Audit of Canadian Police College Cost Recovery Model

• Acronyms and abbreviations
• Executive summary
• Management's response to the audit
• 1.0 Background
• 2.0 Objective, scope and methodology
  • 2.1 Objective
  • 2.2 Scope
  • 2.3 Methodology
  • 2.4 Statement of conformance
• 3.0 Audit findings
  • 3.1 Information for decision making
  • 3.2 Costing Methodology
• 4.0 Conclusion
• 5.0 Recommendations
• Appendices
  • A. Audit objective and criteria
  • B. Management action plan
• End notes

Acronyms and abbreviations

CFO

Chief Financial Officer

CM&C

Corporate Management & Comptrollership

CPC

Canadian Police College

CPC AB

Canadian Police College Advisory Board

D/Commr.

Deputy Commissioner

DCSFA

Directive on Charging and Special Financial Authorities

EBP

Employee Benefit Plan

FAA

Financial Administration Act

FY

Fiscal Year

NHQ

National Headquarters

NPS

National Police Services

NPS NAC

National Police Services National Advisory Committee

O&M

Operation & Maintenance

RCMP

Royal Canadian Mounted Police

SEC

Senior Executive Committee

SME

Subject Matter Expert

SPS

Specialized Policing Services

TB

Treasury Board

TBS

Treasury Board Secretariat

TEAM

Total Expenditures and Asset Management

Executive summary

The Canadian Police College (CPC) has been providing advanced and specialized training and executive development to law enforcement officers from many jurisdictions to help them combat crime and increase the safety of Canadians since 1976. It offers on-site training at its Ottawa and Chilliwack campuses, as well as off-site training both domestically and internationally. The CPC offers programs in technological crime, forensic identification, explosives disposal/investigations, police executive development, and professional development for Indigenous policing. The CPC operates on a cost recovery model where its budget is comprised of annual appropriations ^{Endnote 1} and revenue collected from its operations.

The Commissioner approved the Audit of the CPC Cost Recovery Model in the 2019-2024 Risk-Based Audit and Evaluation Plan. The objective of this audit engagement was to examine the adequacy of the CPC's cost recovery model. The scope of the audit focused on the roles and responsibilities, processes, and internal controls related to the CPC's cost recovery model. The scope period of the audit was April 1, 2018 to March 31, 2020.

Overall, the audit concluded that opportunities exist to improve the adequacy of the CPC cost recovery model, promote compliance with relevant policies, and improve the reliability of costing information. The audit found that CPC management was aware of relevant legislation, policies, procedures and authorities, and reported that sufficient information related to the CPC cost recovery model was received for decision making. However, the audit found that uncertainty exists relating to the treatment of non-respendable revenues and the CPC's respendable revenue authority levels. The lack of guidance on these policy areas and the lack of costing information related to some of the CPC's services may adversely impact the information available to the CPC for decision making.

The CPC's business model requires it to provide static course calendars and tuition fees to its clients. Tuition fees are therefore not adjusted during the academic year despite fluctuations in the demand for CPC's courses. A costing methodology is in place to provide accurate course costs to the CPC. While the majority of tuition fees were set in accordance with relevant policies, the audit found a few instances where the advertised tuition fee was higher than its individual cost. The audit found that there is uncertainty amongst the individuals interviewed as to whether costs should be interpreted at the aggregate program level or individual course level. Notwithstanding this issue, the CPC's tuition fees do adhere to policy requirements when fees were compared to aggregate program level costs.

The audit's findings reflect conditions observed during the two-year audit scope period. However, during the engagement, the audit team was made aware that efforts to update and improve the cost recovery model were already underway. One of the intended objectives of this revision was to improve the accuracy of CPC's course costing exercise. As a result, some audit findings may have been addressed subsequent to the end of the audit's scope period. When known, ongoing efforts beyond the scope of this audit were acknowledged. The findings identified in this audit should be considered by management in the revision of the cost recovery model.

The management response and action plan developed in response to this report demonstrate the commitment from senior management to address the audit findings and recommendations. Royal Canadian Mounted Police's (RCMP) Internal Audit function will monitor the implementation of the management action plan and undertake a follow-up audit if warranted.

Management's response to the audit

The Audit of Canadian Police College (CPC) Cost Recovery Model has highlighted opportunities to improve the adequacy of the CPC cost recovery model, promote compliance with relevant policies, and improve the reliability of costing information. Management accepts the RCMP's Internal Audit findings and recommendations of the Audit of Canadian Police College Cost Recovery Model.

Although the audit found that CPC management was aware of relevant legislation, policies, procedures and authorities, we acknowledge that uncertainty existed in relation to the treatment of non-respendable revenues and the CPC's respendable revenue authority levels. The CPC recognizes it would benefit from updating its directives as appropriate to promote clear and consistent roles, responsibilities, procedures and guidance to support decision making.

While the majority of tuition fees were set in accordance with relevant policies, the CPC acknowledges that the audit found a few instances where the advertised tuition fee was higher than its individual cost in relation to under projections. The CPC's business model requires it to provide static course calendars and tuition fees to its clients. Tuition fees are therefore not adjusted during the academic year despite fluctuations in the demand for CPC's courses. Contextually, each year the CPC undertakes a prioritization exercise to inform the course calendar; however, the CPC must also remain flexible to meet changing demands from police partners. Despite challenges related to projections, the CPC and NPS Financial Management will work to address the related issues noted in the Audit while ensuring that it continues to adhere to policy requirements when tuition fees are compared to aggregate program level costs.

The CPC and NPS Financial Management are currently revising the cost recovery methodology. One of the intended objectives of this revision is to further improve the accuracy and agility of the CPC's course costing exercise. The revised cost recovery model should consider the findings identified in this audit.

To that end, Management agrees together to:

1. determine which costs should be included for all revenue streams in accordance with the CPC's vote netted revenue authority and relevant policy requirements
2. clarify the requirement to formally increase CPC authority levels
3. update CPC directives as appropriate to promote clear and consistent procedures and guidance related to the cost recovery model
4. implement controls to ensure cost inputs are accurate and service fees do not exceed costs while documenting how costs should be interpreted at the aggregate program level or individual course level

The CPC will also work with NPS Financial Management to ensure that respendable and non-respendable revenues are identified and recorded in accordance with relevant central agency policies and guidance.

Deputy Commissioner Stephen White
Specialized Policing Services

Jen O'Donoughue
Chief Financial Officer

1.0 Background

The Canadian Police College (CPC) is a national police service delivered by the Royal Canadian Mounted Police's (RCMP) Specialized Policing Services (SPS). The CPC, which was established in 1976, provides advanced and specialized training and executive development to law enforcement officers from all jurisdictions to help them combat crime and increase the safety of Canadians. It offers on-site training at its Ottawa and Chilliwack campuses, as well as off-site training both domestically and internationally. The CPC offers programs in technological crime, forensic identification, explosives disposal/investigations, police executive development, and professional development for Indigenous policing. The CPC's physical disposition is akin to a traditional college campus, with classroom buildings, special purpose facilities, and overnight accommodations.

Two key oversight bodies—the National Police Services National Advisory Committee (NPS NAC) and the CPC Advisory Board (CPC AB)—are responsible for providing direction to the CPC. The NPS NAC promotes the integrity, accessibility, viability and delivery of National Police Services (NPS) by supporting the exchange of information across the law enforcement community in regards to NPS operations and challenges. The CPC AB provides recommendations to the Commissioner on matters related to the CPC's operations. In addition, the RCMP's Senior Executive Committee (SEC), chaired by the Commissioner, may also make decisions related to CPC's operations.

The CPC operates on a cost recovery model where its budget is comprised of annual appropriations and revenue collected from its operations. The CPC can collect revenue by virtue of its vote netted revenue authority. Vote netted revenues are an alternative means of wholly or partially funding programs or activities that produce revenues. These revenues can be used to offset related expenditures incurred in the same fiscal year. The CPC manages five revenue streams: tuition fees, overnight accommodations, meal plans, meal sales, and facility rentals. With respect to tuition fees, clients are charged a fee based on a cost recovery rate that depends on whether they are from a Canadian police service or other types of organizations. Clients from Canadian police services pay a fee based on 70%of the total cost to deliver the training in 2020, and 50% in 2019 and 2018. Other clients from a Canadian government agency with a public safety mandate or an international organization pay a fee based on 100% of the total costs. The following table illustrates the CPC's revenue and operating expenditures for the last three fiscal years (FY).

The RCMP's Corporate Management & Comptrollership (CM&C) business line is responsible for providing the CPC with financial management services and advice, as well as developing the CPC's cost recovery model. CM&C personnel within its NPS Financial Management and National Headquarters (NHQ) Assets Management branches also provide input to several key variables used to determine course costs.

The Commissioner-approved 2019-2024 Risk-Based Audit and Evaluation Plan included an Audit of the CPC Cost Recovery Model.

2.0 Objective, scope and methodology

2.1 Objective

The objective of the audit engagement was to examine the adequacy of the CPC's cost recovery model. ^{Endnote 2}

2.2 Scope

The audit focused on the roles and responsibilities, processes, and internal controls related to the CPC's cost recovery model. The scope period of the audit was April 1, 2018 to March 31, 2020.

Processes related to revenue management (invoicing and collection of payments) were not included in the scope of the audit due to the low materiality of outstanding accounts receivable.

2.3 Methodology

Planning for the audit was completed in February 2020. In this phase, the audit team conducted interviews, process walkthroughs, and examined relevant policies and procedures.

The examination phase of the engagement, which concluded in September 2020, employed various techniques including interviews, documentation reviews, process walkthroughs, and other audit testing. The audit team reviewed the costing portion of the overall cost recovery model. Course offerings and fees set by the CPC were compared against course projections and costs.

The audit's findings reflect conditions observed during the two-year audit scope period ending on March 31, 2020. However, during the engagement the audit team was made aware that efforts to update and improve the cost recovery model were already underway. As a result, some audit findings may have been addressed subsequent to the end of the audit's scope period. When known, ongoing efforts beyond the scope period of this audit are acknowledged. The audit criteria is available in Appendix A.

2.4 Statement of conformance

The audit engagement conforms to the Institute of Internal Auditor's International Professional Practices Framework and the Treasury Board of Canada Directive on Internal Audit, as supported by the results of the quality assurance and improvement program.

3.0 Audit findings

As one of the few permanent Canadian law enforcement learning institutions, the CPC fulfills a key role in providing advanced and specialized training, as well as executive development, to the law enforcement community. As a national police service of the RCMP, it is also important that the CPC be financially sustainable and show responsible stewardship. A cost recovery model that operates effectively and as intended is pivotal in achieving this state.

Accordingly, the audit team expected to find that information relevant to the cost recovery model was provided to the CPC's management and oversight bodies for decision making. The audit team also expected that a documented costing methodology that considers relevant and reliable information was in place to determine costs used to set fees in the cost recovery model.

3.1 Information for decision making

Awareness of relevant legislation, policies, and authorities

The audit found that the CPC's cost recovery model was based on relevant legislation, policies, procedures, and authorities.

Legislation

The Financial Administration Act (FAA) is the overarching legal framework for financial management and accountability of public service organizations, including the RCMP's CPC. Part II - Public Money regulates the treatment of public money and includes rules regarding charges for services or use of facilities provided by public service organizations. Part III - Public Disbursements includes rules for the expenditure of revenues which allows departments granted with the appropriate authorities to expend revenues to offset related expenditures. Interviewees were aware of the requirement that the fees charged by the CPC cannot exceed the costs incurred to provide the service.

Policies

The Treasury Board (TB) Policy on Financial Management includes a Directive on Charging and Special Financial Authorities (DCSFA). The DCSFA, which came into effect on April 1, 2019, outlines management practices and controls to ensure external and internal charging practices for services provided by public service organizations are consistent across government, that the amounts charged respect legislative limits, and that revenues are treated in a consistent manner. This directive prescribes requirements relevant to the CPC's service fees and vote netted revenues.

The CPC receives advice and guidance from CM&C for its cost recovery activities when requested, however, the audit team noted gaps in the guidance received. Interviewees were aware of the DCSFA section 4.2.3 requirement, which states that fees cannot exceed the costs incurred to provide a service. However, the audit team identified a lack of awareness within CPC and CM&C regarding the appropriate treatment of capital costs and Employee Benefits Plan (EBP) costs in CPC's cost recovery model.

The DCSFA section 4.10.6 indicates that Chief Financial Officers (CFOs) are required to ensure that recoveries of expenditures that are charged to the capital vote are recorded as non-tax, non-respendable revenues ^{Endnote 3}. CM&C senior officials interviewed by the audit team were uncertain how section 4.10.6 applied to the CPC's cost recovery model since capital assets such as vehicles and bomb suits were included in course costs. As a result of the audit team's inquiries regarding TB DCSFA section 4.10.6, officials within CM&C's Financial Policy Directorate clarified with the Treasury Board Secretariat (TBS) that section 4.10.6 would apply to revenues related to the prorated cost of capital assets. The DCSFA does not prohibit the charging and collecting of revenues related to capital costs, but requires that such revenues be recorded as non-respendable.

The DCSFA section 4.10.4 also indicates that revenues should be recorded as non-respendable when they are not related to expenditures incurred to provide the service. TBS indicated that other revenues such as those related to the cost of EBP are also non-respendable.

The audit team noted that capital costs and EBP costs were included in the CPC's course costs and tuition fees. While the inclusion of these costs in course costs and fees is permitted under the DCSFA, the CPC's practice of recording all of its revenues as respendable revenues does not align with the requirements of the DCSFA. Properly recording revenue related to capital costs and EBP costs as non-respendable revenue would reduce the CPC's operating budget.

Procedures

The CPC has published business operations directives that outline the processes and procedures for how fees are established and approved. The CPC reviews and updates its directives as required. The CPC directives clearly document CPC's and CM&C's roles and responsibilities with respect to the process for establishing course costs and tuition fees, without specifying which positions within CPC or CM&C are responsible, other than identifying those responsible for approving tuition fees. Interview results generally showed that while personnel were not aware of these CPC directives, their understanding of roles and responsibilities related to cost recovery activities aligned with them. The directives that are relevant to the cost recovery model appear to be up to date, but interviewees stated that the directive on course costs may need minor revisions and updates.

Authorities

Approval was obtained from the Treasury Board (TB) in April 1998 which authorized the RCMP to establish fees for cost recovery at the CPC. It also authorized an increase to the RCMP Revenue Reference Levels, Receipts and Revenues Credited to Vote, by $3.5 million in 1998/99, which has since been increased to $5.5 million. The approval received from TB also delegated the responsibility for establishing curriculum and setting CPC fees to the Director of the CPC, and the responsibility for approving and monitoring the curriculum and fees to the Commissioner of the RCMP.

The CPC's financial information obtained from CM&C, illustrated in Table 1, shows that the CPC's respendable revenues have consistently exceeded $5.5 million over the last three years. The CPC Executive Director and NPS Financial Management personnel have stated that the $5.5 million revenue reference level is used as an internal budgeting figure to ensure the program generates sufficient revenue to offset costs. The CPC and CM&C may need to consider increasing revenue reference levels as appropriate to improve internal budgeting practices. The audit team noted that there were discussions between CPC and CM&C regarding the formal increase of authority levels via TBS. The CPC Executive Director advised that, as a result of these discussions, reference levels would remain the same until further notice to allow the CPC to assess the impact that increasing tuition fees in 2020 would have on course demand and revenue.

Information for decision making

CPC management shares information and provides updates on its activities with relevant oversight bodies which include the NPS NAC, CPC AB, and the SEC. Records of decisions, briefing notes, and presentation materials reviewed by the audit team demonstrated that CPC management provided periodic updates to oversight bodies and sought decisions and guidance for matters related to CPC's cost recovery model. CPC management consulted with NPS NAC and CPC AB on the CPC's modernization initiatives, which includes tuition fee increases and additional considerations for course costs. A decision to increase CPC tuition fees from 50% to 70% of costs for Canadian police services was made at a SEC meeting on May 21, 2019. The CPC intends to increase tuition fees to 100% of costs for all client types eventually, which would require additional consultation with NPS NAC and CPC AB, as well as approval from SEC.

The CPC Executive Director indicated that while sufficient information is available to inform decisions regarding the cost recovery model, he identified concerns relating to the quality and reliability of the information. Although courses costs and tuition fees should be updated annually, the CPC Executive Director indicated that the tuition fees have not been thoroughly reviewed for several years because the cost recovery rate remained unchanged until the 2020 costing exercise. The CPC Executive Director stressed the need for an updated cost recovery model that provides accurate costs, and that is also simple to use and explain to stakeholders. Some of the expected outcomes of revising the current cost recovery model are to simplify the methodology and to help ensure costs are more accurate.

The audit team also noted that the lack of costing information relating to CPC's overnight accommodations and facility rental services adversely impact the CPC's ability to make informed decisions. CPC interviewees indicated that these services are not costed because expenditures do not come out of the CPC's budget and there are challenges in obtaining accurate costs from CM&C.

Overall, CPC management shares information, provides updates, and seeks guidance on its activities with relevant oversight bodies on a periodic basis. CPC management was aware of relevant legislation, policies, procedures, and authorities and reported that sufficient information related to the CPC cost recovery model is received for decision making. However, concerns regarding the quality and reliability of costing information were raised by CPC management. The audit found that uncertainty exists relating to the treatment of non-respendable revenues and the CPC's respendable revenue authority levels. The lack of guidance on these policy areas and the lack of costing information related to overnight accommodations and facility rentals may adversely impact the information available to the CPC for decision making.

3.2 Costing Methodology

Costing process

The audit team found that the costing methodology for tuition fees is documented in the CPC's business operations directives. These CPC directives state that the CPC Business Operations unit is responsible for setting tuition fees on an annual basis, with support from NPS Financial Management. According to the CPC's directives, the CPC provides NPS Financial Management with course costing templates, which includes cost inputs such as the proposed number of on-site and off-site courses, projected course offerings and participants, as well as other pertinent cost drivers such as course materials and equipment. NPS Financial Management then incorporates additional support and maintenance costs ^{Endnote 4} and calculates course costs in accordance with the methodology and cost recovery rates described in CPC directives. NPS Financial Management provides the CPC with updated per-student cost estimates for each course. The CPC program areas are responsible for determining whether the proposed prices fall under what can be reasonably charged for fair market value. If the CPC determines that a particular price cannot be borne by the market, it will propose an alternate price with supporting rationale for CPC management approval.

CPC instructors and managers advised that the course costing process is lengthy, the templates used for estimating course costs do not clearly indicate how certain inputs should be included, and some course costs are difficult to track and estimate. NPS Financial Management personnel also indicated that the costing process is prone to human error due to high amounts of manual data manipulation.

Interviewees confirmed that there is no documented costing methodology for the overnight accommodations or facility rentals, and that fees for these revenue streams are based on market research conducted by the CPC. Interviewees also indicated that food-related services are cost neutral and contracted to a third-party service provider. As supported by documentation obtained by the audit team, the CPC does not earn revenues from food-related services, as revenues collected from clients are paid to the service provider.

Relevance of cost inputs

Subject Matter Experts (SMEs) are individuals external to the CPC who assist or deliver training at the CPC. Within the costing methodology, the audit team observed that SME salaries were included in the calculation of course costs, though the CPC is typically only responsible for paying their overnight accommodation and hospitality costs. The majority of SMEs were reported to be volunteers from the RCMP or from external organizations. Inclusion of RCMP SME costs would reflect the full cost to the RCMP for delivering its courses, however revenue may need to be recorded as non-respendable. Conversely, there is a risk that the inclusion of external SME salary costs not paid for by the RCMP would exceed actual costs.

The audit team also noted that real property costs not paid for by the CPC were also included in the calculation of course costs. NHQ Assets Management is responsible for providing real property services such as managing building operations and maintenance (O&M) which includes funding the majority of the CPC's real property costs through its annual appropriations. By including these real property costs in the CPC's course costing exercise, a portion of the CPC's revenues from tuition fees would be attributed to expenses already paid for using NHQ Assets Management's annual appropriations. The CPC's practice of recording all of its revenues as respendable revenues results in dual sources of funding for CPC's real property costs (i.e., annual appropriations as well as respendable revenues). Inclusion of real property costs would reflect the full cost to the RCMP for delivering its services, however revenue may need to be recorded as non-respendable. Otherwise, the RCMP's reference levels can be reduced if the costs related to CPC's real property are funded with respendable revenues. This issue may also apply to overnight accommodation revenues as NHQ Assets Management pays for the majority of the real property costs associated with those buildings.

Reliability and timeliness of cost inputs

Challenges with cost inputs

CPC interviewees, including senior officials, raised several issues with the reliability of cost inputs during the course of the audit. The audit team noted the innate difficulties involved with developing accurate projections because they are based primarily on the previous year's costs. Tuition fees are set on an annual basis and are based on costing templates that could have been completed up to 18 months prior to when a course is held. Changes to the actual number of course sessions and registration levels during the academic year affect the true costs of courses. However, course costs and corresponding tuition fees are not adjusted mid-year. According to the CPC, it is necessary to provide course calendars and tuition fees in advance to align with client planning and budgeting cycles.

Instructors may have difficulty estimating ongoing costs associated with capital assets used in specific courses. The utilization rate ^{Endnote 5} of capital assets depends on the number of course sessions that use the assets as well as the estimated useful life of the assets. Since the number of course sessions can fluctuate once course costs are finalized, the utilization rate may be impacted as well. Instructors and managers indicated that they may consult each other, personally keep detailed cost records, or review course syllabuses to enhance the accuracy of their estimates. The CPC Executive Director indicated that there is a lack of visibility over how costs are amortized by CM&C. At the time of this audit, there were ongoing discussions between CPC and CM&C regarding amortization as part of the costing methodology revision.

It was noted that real property costs used in the FY 2019/20 costing exercise were not timely as CPC was not able to obtain updated real property costs from NHQ Assets Management prior to completing the costing exercise for that fiscal year. An old average taken from FYs 2014/15 to 2016/17 was used instead. Personnel involved in completing the costing exercise indicated that this was due to the lack of clear procedures, roles and responsibilities in this part of the costing process, as well as staff turnover. In addition, real property costs may not be reliable since NHQ Assets Management is unable to allocate O&M costs to specific CPC buildings, and the methodology for determining the cost information supplied to CPC in prior years was not documented.

Approvals

A formal approval process was not in place for completed costing templates to ensure cost inputs were relevant and reliable. CPC managers and directors may review the templates for reasonableness and identify significant errors or noticeable anomalies, but templates are not formally approved before they are provided to NPS Financial Management.

NPS Financial Management transcribes the information from the costing templates into the costing model, adds other support and maintenance costs, then returns the final course costs to the CPC. CPC personnel may review the final course costs, however, they indicated that they do not have visibility over how support and maintenance costs were derived, and that it is unclear how final costs were calculated by NPS Financial Management. CPC personnel use the final course costs to propose tuition fees that are ultimately approved by the CPC Executive Director.

Errors in the costing data

The audit team reviewed FY 2019/20 course costing data and identified 67 issues resulting from data entry and formula errors. The audit team applied CM&C's revenue projection methodology to 41 of the 67 issues (61%) resulting in a net impact of $757,174 in lost potential revenues. As an example, one course did not properly sum all relevant CPC instructor salary costs. This resulted in a single $94,192 costing error that translated into a potential loss of $209,671 in revenues if all of the course's projected sessions were filled to capacity. The remaining 26 of 67 issues (39%) were not further assessed because they required significant assumptions or modifications of the formulas involving the useful life of assets or consumables. This analysis was not repeated for FY 2018/19 as CPC and NPS Financial Management personnel confirmed that a costing exercise was not completed in that FY because the cost recovery rate remained unchanged.

Accuracy of projections

The projected number of course sessions and participants used in the costing methodology is input into the costing templates by CPC personnel. These projections have a significant impact on costs because they are major factors in determining the total costs per student for each course.

The number of projected sessions is based on CPC's human resources capacity and the number of courses offered during the previous years. CPC also networks with policing communities of practice to help determine the demand for courses. For example, CPC established a network with the police explosives community (i.e., bomb squad coordinators/commanders) to review the Explosives Training Unit's course content, training projections, and projected new hires in the community. The number of projected participants is based on historic and anticipated demand. Courses that are generally full use maximum capacity as a projection while other courses that are not consistently full use an average figure. Demographics of the policing community and the frequency of course delivery are also considered when developing projections

The audit team compared the initial projections used to calculate course costs against the actual performance in terms of the number of course sessions delivered and number of registered participants. For FY 2019/20, 44% (24/55) of courses had projected sessions that matched actual sessions delivered, 11% (6/55) had more sessions than projected, and 45% (25/55) had fewer sessions than projected. Table 2 below illustrates the accuracy of the projected course sessions.

Inaccurate course session projections were observed to have a significant impact on the accuracy of participant projections. The audit team observed that only 11% (6/55) of courses had projected participants that matched actual registered participants.

As noted previously, the CPC's business model requires it to provide static course calendars and tuition fees to its clients. Tuition fees are therefore not adjusted during the academic year despite fluctuations in the demand for CPC's courses. Projections may have been accurate during the costing exercise, but the delivery of a course could occur up to 18 months after its corresponding costs were developed. The DCSFA states that fees should not exceed the cost of providing a service, but does not prescribe whether the requirement is at the aggregate service level or at the individual service level. This has left room for interpretation as some interviewees advised that it should be the individual course level while others stated the requirement is at the aggregate program level. The CPC's tuition fees would adhere to policy requirements if fees were compared to aggregate program level costs. However, at the individual course level, CPC would absorb costs when actual performance (i.e., frequency and capacity) is below projections and overcharge clients when actual performance is above projections. There are additional considerations related to both of these possible interpretations and the organization should continue to assess this and seek guidance accordingly.

Tuition fees and course costs

The CPC's advertised tuition fees are derived from the course costs calculated by CM&C and the CPC's approved cost recovery rate. The cost recovery rate was 70% for clients affiliated with a Canadian police service in 2020 (50% in 2019 and 2018), and 100% for clients from a Canadian government agency with a public safety mandate or an international organization. The audit team compared CPC's advertised tuition fees against the final costs calculated by CM&C to determine how closely tuition fees were supported by the costing data. Tuition fees for calendar year 2020 were closely aligned to the FY 2019/20 costing data, demonstrating that CPC considers costing information when establishing tuition fees. FY 2018/19 data was not available for the 2019 fees, but a correlation with FY 2016/17 costing data was observed. The 2018 tuition fees were not generally aligned to the FY 2017/18 costing data, however, there was an increased correlation when compared to the FY 2016/17 costing data. These correlations suggest that CPC partially relied on old costing data to set its fees for those years.

The audit team observed that while the majority of tuition fees were set in accordance with relevant policies, there were a few instances where the advertised tuition fee was higher than its individual cost in the program's costing data. Interviews with program officials identified that there is uncertainly within the RCMP as to whether or not costs should be interpreted at the aggregate program level or individual course level. The instances where fees were higher than costs may not adhere to relevant policies if costs are interpreted at the individual course level. However, since certain course costs and tuition fees may have been underestimated due to errors in the costing data and Canadian police tuition fees are set based on a lesser cost recovery rate, there is a reduced risk that advertised tuition fees are greater than costs.

Overall, there were issues with the relevance and reliability of the inputs used to determine course costs, which impact the accuracy of the costing process. External SME costs not incurred by the RCMP were included in the costing process, errors in the costing data were observed, maintenance costs were based on dated real property information, and the projections used in the costing model were not always accurate when compared to the actual number of course sessions and registered participants due to the CPC's requirement to provide static tuition fees to its clients.

General observations related to the new cost recovery model

Interviews with CPC and NPS Financial Management personnel indicated that the current cost recovery model was developed in 2014, and that the methodology had not been significantly reviewed since. In fall 2019, CPC and NPS Financial Management started revising the cost recovery methodology, which will be used in establishing course costs and corresponding tuition fees for 2021. The audit team did not review the new costing methodology in detail as revisions were ongoing during the course of the audit

CPC and CM&C have stated that the new model will use actual costs from the Total Expenditures and Asset Management System (TEAM) instead of estimates which may reduce potential errors that exist in the current model. Courses will be categorized into four cost tiers: classroom type with no additional expenses, classroom type with minor computer and equipment expenses, classroom type with mid-range computer and equipment expenses, and classroom or other type with major expenses such as robots and bomb suits. NPS Financial Management will extract all operating costs of the courses and capital costs for high value assets from TEAM. Capital costs will be added to the specific courses that use the assets. It was unclear how certain costs not currently charged to CPC's cost centres, such as real property costs and SME salaries not paid by the CPC, will be treated in the new model. The new model may not address the issue of proper identification of respendable versus non-respendable revenues.

4.0 Conclusion

Overall, the audit concluded that opportunities exist to improve the adequacy of the CPC cost recovery model, promote compliance with relevant policies, and improve the reliability of costing information. The CPC and NPS Financial Management are currently revising the cost recovery methodology. One of the intended objectives of this revision is to improve the accuracy of CPC's course costing exercise. The revised cost recovery model should consider the findings identified in this audit.

The audit found that CPC management was aware of relevant legislation, policies, procedures, and authorities, and reported that sufficient information related to the CPC cost recovery model is received for decision making. The audit also found that uncertainty exists relating to the treatment of non-respendable revenues and the CPC's respendable revenue authority levels. The lack of guidance on these policy areas and the lack of costing information related to overnight accommodations and facility rentals may adversely impact the information available to the CPC for decision making.

The CPC's business model requires it to provide static course calendars and tuition fees to its clients. Tuition fees are therefore not adjusted during the academic year despite fluctuations in the demand for CPC's courses. A costing methodology is in place to provide accurate course costs to the CPC. While the majority of tuition fees were set in accordance with relevant policies, the audit found a few instances where the advertised tuition fee was higher than its individual cost. The audit found that there is uncertainty amongst the individuals interviewed as to whether costs should be interpreted at the aggregate program level or individual course level. Notwithstanding this issue, the CPC's tuition fees do adhere to policy requirements when fees were compared to aggregate program level costs.

5.0 Recommendations

1. The Deputy Commissioner, Specialized Policing Services (D/Commr. SPS), in collaboration with the Chief Financial Officer (CFO), should:
   1. determine which costs should be included for all revenue streams in accordance with the CPC's vote netted revenue authority and relevant policy requirements
   2. clarify the requirement to formally increase CPC authority levels
   3. update CPC directives as appropriate to promote clear and consistent roles, responsibilities, procedures and guidance related to the cost recovery model
   4. implement controls to ensure cost inputs are accurate and service fees do not exceed costs, while documenting how costs should be interpreted at the aggregate program level or individual course level
2. The CFO should ensure that respendable and non-respendable revenues are identified and recorded in accordance with relevant central agency policies and guidance

Appendices

A. Audit objective and criteria

Objective

To examine the adequacy of the CPC's cost recovery model

Criterion 1

Sufficient information relevant to the cost recovery model is provided to the CPC's management and oversight bodies for decision making

Criterion 2

A documented costing methodology that considers relevant and reliable information is in place to determine costs used to set fees in the cost recovery model

B. Management action plan

Date modified:

2021-11-09