PACP Committee Report

OUTSOURCING OF THE ADMINISTRATION OF THE INSURANCE PLAN

In December 1999, the National Compensation Policy Centre (NCPC) requested that Great-West Life provide them with an estimate for taking over the basic administration services for the insurance plans from the RCMP. Up to this point, Great-West Life had been only the underwriter of the insurance plans.

Dominic Crupi, the Director of the NCPC, instructed Great-West Life to begin preparing for outsourcing the administration of the RCMP insurance plans. This preparatory work was performed by Great-West Life without a contract, which was contrary to contracting regulations.

In December 2001, after working on the project for several months, the RCMP requirements changed and Great-West Life determined that it could not provide all the required services within the specified delivery date. Great-West Life suggested that since Morneau Sobeco had already been contracted to administer the RCMP’s pension plan, the NCPC should consider outsourcing with Morneau Sobeco. After being contacted by Pat Casey (who worked for Mr. Crupi on the administration of the RCMP pension), Morneau Sobeco submitted an insurance outsourcing proposal to Garry Roy quoting start-up costs of $450,000 and ongoing annual costs of $552,000. Mr. Roy worked at the NCPC and reported directly to Mr. Crupi.

The Ottawa Police Service investigation noted that after receiving approval from Mr. Crupi that Morneau Sobeco would be the outsourcer, Mr. Casey and Mr Roy explored the available contracting options. However, after reviewing the options, Mr. Crupi decided that any legitimate process would take “too long” and that he might have to open to competition the actual underwriting as well.

To circumvent the tender process, Great-West Life was persuaded to act as a go-between for payments to Morneau Sobeco, which took on the job of administering the insurance plans for the RCMP. The RCMP then paid Morneau Sobeco for the firm’s own requirements definition phase of the contract, indicating that the contractor started again from the very beginning. The Office of the Auditor General noted that RCMP officials could not identify any tangible service performed by Great-West Life. ¹ However, Great-West Life believes that it helped to define requirements for future outsourcing work. The Ottawa Police Service investigation concluded that the RCMP insurance plans paid over $250,000 in unnecessary payments to Great-West Life.

The Committee tried during its hearings on this matter to determine who approached Morneau Sobeco to undertake the administration of the insurance plans. There were no clear answers given as to whether Morneau Sobeco approached the RCMP or Great-West Life, or if Great-West Life contacted Morneau Sobeco, or if even the RCMP approached Morneau Sobeco. There were many questions raised as to why Great-West Life and Morneau Sobeco would enter into a potentially risky venture such as this one described here. Staff Sergeant Mike Frizzell, who headed up the Ottawa Police Service investigation into the administration of the insurance plan, was unable to clarify the questions asked here. He stated that there were a number of theories and that none of them had been proven, in part because he was directed to not further investigate this particular area.

The Committee was concerned that Staff Sergeant Frizzell was told that he should not follow the trail from the RCMP to Great-West Life to Morneau Sobeco because it was not in the investigation’s mandate. The Committee was even more concerned that this direction came from Assistant Commissioner David Gork, who was assigned to act as the administrative liaison for the Ottawa Police investigation. As discussed later in this report, the apparent lack of independence of the Ottawa Police Service investigation is very troubling, especially given that some aspects of the investigation could not be carried out to completion.

In addition to the questions surrounding why Morneau Sobeco was given the contract for the administration of the insurance plan, there is an outstanding question about an additional $540,000 being taken out of the insurance plan and put into the pension plan. The Committee first heard of this issue when S/Sgt Frizzell played for the Committee a recording of a voice message he left for Rosalie Burton, who at the time was a Director General in Human Resources, in which he stated that “senior management took another half million dollars out of the insurance funds”. ² The Committee received documentation that suggested that the $540,000 was removed from the insurance plan between November 2003 and March 2004 by Great-West Life because a review had determined that the agreement that had originally justified the movement of funds was entered into without authorization and thus had to be reversed. However, the Committee is unclear whether the RCMP even had the authority to allow this transfer.

Related to the issue of the $540,000 being directed from the insurance plan to the pension plan is the accusations heard by the Committee that the minutes of an RCMP Insurance Committee were altered. Sergeant Brad Chugg, a Staff Relations Representative, informed then Deputy Commissioner Barbara George in June 2005 that the minutes of the March 15, 2005 Insurance Committee meeting that he attended were inaccurate. The minutes of the meeting suggested that the $540,000 were to come from the insurance plan. Sgt. Chugg wrote that the Insurance Committee was instead assured that the funds would come through RMCP appropriations. When Sgt. Chugg questioned Garry Roy, who wrote the minutes and worked at the NCPC, as to why the minutes were changed, Mr. Roy stated that he reported what “should have happened” as opposed to what did happen.

The Committee is greatly concerned that the minutes of the Insurance Committee meeting may have been altered. To the Committee’s knowledge, no Code of Conduct investigation was initiated to examine the allegations of Sgt. Chugg, despite the fact that he explicitly called for one to be opened on this matter. Given the gravity of the accusation, the Committee recommends that

Recommendation 18

The Royal Canadian Mounted Policy initiate a Code of Conduct investigation into the allegation that the minutes of the March 15, 2005 Insurance Committee meeting were altered.

With the large number of unanswered questions surrounding the administration of the RCMP insurance plan, the Committee is very troubled by the fact that the insurance part of the Ottawa Police Service investigation was cut short. The Committee believes that the criminal investigation of the administration of the RCMP insurance plan should be reopened so as to best determine a full account of what occurred. Given that neither the RCMP nor the Ottawa Police Service have sufficient independence to carry out this investigation, the Committee recommends that:

Recommendation 19

The Government of Canada ask the Ontario Provincial Police to complete the investigation into the insurance plan, which should include a forensic audit, so as to fully examine the irregularities in the outsourcing of the administration of the insurance plan.

Treasury Board Authority

The Office of the Auditor General raised in its audit on the administration of the pension and insurance plans the question of whether the RCMP had the authority to administer its own insurance plan. ³ Though the RCMP has been administering its own insurance plans for more than 50 years, it does not believe it has the authority to collect premiums and manage the insurance plans on behalf of its members. D/Commr Paul Gauvin, the then Chief Financial Officer of the RCMP explained that:

With respect to the question regarding whether the RCMP should pay for insurance administration costs out of its appropriations rather than having such costs funded by plan members as part of their premiums, which is currently the case, I want to clarify that a Department of Justice legal opinion has stated that the RCMP cannot pay for insurance administration out of its appropriations without Treasury Board authority, and we do not have such authority. ⁴

Treasury Board Secretariat officials agreed with this opinion and committed to working with the RCMP to clarify the issue of the authority to administer the RCMP’s insurance plans.

When Deputy Commissioner Kevin Mole, the current Chief Human Resources Officer, appeared before the Committee, he was asked about who has the authority to administer the insurance plan, and he replied discussions began in 2005 with the Treasury Board Secretariat and that the RCMP hoped:

To go to the Treasury Board ministers as early as September [2007] with a submission with a number of options, including the delegation of authority for the plan to the RCMP… ⁵

The Committee was glad to hear that this issue is being addressed, but would like to have confirmation that the authorities have been clarified. As such, the Committee recommends that:

Recommendation 20

The Royal Canadian Mounted Police provide the Committee a status report by March 31, 2008 on the efforts to clarify the authorities in the administration of the RCMP’s insurance plans.

Given the uncertainty surrounding the choice of outsourcing the administration of the RCMP’s insurance plans to Morneau Sobeco without competition, the Committee believes the RCMP may not be getting the best possible value for its money. The Committee agrees with the Auditor General’s recommendation that the RCMP should “open the insurance administration contract to competitive bids.” ⁶ The Committee was pleased to see that the RCMP agreed with the Auditor’s recommendation but noted that carrying out the Auditor General’s recommendation was contingent on the authorities to administer the insurance plan being clarified. To ensure that this does happen, the Committee recommends that

Recommendation 21

The Royal Canadian Mounted Police open the contract to administer the RCMP insurance plans to competition when the current contract ends.