Public servants paid ArriveCan's main contractor GCStrategies without ensuring work was done, Auditor-General finds

Globe and Mail

a day ago

Auditor-General Karen Hogan has found wide-ranging concerns about federal contracts awarded to GCStrategies, an IT staffing agency, including that public servants regularly paid the company without evidence that work was done, failed to request or review time sheets, allowed contractors to work on federal files without security clearances and did not ensure the company was charging fair market rates.
GCStrategies is a two-person company founded in 2015 in the Ottawa-area by Kristian Firth and Darren Anthony, two men who had previously worked in IT sales for other companies in the national capital.
The largely unknown duo jumped into the Canadian political spotlight nearly three years ago in connection to their role as the main private contractors on the Canada Border Service Agency's ArriveCan app for cross-border travellers, which was launched during the pandemic.
Revelations that the cost of the app grew from an initial $80,000 to nearly $60-million led to a wave of independent investigations and years of House of Commons committee hearings into the project and the broader issue of how much Ottawa is paying for private-sector IT consultants.
This is Ms. Hogan's second audit report involving GCStrategies. Her 2024 audit report into federal spending on ArriveCan found a 'glaring disregard' for basic management practices and concluded that GCStrategies was directly involved in setting narrow terms for a $25-million contract involving some ArriveCan work that it ultimately won.
Auditor-General's ArriveCan report finds 'glaring disregard' for basic management practices
The House of Commons later approved a motion calling on Ms. Hogan to review all of GCStrategies' federal contracts, which she agreed to in October of last year, leading to Tuesday's report.
Mr. Firth, the company's managing partner, has told MPs that neither he nor his partner perform any IT work. Rather they secure federal contracts and then subcontract the work to other IT consultants. He said they retain a fee worth between 15 and 30 per cent of the contract value for their services.
Tuesday's report said GCStrategies was awarded 106 contracts by 31 federal organizations between April, 2015 and March, 2024, worth an estimated combined value of $92.7-million. Of those contracts, 41 were awarded without competition. The total amount spent by the government for the contracts is estimated at $64.5-million.
The report said that nearly half of the spending with the company was by the Canada Border Services Agency, which led the ArriveCan project. The CBSA has launched an internal investigation that includes a review of the agency's relationship with GCStrategies and the RCMP has also said it is conducting an investigation.
The RCMP searched Mr. Firth's home in April, 2024.
Neither the CBSA nor the RCMP have released any conclusions related to the investigations.
Tuesday's audit report is based on a review of a sample of the federal contracts awarded to GCStrategies.
The report said that in 46 per cent of the reviewed contracts, the federal organizations had little to no evidence to support that the requested work was actually performed.
'Despite this, federal government officials consistently authorized payments. As a result, we were unable to conclude whether these certifications by government officials were appropriate or amounted to a contravention of the Financial Administration Act,' the report states.
That act is what guides public servants who have authority to approve federal spending.
The report also found that in half of the reviewed contracts, federal organizations were not able to show that all subcontractors had the appropriate security clearance prior to the contract being awarded. It also found that in 21 per cent of the contracts with security requirements, subcontractors were working throughout the contract period without the required clearance on file, including one contract at National Defence and one contract at Innovation, Science and Economic Development Canada.
'Having contract resources working without the required security clearances weakens the government's ability to protect sensitive information, assets, and work sites,' the report states.
Another failing identified in the report relates to poor oversight of the fees charged by GCStrategies and its subcontractors.
The report found that in 58 per cent of the reviewed contracts, public servants either accepted time sheets with poorly documented descriptions of work performed or failed to collect time sheets at all.
In one contract involving the federal innovation department, officials could only provide auditors with time sheets for one of the 25 subcontractors hired to work for them through GCStrategies.
The report also found that in about a third of the reviewed contracts, officials could not show that the subcontractors had the experience and qualifications to do the work.
'Without this information, federal organizations did not know whether contract resources provided by GCStrategies could perform the work in the contract or whether the rates paid were appropriate,' the report said.
The report states that while this audit focused on contracts awarded to one company, the findings highlight gaps in basic requirements that all federal organizations should follow when procuring services. It also says the report confirms weaknesses raised in previous audits.
For instance, the report found that no federal department currently collects government-wide information on rates paid and supplier performance related to contracting.
Public Services and Procurement Canada announced on Friday, just days before the release of the Auditor-General's scheduled report, that it was suspending GCStrategies from all federal contracting for seven years.
The announcement extended an earlier suspension announced in March, 2024. The department did not provide details on its decision, other than to say it was deemed ineligible following 'a thorough assessment of the supplier's conduct by the Office of Supplier Integrity and Compliance.'
Joël Lightbound, the federal minister for Government Transformation, Public Works and Procurement, released a statement Tuesday in response to the Auditor General's findings.
He said the government is in the process of modernizing the contracting process to address issues found in previous audits and reviews.
'We also expect public servants and departments to operate with the highest standards of integrity when procuring professional services to support their program delivery,' he said.
The statement did not indicate whether any public servants have faced consequences for the oversight shortfalls identified in the report.