ArriveCan’s main contractor GCStrategies paid without ensuring work was done: A-G

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Auditor-General Karen Hogan has found wide-ranging examples of federal public servants awarding millions of dollars in contracts to GCStrategies, an IT staffing company, without performing basic checks such as ensuring the requested work was done, time sheets were reviewed or contractors had proper security clearances.

Ms. Hogan said it’s clear from her findings that there are widespread problems with how Ottawa verifies that it receives fair value for the money it spends on contractors. The findings, released in an audit report on Tuesday, echo conclusions from other reviews by her office.

In an interview, she said too many federal organizations “are just missing some of the most basic rules,” that are in place to ensure fairness and transparency.

“There’s a clear requirement to have supporting evidence to go with an invoice, so that you know for sure that you’re paying each resource the right amount and that you’re certifying that you received the goods before you authorize payment,” she said. “So in my mind, the responsibility rests with the public service to make sure that the procurement rules are being followed.”

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 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 has 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.

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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.

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 provide auditors with time sheets for only 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.

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. The report also says it confirms weaknesses raised in previous audits.

For instance, the report found that no federal department 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 a suspension announced in March, 2024. The department did not provide details on its decision, other than to say it was deemed ineligible after “a thorough assessment of the supplier’s conduct by the Office of Supplier Integrity and Compliance.”

Conservative Leader Pierre Poilievre told reporters that Liberal ministers should be held accountable for the fact that officials paid contractors without ensuring work was done.

“It’d be like if you walked into a restaurant, you were never served a meal, but you paid the bill anyway and added a big tip and sent off the bill to the taxpayer,” he said.

Leading off Question Period, Conservative MP Larry Brock called the situation “a total waste of taxpayer dollars and a betrayal of Canadians who are living through a cost of living crisis.”

Prime Minister Mark Carney responded by pointing to the company’s suspension.

“As a member of Canada’s new government and a new member of Parliament, we will uphold higher standards,” he replied.