing process?

Given that the acquisition card is the most efficient method of payment, what steps are in place to ensure that the less efficient methods (i.e. petty cash and LPO) are gradually eliminated and replaced by acquisition cards?

Are controls in place to detect instances of purchase splitting in order to avoid purchasing limits?

Are there cancellation procedures in place to ensure that cards are returned when an employee is transferred or leaves the organization?

Appendix E - Reducing Inventory Costs

Inventory has many unseen costs, including the cost of warehouse or storage space; the cost of capital tied up in inventory, loss of value or effectiveness while in storage, etc. Treasury Board policy encourages departments and agencies to reduce their inventories and thereby reduce the overall costs to government. This can usually be achieved without negative impact on operations through alternative means of securing the supply of materiel. For example, greater use can be made of "just in time" delivery, standing offers, local purchasing, etc.

The following list provides additional issues that may be considered in a review of materiel management that looks at reducing inventory costs.

Are there effective processes in place to forecast short-term and long-term inventory requirements? Have alternatives to inventories been considered?

Is there an efficient and effective strategic decision process for the holding of inventories? Does the process integrate current/future organization requirements, aspects of the other stages of materiel life-cycles, and all types of material? Does the process consider alternatives to inventories?

Is the inventory management process streamlined and automated such that cost-effective inventory investment decisions are made? Are approval processes and levels of spending delegations such that cost-effective inventory management practices are promoted?

Is there a full costing (imputed or actual) of inventory and are these costs allocated to the responsibility centres initiating the management decisions to incur those costs? Have the costs of alternatives been compared to full inventory costs? For example, are the extra costs of buying off the suppliers' shelves as the need arises cheaper than the costs of keeping inventory on our own shelves?

Are the level of resources dedicated to inventory management optimal given the nature, volume and value of the inventory? Are the costs of these resources visible to users of the inventory?

Are there systems in place which provide timely and accurate performance information on:

• target levels of inventory by type
• status of inventory
• cost of inventory by type of cost and type of inventory
• actual rate of inventory consumption by product line and organizational unit compared against standard;
• turnover statistics;
• waste and theft statistics;
• costs associated with ordering inventory;
• volume activity and trends analysis; and
• overall impact of inventory management decisions on program delivery and levels of service.

Are there mechanisms in place which utilize the performance information to monitor and evaluate the economy, efficiency and effectiveness of inventory management? Does the organization strive to improve performance by eliminating its inventory wherever it is economical and practical?

Are commercially available items purchased directly wherever possible? Does the organization minimize its inventories of commercially available items?

Are items in inventory regularly checked to determine usage, and to assess whether the items really need to be in inventory? Where items must be held in inventory for operational purposes, are quantities minimized?

Are end users paying for the full cost of holding items in inventory? Are overheads such as the cost of inventory storage space, warehouse security, time and machinery costs of handling and transport, being charged to end users? Have end users compared the full costs of items from inventory to the costs of alternatives?

Does the organization perform investment analyses to ensure that the total value of benefits exceed the costs of maintaining inventories? Are these analyses based on clearly defined criteria and cost elements, and are they consistent with generally accepted investment management practices.

Do transfer prices and/or cost allocations for inventory items promote the economic and efficient use of inventory? Do they include full costs, direct and indirect, whether actual or imputed, eg. interest costs for carrying materiel in inventory? Are full costs visible to end users?