Public Services and Procurement Canada
Summary of conclusions and recommendations: Evaluation of the Controlled Goods Program

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Initiative description

The Controlled Goods Program (CGP) functions are located in the Industrial Security Sector within the Departmental Oversight Branch of Public Services and Procurement Canada (PSPC). The objective of this PSPC program is to mitigate the risk of proliferation of tactical and strategic assets, help strengthen Canada's defence trade controls, and support Canada's domestic and international security interests.

The Controlled Goods Regulations provide the minister with the authority to deny, suspend, amend or revoke registrations or exemptions to registration in the CGP, as well as stipulate application requirements and registration conditions. Further, the regulations provide the minister the authority to conduct security assessments on specific groups of individuals, inspect registered companies to ensure compliance, and detain or remove any controlled good if the requirements of the Defence Production Act or the Controlled Goods Regulations are not met. 

Evaluation objective, scope and methodology

This evaluation examined the relevance (continued need, alignment with federal priorities and departmental strategic outcomes, and alignment with PSPC roles and responsibilities) and performance (achievement of immediate and intermediate outcomes and program efficiency and economy) of the CGP.

The evaluation was examined based on the following lines of evidence:

Evaluation constraints and limitations

Limitations included some data availability and integrity issues, comparability of other government jurisdictions, and availability of some private sector stakeholders for interviews.

Evaluation findings

Relevance

The CGP fulfills legislative requirements to control access to defence articles in Canada. PSPC, on behalf of the federal government, has a role in the delivery of the CGP in support of an integrated North American defence industrial base. The program responds to a demonstrable need to ensure access to a North American defence industrial base and to ensure that controlled goods are protected against unauthorized access. The program's role as a domestic security program has increased over time in response to evolving security needs. The CGP is aligned with departmental and government-wide priorities through its role in regulating and controlling arms, its support of a bilateral defence trade agreement, and its program enhancements.

Performance

The evaluation found that the CGP has seen improvements over the evaluation period. The program improvements have contributed to the achievement of the majority of its immediate outcomes pertaining to the timely and effective authorizations of Canadian companies, individuals, temporary workers, and visitors.

The immediate outcomes that were partially met related to compliance inspections and risk identification. While compliance inspections were effective in identifying and addressing deficiencies, there were only incremental improvements to the timeliness of completing them. The CGP delegates security assessments of company employees to a designated official within the company. The CGP has risk matrices for security assessments of individuals, compliance inspections of registrants, and assessments of company ownership, but the security assessment process for exemptions of temporary workers, visitors, and foreign students is not as robust as the process used for the security assessment of individuals. The CGP has also not developed a formal risk-based approach for the conduct of foreign ownership, control, and influence assessments. Through its guidance, training, and support, the CGP has contributed to improving Canadian industry's understanding and ability to meet their legislative and regulatory obligations.

The CGP has achieved the majority of its immediate outcomes, and as a result, has helped safeguard and protect controlled goods from unauthorized access. Overall, the CGP has effectively identified and rectified violations of the Defence Production Act and its regulations, although issues were identified with the timeliness of the compliance inspections. There were few cases involving businesses operating in Canada that required prosecution by the Royal Canadian Mounted Police or that resulted in penalties under the United States International Traffic in Arms Regulations. The CGP has a process in place to address compliance deficiencies, although challenges were noted with the mitigation of unauthorized access in a timely manner. The effectiveness of the regulatory framework was enhanced, as the CGP addressed the majority of the gaps identified in its threat and risk assessment through the implementation of various tools, amendments to the Defence Production Act and the Controlled Goods Regulations, and operational improvements to the program. These improvements contributed to the United States' recognition of the effectiveness of the program and helped ensure the continued provision of the International Traffic in Arms Regulations license exemptions used by registrants.

The CGP improved the efficiency of its output delivery by producing a higher level of outputs with the same or fewer resources. The CGP has relied on temporary funding for approximately half of its planned spending for the last 3 fiscal years and there has been a significant and growing variance between planned and actual expenditures, with the majority of the variance stemming from lower than planned salary expenditures.

Recommendations

The Assistant Deputy Minister, Departmental Oversight Branch, should develop methods to report on the program's performance story related to its compliance, enforcement and security activities.

The Assistant Deputy Minister, Departmental Oversight Branch, should develop a framework to ensure a risk-based approach to foreign ownership, control or influence assessments of registered businesses so that greater effort is placed on those of higher risk.

The Assistant Deputy Minister, Departmental Oversight Branch, should implement an enhanced exemption process for visitors, temporary workers and foreign students with a view to mitigate risks associated with these. 

The Assistant Deputy Minister, Departmental Oversight Branch, should explore options to strengthen the program's ability to address administrative non-compliance.

The Assistant Deputy Minister, Departmental Oversight Branch, should develop procedures for how the CGP would address a situation where a registrant improperly assesses the risk of an employee and an incident occurs, to ensure that consequences to Canada are mitigated.

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