Audit Information

Notice

This website will change as a result of the dissolution of Indigenous and Northern Affairs Canada, the creation of Indigenous Services Canada and the eventual creation of Crown-Indigenous Relations and Northern Affairs Canada. During this transformation, you may also wish to consult the updated Indigenous and Northern Affairs home page.

To access the Procurement Strategy for Aboriginal Business (PSAB) set-aside requirements, a business has to register in the Aboriginal Business Directory (ABD) certifying that the business is Aboriginal as defined within the PSAB.

Aboriginal businesses are requested to provide proof of meeting the PSAB criteria through the self-declaration certificate when they register in the ABD or when they bid on the PSAB set-aside requirements. For that reason, AANDC conducts audits to ensure that self-declared Aboriginal businesses meet the PSAB criteria and that set-aside requirements are effectively reserved for the PSAB registered businesses. 

What is a compliance audit?

The Procurement Strategy for Aboriginal Business compliance audit verifies that the Aboriginal businesses, joint ventures or partnerships registered in the Aboriginal Business Directory under the PSAB meet the Ownership, Control, Aboriginal Employment and Aboriginal Content criteria where applicable.

Ownership Criterion

The Aboriginal ownership criterion requires an Aboriginal person(s) and/or Aboriginal firm(s) to have at least 51% ownership of the business.

Control Criterion

The Aboriginal control criterion requires an Aboriginal person or Aboriginal business to have at least 51% of control of the business.

Employment Criterion

The Aboriginal employment criterion applies to an Aboriginal business which has six or more full-time employees at the date of registering under the PSAB or bidding on a PSAB set-aside requirement. At least 33% of the full-time employees have to be Aboriginal persons and this ratio must be maintained throughout the duration of the PSAB registration and the contract if a requirement is awarded.

Aboriginal Content Criterion

The Aboriginal content criterion dictates at least 33% of the total value of the work to be performed under a contractFootnote 1 is performed by an Aboriginal business contractor or by a combination of that contractor and other Aboriginal businesses. The value of the work is considered to be the total value of the contract less any material directly purchased by the contractor for the performance of the contract. (For more information please refer to Interpretation Bulletin - Procurement Strategy for Aboriginal Business)

Why conduct a compliance audit?

AANDC is mandated to verify the eligibility of bidders on the PSAB set-aside requirements and maintain the integrity of the PSAB Aboriginal Business Directory (ABD). Compliance audits ensure Aboriginal businesses registered under the PSAB meet the policy's criteria.

AANDC communicates audit progress and results to other government departments. Information pertaining to audits is confidential until it is finalized.

What kinds of audits are conducted?

For PSAB compliance, AANDC conducts three types of audits.

1.  Pre-award Audit

According to Contracting Policy Notice (CPN) 1997-6, section 8.1.4 and 8.2, AANDC needs to be notified by the contracting authority for all PSAB set-aside requirements (regardless of the value of the contract).

A pre-award audit is mandatory for PSAB set-aside requirements valued at, or greater than, $2 million. However, pre-award audits may be conducted for requirements below the value of $2 million when a need is identified, either by the requisitioning department, the contracting authority or AANDC. A pre-award audit may also be conducted on a random basis.

A pre-award audit is performed to verify that the Aboriginal business to be audited meets the Ownership, Control, and Employment criteria of the PSAB policy. Note that the Aboriginal content is not audited when it is a pre-award audit or a random audit. However; the auditor ensures that the Aboriginal joint venture or partnership is aware of the Aboriginal content criterion.

When a pre-award audit is conducted the auditing process can only begin when all the bids have been received and evaluated by the contracting authority. The contracting authority will then notify AANDC of the two best-assessed bidders, without disclosing the bid price. The audit of the two best-assessed bidders will be performed before the requirement is awarded.

Mandatory pre-award audits are prioritized as the award of the contract is dependent on the audit results. If the business fails to provide the required documentation to AANDC, their bid is considered non-compliant.

Once the contract is awarded the contracting authority must provide AANDC with the following information:

  • Name of the business selected
  • Dollar value of the contract
  • Description of goods, services, or construction
  • Solicitation number
  • Closing date
  • Buyer name and phone/fax numbers

This can be sent by email to: saea-psab@aandc-aadnc.gc.ca or by fax to 819 956-9837.

2.  Post-award Audit

A post-award audit is conducted to verify if the Aboriginal business meets the Ownership, Control, and Employment criteria as well as the Aboriginal Content criterion. The audit can be random or requested by a contracting authority. The purpose of the post-award audit is to ensure that the contractor meets the PSAB criteria during the contract duration. It also ensures the integrity of the Aboriginal Business Directory.

3.  Random Audit

An audit for compliance can be performed on a random basis. It is not related to any pre- or post-awarded requirement. The purpose of the audit for compliance is to ensure the integrity of the Aboriginal Business Directory by guaranteeing that businesses registered under the PSAB are compliant with the requirements set out in the CPN 1996-6.

The audit for compliance follows the exact same procedure as the pre-award audit procedure.

Note:
When a joint venture between an Aboriginal business and a non-Aboriginal business or a joint venture between two Aboriginal businesses is to be audited, the PSAB eligibility of the Aboriginal businesses must be verified in order for the joint venture to be assessed accurately. The Aboriginal partner must meet the Ownership, Control, and Employment criteria before the joint venture or partnership audit can be performed.

Do registered businesses, joint ventures and partnerships agree to be audited?

As part of the PSAB registration process the registered Aboriginal business declares it meets the PSAB criteria and agrees to provide all documents to verify compliance when requested by the Government of Canada. Therefore, any registered Aboriginal business, joint venture or partnership that has been notified of an audit and/or requested to provide documentation and information to assess its compliance with the PSAB criteria, is obliged to provide the requested documentation to the Government of Canada. In addition, with all pre-award or post-award audits, the bidders agree to provide the Government of Canada with any requested information for an audit.

In the case where the Aboriginal business, joint venture or partnership does not respond to the auditor's request for information or documents, AANDC has the right to remove the Aboriginal business, joint venture or partnership from the Aboriginal Business Directory on behalf of the Government of Canada.

Once the audit is completed - what next?

When the audit for compliance is completed the audit results are communicated to the contracting authority where applicable (pre-award audits and post-award audits) and to the audited business. If the audited business is deemed compliant with the PSAB it will continue to be eligible to bid on set-aside requirements.

If the audited business is deemed non-compliant with the PSAB, the Government of Canada could apply the following civil consequences:

  • business profile removed from the Aboriginal Business Directory;
  • forfeiture of the bid deposit;
  • retention of the holdback;
  • disqualification from participating in future set-aside requirements; and
  • termination of the contract.

The business has the opportunity to re-register in the ABD when it complies with the PSAB criteria.

Note:
In the event that a contract is terminated, the Government of Canada may engage another contractor to complete the performance of the contract and the Aboriginal business or joint venture in fault shall be responsible for any additional costs incurred by the Government of Canada.

Footnotes

Footnote 1

This applies only on PSAB Set-aside contracts.

Return to footnote 1 referrer