Education: Contract Management of Public-Private Partnership Schools

Audited Entity

• Department of Education

Audit Scope and Objectives

To determine whether:

• the Department of Education’s contract management processes and procedures are adequate to ensure services detailed in the service contracts are received and payments for services are made in accordance with the contracts.
• the developers are complying with significant terms of the service contracts, focusing primarily on those terms related to student health and safety.
• service contract terms are adequate to ensure the public interest is being protected.
• subcontracts between developers and regional school boards result in government getting value for money.

Audit Criteria

• Not publicly available

Main Audit Findings

• Comprehensive contract terms and management processes and procedures which ensure services paid for are received are essential to protecting the public interest. The audit identified significant weaknesses in both of these areas. As a result, the audit team cannot conclude on whether key calculations supporting contract payments are correct or whether many services paid for are received.
• The audit identified instances in which child abuse registry and criminal record checks, fire safety inspections, and emergency first aid and CPR training were not completed by the developers as required under the service contracts. Contract terms do not address significant areas such as audit access for the Province; measurable levels for all services; monitoring compliance with contract terms including required documentation; and an adequate payment adjustment system when contract terms are not complied with. The Department’s reliance on negative feedback to monitor contract compliance is not sufficient to ensure services are received.
• Two developers subcontracted their responsibilities under their service contracts for certain schools to the regional school boards. These subcontracts effectively transfer the risks for the operation and maintenance of the schools assumed by the developers in the service contracts back to government. Regional school boards are delivering contracted services at a lower cost than that paid to the developers. Over the 20 year life of the contracts the estimated difference in payments between the developers and regional school boards is approximately $52M.
• The audit noted instances in which amounts received by the regional school boards did not comply with contract terms; these will result in significant financial recoveries for the Boards.

Selected Audit Recommendations

• The Department should ensure child abuse registry checks and criminal record checks are completed prior to hire for all employees working in schools.
• The Department should ensure all employees working in schools have required emergency first aid and CPR training.
• The Department should ensure the developers are completing and documenting the results of all fire safety inspections required under the Fire Safety Act.
• The Department should ensure all preventative maintenance is completed in accordance with manufacturers’ requirements.
• The Department should ensure adequate documentation is maintained to support the provision of required cleaning services under the contracts. The Department should review documentation to ensure cleaning is completed.
• The Department should ensure the developers maintain adequate documentation to show maintenance work is completed on a timely basis. The Department should review this documentation to ensure maintenance work is completed on a timely basis.
• The Department should establish adequate contract management processes to ensure contracted services are received. These processes should be followed for the remainder of the contracts.
• The Department should obtain appropriate supporting documentation from the developers for amounts used in calculating operating payments.
• The Department should establish adequate contract management processes to ensure payments made under the P3 contracts comply with contract terms. These processes should be followed for the remainder of the contracts.
• The Department should maintain a control copy of all significant contracts, which includes all approved changes and supporting documentation.
• The Department should monitor funds received from the developers concerning technology refresh and furniture, fixtures and equipment.
• The Department should develop a contract management manual for use by staff.
• All significant new contracts between the Department and service providers should include audit provisions for the Province.
• The Department should define measurable service levels for all services in future contracts and these should be included in the contracts prior to signing.
• The Department should ensure future contracts describe the contract monitoring process, including documentation requirements and sanctions for instances of non-compliance.
• The Department should work with the developers to assess the risk of not completing periodic record checks subsequent to hiring, determine the appropriate frequency of rechecks, and amend contract terms accordingly.

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