Audit of the Procurement Strategy for Indigenous Business

Internal Audit Report
Prepared by: Audit and Assurance Services Branch

May 22, 2025

PDF Version (936 KB, 22 pages)

Table of contents

Acronyms

IBD
Indigenous Business Directory
ISC
Indigenous Services Canada
OGDs
Other Government Departments
PSIB
Procurement Strategy for Indigenous Business
TIPS
Transformative Indigenous Procurement Strategy

Executive Summary

With a long-standing commitment to fostering Indigenous economic development and entrepreneurship, the federal government’s Procurement Strategy for Indigenous Business (PSIB) plays a pivotal role in enhancing Indigenous participation in federal procurement. Established in 1996 and revised in August 2021, the PSIB ensures that eligible businesses, those that are at least 51% Indigenous-owned and controlled and that a minimum of 33% of contract work is performed by Indigenous business(es) are prioritized through both mandatory and voluntary set-aside procurement processes. Administered by the Transformative Indigenous Procurement Strategy (TIPS) Directorate at Indigenous Services Canada (ISC), the PSIB is critical to achieving the government-wide mandate of awarding at least 5% of total federal contract value to Indigenous-owned and led businesses.

In fiscal year 2022-23, the PSIB set-asides accounted for approximately $862.8 million of the total $1.6 billion spent on Indigenous business procurement, underscoring the program’s significant financial and economic impact. The Indigenous Business Directory (IBD) supports this initiative by serving as a publicly accessible platform to determine whether Indigenous businesses meet the PSIB’s eligibility criteria, with businesses consenting to audits designed to preserve the program’s integrity.

The Audit of the Procurement Strategy for Indigenous Business was conducted as part of the Indigenous Services Canada Risk-Based Audit Plan for 2024-25 to 2025-26. The objective was to provide assurance on the PSIB’s key aspects, including the verification of Indigenous business status, the robustness of monitoring and reporting practices related to the mandatory minimum 5% Indigenous procurement target, and the overall alignment of program implementation with its intended benefits for eligible Indigenous businesses. The audit, covering activities from April 1, 2022, to March 31, 2024, employed a range of techniques including stakeholder interviews, document reviews, walkthroughs of data tracking systems and testing of IBD registrations selected through a combination of random sampling and judgmental sampling based on complexity and business type (e.g., joint ventures, sole proprietorships, cooperatives).

Key Findings:

The audit identified a strong governance framework and clear alignment with the mandatory minimum 5% Indigenous procurement target, reflecting the program’s substantial role in advancing Indigenous economic participation. However, several opportunities for improvement were noted. Key findings indicate that, while mechanisms exist to verify Indigenous business eligibility for PSIB, there is a need for finalized, standardized procedures and comprehensive checklists to address complex cases and ensure accurate and consistent application of PSIB requirements. Additionally, gaps in staff training, limited oversight of third-party verification of Indigenous business eligibility and inconsistencies in eligibility criteria monitoring and reporting practices were observed. The audit also highlighted deficiencies in documentation, risk assessment and formalized reporting channels for non-compliance, which could compromise transparency and the consistent application of the PSIB eligibility criteria. Addressing these issues will help ensure the integrity, accountability and long-term effectiveness of the PSIB in delivering its intended benefits to eligible Indigenous businesses.

The audit resulted in the following four recommendations:

  1. The Assistant Deputy Minister of Lands and Economic Development should finalize and standardize verification guidelines and procedures, ensuring comprehensive documentation and consistent application across all cases, alongside the implementation of a structured, ongoing training program to equip staff with up-to-date knowledge on verification criteria, including complex cases (e.g., joint ventures).
  2. The Assistant Deputy Minister of Lands and Economic Development should enhance monitoring and misuse prevention efforts by increasing the frequency of audits, implementing fraud detection mechanisms and formal risk assessments specific to PSIB, and formalizing non-compliance reporting systems to ensure more robust oversight and reduce the risk of misuse.
  3. The Assistant Deputy Minister of Lands and Economic Development should enhance existing efforts by formalizing a structured approach to reviewing data trends, strengthening the tracking mechanisms for reporting timeliness and refining notification processes for other government departments (OGDs) regarding potential delays. Given the scale of reporting across 96 departments, a scalable and proportionate approach should be explored.
  4. The Assistant Deputy Minister of Lands and Economic Development should establish a formalized system for tracking and integrating Indigenous stakeholder feedback, and create a process to act on recommendations from the Director General 5% Interdepartmental Working Group. These actions should contribute to aligning program adjustments with a long-term strategy to address the evolving needs of Indigenous businesses and their communities, ensuring sustainable improvements and lasting impact.

Statement of conformance

The audit conforms with the Institute of Internal Auditors' Global Internal Audit Standards and the Government of Canada's Policy on Internal Audit, as supported by the results of the Quality Assurance and Improvement Program.

Management’s Response

Management is in agreement with the findings, has accepted the recommendations included in the report and has developed a management action plan to address them. The management action plan has been integrated into this report.

1. Context

The Procurement Strategy for Indigenous Business, was established by the federal government in 1996 and updated in August 2021, is designed to increase the participation of Indigenous businesses in federal procurement processes, aligning with the broader goals of fostering Indigenous economic development and entrepreneurship. The Procurement Strategy for Indigenous Business (PSIB) facilitates contracts for Indigenous businesses that meet specific eligibility criteria, including:

To ensure compliance with these criteria, businesses must first be registered on the Indigenous Business Directory (IBD), a publicly accessible platform that verifies and lists Indigenous businesses eligible for PSIB-related procurement opportunities. At the time of registration, applicants must provide documentation proving Indigenous ownership and control, as well as Canadian residency. Evidence of Indigenous identity may include:

Indigenous Services Canada (ISC) assesses the authenticity of supporting documents and if necessary, third-party auditors may be engaged to verify complex business structures. Businesses listed as modern treaty beneficiaries are confirmed as Indigenous by the Indigenous group with whom Canada has signed the treaty.

In addition to these criteria, Indigenous businesses must meet all functional requirements and qualifications for the contract, just like any other business. Contracts are not awarded solely based on Indigenous status, rather on the business's ability to fulfill the contract’s scope and deliverables.

Beyond eligibility verification, the PSIB includes a set-aside component that enables designation of procurements as either mandatory or voluntary set-asides for Indigenous businesses. Mandatory set-asides apply to procurements over $5,000 where Indigenous populations are the primary recipients, ensuring that Indigenous businesses are given priority in these opportunities. Voluntary set-asides may be used in situations where sufficient Indigenous capacity has been identified, even in procurements where Indigenous peoples are not the primary recipients of the goods or services.

Each department and agency is responsible for implementing Indigenous procurement to help meet the mandatory 5% Indigenous procurement targets. The Transformative Indigenous Procurement Strategy (TIPS) Directorate at ISC is responsible for overseeing the implementation of the PSIB, which is a key procurement mechanism that assists departments and agencies with meeting the government-wide mandate to award at least 5% of the total value of federal contracts to Indigenous-owned and led businesses. The Directorate also collects plans and results from federal organizations and publicly reports on government-wide performance in meeting the 5% target.

The mandatory minimum 5% target includes:

The 5% target is being phased in over three years with full implementation expected by the end of fiscal year 2024-25.

The IBD underpins the PSIB by providing a publicly accessible platform that lists verified Indigenous businesses. These businesses must meet the PSIB's eligibility criteria.

IBD & PSIB Audits

The TIPS Directorate is responsible for overseeing the audit process for Indigenous businesses under the IBD. The purpose of the audits is to verify that businesses registered in the IBD meet the established eligibility criteria, and businesses applying for or who have completed PSIB set-asides meet/met the established criteria.

Indigenous businesses seeking to register in the IBD must consent to these audits and agree to provide all required documentation to demonstrate compliance with PSIB criteria. This process is designed to preserve the integrity of the IBD and the PSIB set-aside component.

Three types of audits are conducted:

  1. Pre-award audits are mandatory for contracts valued at or above $2 million and are performed before awarding contracts to verify ownership and control criteria. However, pre-award audits may be conducted for set-aside contracts lower than $2 million when a need is identified either by the requisitioning department, the Contracting Authority or ISC;
  2. Post-award audits verify compliance throughout the contract’s duration, ensuring that the Indigenous content criterion is/was met; and,
  3. Discretionary audits are conducted independently of specific contract awards to uphold the overall integrity of the IBD and PSIB programs.

If a business fails to provide the required documentation or is found non-compliant, this may result in the removal of the Indigenous business from the IBD and/or other contractual penalties.

PSIB’s performance/contribution by phase

In line with the Treasury Board Directive on the Management of Procurement, TIPS collects and publishes data on federal government departments’ performance against the mandatory minimum target of 5%. For fiscal year 2022-23, TIPS collected the following results data:

  1. PSIB set-asides account for $862,818,576 of the $1.6 billion total that the Government of Canada awarded on procurement to Indigenous businesses.
  2. Contracts to Indigenous businesses excluding PSIB set-asides (this includes contracts awarded to beneficiaries of Modern Treaty areas with procurement obligations and open tendered contracts awarded to Indigenous firms) account for $763,419,138 of the $1.6 billion.
  3. Subcontracting opportunities and acquisition cards under $10,000 account for $ 6,088,396 of the $1.6 billion.
Breakdown of Government of Canada Procurement Spend on Indigenous Businesses Under PSIB and Related Contracts (FY 2022-23)
Category Amount Percentage of Total Spend
PSIB $862,818,576 52.86%
Indigenous businesses excluding PSIB $763,419,138 46.77%
Subcontracting + Acquisition cards under $10,000 $6,088,396 0.37%
Total $1,632,326,110

PSIB Governance

The governance of the PSIB plays an important role in supporting the implementation of the mandatory procurement target, established in May 2021, to award at least 5% of federal contract value to Indigenous businesses. This target prompted significant updates to the strategy, including its renaming from the Procurement Strategy for Aboriginal Business and the expansion of Indigenous business participation.

Oversight for the 5% mandatory minimum target is provided by the Director General 5% Interdepartmental Working Group, under the Assistant Deputy Minister Advisory Committee on Procurement Modernization. The Working Group ensures a coordinated approach across government to achieve the 5% target. The Working Group addresses key implementation themes such as defining the 5% target, managing data and reporting, engaging Indigenous partners and providing training. The Working Group is chaired by Public Services and Procurement Canada, with ISC and Treasury Board of Canada Secretariat as vice-chairs. Public Services and Procurement Canada also handles secretariat support, including meeting coordination and record keeping. The meetings are held bi-monthly.

The interdepartmental working group was complemented by the Indigenous Reference Group, which included representatives from Indigenous organizations and federal departments, offering expertise and recommendations for enhancing Indigenous procurement practices. The Indigenous Reference Group was reconstituted as the Co-Development Table that is currently working with TIPS Directorate on the establishment of new policy approaches.

2. About the Audit

The Audit of the Procurement Strategy for Indigenous Business (PSIB) was included in the Indigenous Services Canada Risk-Based Audit Plan for 2024-25 to 2025-26, which was presented to the Departmental Audit Committee and approved by the Deputy Minister in May 2024.

2.1 Why it is important

The audit team identified several critical factors that underscore the importance of assessing the PSIB. This initiative is fundamental to advancing Indigenous economic participation in the broader Canadian economy and in ensuring that the program is implemented effectively to support eligible Indigenous businesses. The significance of the audit stems from the following key risk considerations:

  1. Integrity and Compliance of Eligibility Verification: There may be a risk that any shortcomings in verifying Indigenous business status and ensuring adherence to PSIB criteria could undermine the program’s overall effectiveness and integrity.
  2. Robust Monitoring and Reporting: There may be a risk that any inaccurate reporting and limitations in monitoring, stemming from incomplete or erroneous data received from other governmental departments, could distort federal departments’ performance in meeting the 5% Indigenous procurement target and compromise transparency, as mandated by the Treasury Board of Canada Directive on the Management of Procurement.
  3. Alignment of Program Benefits and Target Population Impact: There may be a risk that any misalignment between the strategy’s intended target population and its actual implementation could result in the benefits for Indigenous businesses not being fully realized, thereby limiting the initiative’s impact.

2.2 Audit Objective

The audit objective was to assess the effectiveness of the Procurement Strategy for Indigenous Business in verifying Indigenous business status, monitoring and reporting practices for data collection as part of the 5% mandatory minimum target, of which contracts awarded under PSIB set-asides are a component, and ensuring the program's implementation aligns with its intended benefits for eligible Indigenous businesses

2.3 Audit Scope

The audit scope encompassed the period from April 1, 2022, to March 31, 2024, focusing on the PSIB activities within the Lands and Economic Development sector at Indigenous Services Canada (ISC).

The engagement concentrated on assessing the effectiveness of the PSIB in verifying Indigenous business status, preventing misuse by non-Indigenous businesses and evaluating the monitoring and reporting practices for data collection to ensure compliance with the 5% mandatory minimum target, of which contracts awarded under PSIB set-asides are a component. In addition, the audit examined whether the strategy’s implementation aligns with its intended benefits for eligible Indigenous businesses.

The scope excluded general procurement practices, financial management and budgeting aspects and any procurement activities not directly related to PSIB contracts, including other components that contribute to the 5% target.

2.4 Audit Approach and Methodology

The audit was conducted in accordance with the requirements of the Treasury Board of Canada Secretariat’s Policy on Internal Audit and followed the Institute of Internal Auditors International Professional Practices Framework. The audit examined sufficient, relevant evidence and obtained sufficient information to provide a reasonable level of assurance in support of the audit conclusion.

The audit fieldwork was performed from May 2024 to February 2025 and consisted of three phases: planning, conducting and reporting. The main audit techniques used included:

  • Interviews were conducted with key internal stakeholders from PSIB, Transformative Indigenous Procurement Strategy (TIPS) Directorate and the Indian Registration System groups to gather insights on the program's functioning and identify gaps and areas for potential improvement.
  • The audit team analyzed and reviewed various documents, including key policies and directives related to the PSIB as well as key PSIB documentation (i.e., PSIB DRAFT Audit Manual, audit tracker information, results from Post-Award, Pre-Award and Discretionary audits, etc.).
  • Walkthrough was conducted with the TIPS Directorate to understand how reporting and data are captured and communicated to Management. The session focused on gaining a clear understanding of the system used to capture this data.
  • Testing was done by the audit team where they reviewed and tested 50 random Indigenous Business Directory (IBD) companies to verify that proper verification procedures were followed for inclusion in the IBD.
  • Fact-Sheet Validation was conducted with the TIPS Directorate.

The approach used to address the audit objective included the development of audit criteria, against which observations and conclusions were drawn. The audit criteria can be found in Annex A.

3. Key Findings and Recommendations

3.1 Integrity, Compliance and Effectiveness of Controls in the PSIB Eligibility Verification Process

Background

Maintaining the integrity, compliance, and effectiveness of controls in the Procurement Strategy for Indigenous Business (PSIB) eligibility verification process is essential to protect the program from misuse and ensure that benefits reach eligible Indigenous businesses, as intended under the government's 5% procurement target. Given the PSIB’s significant economic impact and its role in advancing Indigenous economic participation, the audit assessed whether verification procedures were comprehensive, consistently applied, and supported by accurate record-keeping, and whether controls effectively prevented non-Indigenous businesses from accessing program benefits.

The audit expected to find standardized procedures for verifying Indigenous business status, supported by a structured documentation system to ensure accurate record-keeping and compliance. Staff responsible for verification and compliance monitoring were expected to receive formal training, and monitoring mechanisms should be in place to ensure that businesses listed in the Indigenous Business Directory (IBD) continue to meet eligibility criteria over time. Formalized risk assessments were anticipated to identify vulnerabilities and inform mitigation strategies, alongside preventive controls and fraud detection measures to minimize misuse. Finally, clear and structured procedures for identifying and escalating non-compliance cases were expected to ensure consistent and transparent reporting.

Risk

There may be a risk that the verification processes and controls under the PSIB do not provide sufficient assurance of integrity and compliance. This could occur due to the absence of finalized guidelines, inconsistencies in staff training, gaps in documentation, inadequate monitoring mechanisms, incomplete risk assessments, insufficient preventive controls and a lack of formalized reporting procedures. These deficiencies increase the risk of program misuse, undermine confidence in the verification process and hinder transparency in compliance monitoring.

Findings

Absence of Finalized Guidelines and Standardized Procedures

The audit found that, while verification mechanisms exist, there is no finalized, standardized procedure governing the process. This increases the risk of inconsistencies in how eligibility is determined. Additionally, there is no comprehensive checklist for assessing complex cases, such as joint ventures, leading to challenges in ensuring accurate and consistent application of PSIB requirements.

Staff Uncertainty and Lack of Training

Verification responsibilities were previously delegated to third-party auditors with limited oversight. As a result, internal staff lacked formal training on eligibility verification, leading to inconsistencies in assessing the 51% ownership and control requirements. A review of 50 sampled registrations in the IBD revealed inconsistencies, particularly in cases involving complex business structures. Additionally, there is no specialized training focused on identifying potentially fraudulent applications or assessing program access risks. Training is currently provided on an ad-hoc basis, with limited departmental capacity for consistent knowledge transfer.

Inadequate Monitoring Mechanisms and Inconsistent Audits

The audit found that the current monitoring process relies primarily on third-party audits, which appear insufficient given the large number of businesses registered in the IBD. As of August 21, 2024, the IBD had 2,925 active listings. During Fiscal Year 2023–24, a total of 213 discretionary audits, two pre-award audits and one post-award audit were conducted. Prior to 2023, business verifications were conducted by third-party firms; however, these activities were carried out with limited departmental oversight, which may have contributed to inconsistencies in the application of eligibility criteria and challenges for the Program. In addition, staff oversight varied depending on the complexity of the business structure, resulting in inconsistent monitoring. Despite the increase in discretionary audits, the limited number of pre- and post-award audits and reliance on third-party verification may have led to gaps in ensuring businesses consistently meet the PSIB eligibility criteria. Verification is now carried out by a combination of Transformative Indigenous Procurement Strategy (TIPS) employees and new third-party auditors. The Directorate has indicated that this process is improving compared to the audits conducted by the previous auditors.

Inconsistent Application of Eligibility Criteria

The level of scrutiny applied during the verification process varied significantly. Some applications underwent minimal assessment, while others faced rigorous scrutiny. These inconsistencies stemmed from a lack of standardized procedures, varying levels of rigor applied by previous auditors and gaps in training when Indigenous Services Canada (ISC) assumed responsibility in 2023. Additionally, temporary flexibility in the approval process resulted in numerous approvals that were granted on a conditional basis, meaning the businesses were permitted to register in the IBD while still pending the submission or validation of certain documents required to confirm Indigenous identity. Due to competing priorities, limited staff capacity and the absence of a structured follow-up process, the majority of these conditional approvals have not been revisited, creating potential risks related to eligibility compliance

Gaps in Documentation and Oversight

While businesses are responsible for providing the required documentation as part of the application process to be listed on the IBD, the audit identified gaps in documentation related to verification records for the period 2020 to 2022. Specifically, a random sample of 50 Indigenous businesses revealed that 68% of cases had missing or incomplete verification documents. This issue was primarily linked to the third-party audit processes at the time for which there was no evidence the previous audit contractor collected or maintained necessary supporting documentation. Additionally, some records were not migrated from legacy systems, which further complicated the verification of compliance. The Program has confirmed that the PSIB team is actively addressing this issue by manually re-uploading the missing documents.

Insufficient Risk Assessments for Program Access

While formal, program-specific risk assessments have not been conducted for the PSIB the Department’s Corporate Risk Profile identifies several vulnerabilities that directly relate to the PSIB process. These include barriers to registration in the IBD, such as limited access to technology, the complexity of ownership verification audits and challenges faced by smaller or remote Indigenous communities and businesses. Although these risks are acknowledged at a high level, they highlight the need for more detailed, targeted risk assessments for PSIB to better understand and mitigate barriers to participation and to support progress toward economic reconciliation.

Lack of Preventive Controls Against False Participation

The audit found that the verification process lacks robust checks and fraud detection methods to identify businesses misrepresenting their eligibility for the PSIB. The temporary relaxation of evidence requirements during COVID-19 further exacerbated vulnerabilities.

Absence of Formalized Reporting Channels for Non-Compliance

There are no formalized procedures for reporting or escalating non-compliance cases under the PSIB. Currently, non-compliance is typically handled at the contract level by individual departments, rather than being managed centrally by ISC. As a result, when a business is found to be non-compliant, the removal process from the IBD may not always be documented or tracked consistently. Post-award audits, which are essential for identifying and addressing non-compliance, have been infrequent, with no audits conducted in 2022, two completed in 2023 and none completed in 2024. There may be limited awareness and training among contracting authorities on the availability of tools and processes for initiating post-award audits, leading to infrequent use of this compliance mechanism. Additionally, the absence of formalized procedures for reporting and escalating non-compliance under the PSIB could contribute to uncertainty regarding when and how to conduct these audits.

The audit revealed significant gaps in the integrity, compliance and effectiveness of controls within the PSIB eligibility verification process. Key areas of concern include those related to the adequacy of monitoring, consistent audits, completion of risk assessments, sufficient preventive controls, the existence of formal reporting mechanisms and specialized training for staff. Immediate actions to strengthen controls, expand capacity and implement standardized procedures are critical to improving the integrity of the PSIB.

Recommendations

  1. The Assistant Deputy Minister of Lands and Economic Development should finalize and standardize verification guidelines and procedures, ensuring comprehensive documentation and consistent application across all cases, alongside the implementation of a structured, ongoing training program to equip staff with up-to-date knowledge on verification criteria, including complex cases (e.g., joint ventures).
  2. The Assistant Deputy Minister of Lands and Economic Development should enhance monitoring and misuse prevention efforts by increasing the frequency of audits, implementing fraud detection mechanisms and formal risk assessments specific to PSIB, and formalizing non-compliance reporting systems to ensure more robust oversight and reduce the risk of misuse.

3.2 Monitoring and Reporting on the 5% Mandatory Minimum Target

Background

Effective monitoring and reporting on the 5% Indigenous procurement target are essential to ensure the integrity of data used for oversight and accountability across departments.

The audit assessed the monitoring and reporting practices on the 5% mandatory minimum target to determine whether data collection on contracts awarded to Indigenous businesses is accurate, timely and reliable. The audit focused on TIPS’ verification processes, reporting mechanisms and record-keeping controls to evaluate compliance with the 5% mandatory minimum target and ensure robust monitoring practices.

The audit expected to find comprehensive data verification procedures to ensure the accuracy of reported contract awards, effective monitoring mechanisms to identify and correct discrepancies in data received from other government departments, and a structured process for tracking reporting timeliness and communicating delays. It also anticipated secure and well-documented record-keeping practices to maintain data integrity, along with periodic reviews to assess data trends and address systemic accuracy issues.

Risk

There may be a risk that monitoring and reporting practices do not fully support the integrity and reliability of data on Indigenous procurement. This could result from the absence of structured periodic reviews, gaps in tracking reporting timeliness, reliance on informal notifications for delays and potential data inconsistencies originating from Other Government Departments (OGDs). These deficiencies may impact the transparency, accountability and overall effectiveness of TIPS’s reporting processes.

Findings

Absence of Structured Periodic Reviews of Data Trends

The audit found that while TIPS has a robust process in place for verification of Indigenous procurement data submitted by OGDs, reviews of data trends occur when reports are drafted and published, there is no structured process for conducting periodic reviews of reported data trends. Standardizing this process would improve the ability to proactively identify patterns that may indicate broader systemic issues. TIPS has identified planned efforts to enhance trend analysis, which could further strengthen data quality and decision-making. Additionally, the absence of a structured process for reviewing trends limits the ability to proactively identify emerging risks and refine verification methodologies over time.

Lack of Formalized Mechanisms to Track Reporting Timeliness

Reporting deadlines are established in accordance with Treasury Board directives and informal follow-ups are conducted to reinforce accountability. TIPS currently engages the Director General’s office to send reminders and uses an internal tracking tool to monitor reporting timeliness. However, there is no formalized process that consistently tracks and escalates delays across all 96 departments. While the existing informal approach has helped avoid significant delays to date, the absence of a structured, scalable system may limit the ability to proactively identify and address delays as the reporting process expands. The lack of a formal notification process to inform OGDs of missed deadlines also reduces transparency, making it difficult to ensure accountability and timely reporting across all departments.

Inconsistent Application of Record-Keeping Reviews

TIPS maintains a secure and structured record-keeping system using an automated data tracker and GCdocs, ensuring data integrity. However, the audit identified that there is no formalized process for conducting scheduled reviews of record-keeping practices. TIPS has established strong record-keeping controls, including an automated tracking system, secure document storage and audit trails. Records related to the tracking and reporting of Indigenous procurement data are updated annually and approved at the Deputy Head level. While these processes ensure data integrity, a more structured and scheduled review process could further enhance consistency in the application of record-keeping practices across all departments. Furthermore, a lack of standardized review protocols may result in variations in data management practices across reporting entities.

The monitoring and reporting practices implemented by TIPS provide a strong foundation for ensuring the accuracy, timeliness and integrity of data related to Indigenous procurement. The Directorate employs comprehensive verification processes and secure record-keeping mechanisms while maintaining transparency in its reporting efforts. Given the scale of reporting across 96 departments, a scalable and proportionate approach should be explored to ensure that enhancements remain practical and effective in strengthening data integrity and reporting accountability. Addressing these gaps would further enhance the reliability and accountability of TIPS’s monitoring and reporting framework.

Recommendations

  1. The Assistant Deputy Minister of Lands and Economic Development should enhance existing efforts by formalizing a structured approach to reviewing data trends, strengthening the tracking mechanisms for reporting timeliness, and refining notification processes for other government departments (OGDs) regarding potential delays. Given the scale of reporting across 96 departments, a scalable and proportionate approach should be explored.

3.3 Responsiveness, Feedback Integration, and Performance Tracking in the PSIB

Background

Ensuring that the PSIB meaningfully supports Indigenous businesses requires clear alignment between program activities, measurable outcomes, and the evolving needs of its target population.

The audit looked at the extent to which the PSIB aligns with its intended objectives and target populationFootnote 1. Specifically, the audit examined how the strategy measures its impact on Indigenous businesses, ensures accessibility and incorporates feedback to drive continuous improvement to the Directorate. The focus was on the strategy’s ability to provide meaningful economic opportunities, address barriers and respond to the evolving needs of Indigenous businesses.

The audit expected the strategy’s implementation activities to be clearly documented, measurable, and directly aligned with its objectives for supporting Indigenous businesses. It also expected the directorate to collect, analyze, and integrate feedback from Indigenous stakeholders to improve program benefits and responsiveness. In addition, performance tracking mechanisms were anticipated to provide insights into regional variations and challenges faced by different Indigenous business groups, ensuring equitable access to procurement opportunities.

Risk

There may be a risk that the strategy does not fully capture or respond to the evolving needs of Indigenous businesses due to gaps in feedback integration, performance tracking and structured implementation of recommendations. This could lead to inconsistencies in strategy adjustments, missed opportunities to address barriers and reduced trust among Indigenous stakeholders.

Findings

Absence of a Centralized System for Tracking and Integrating Feedback

The audit found that while TIPS actively engages Indigenous businesses and stakeholders through various consultation mechanisms, there is no centralized system for tracking, analyzing and integrating feedback into program adjustments. While feedback is collected through multiple channels, including the Indigenous Procurement Network, the Co-Development Table (previously known as the Indigenous Reference Group) and advisory bodies, there is no structured mechanism to ensure that feedback is systematically reviewed and acted upon. The absence of a centralized feedback system may reduce the program’s ability to respond to evolving needs in a timely and consistent manner.

Lack of a Formalized Process for Evaluating and Prioritizing Feedback

Although the program demonstrates a commitment to continuous improvement by incorporating partner and stakeholder (e.g., Indigenous businesses, organizations, communities, etc.) input, the absence of a structured framework for evaluating and prioritizing feedback limits its ability to systematically address concerns. While feedback is collected, it is often reviewed on an ad hoc basis, without clear criteria for determining which recommendations should be implemented and in what order. This lack of a formalized approach increases the risk that important stakeholder concerns may be overlooked or inconsistently addressed.

Limited Tracking of Collaborative Efforts and Outcomes

The audit found that while the Director General 5% Interdepartmental Working Group provides an important platform for collaboration, there is no formal process to track recommendations, decisions and implementation progress. Without a structured tracking mechanism, opportunities for improvement identified through interdepartmental discussions may not be systematically actioned, leading to missed opportunities for program enhancements.

Gaps in Performance Indicators for Measuring Regional and Group-Specific Challenges

The program successfully tracks overall procurement performance against the mandatory minimum 5% Indigenous procurement target. which is led by Public Services and Procurement Canada. However, within its scope of responsibility, there is an opportunity for ISC to strengthen performance measurement by incorporating more granular indicators that capture regional differences and challenges faced by specific Indigenous business groups. While ISC is bound by the data fields available in the TBS reporting tool, there is potential to enhance its internal tracking and analysis of PSIB-related procurement data to better identify systemic barriers affecting Indigenous business subgroups or regions. A more detailed performance tracking process, focusing on disaggregated data within ISC’s PSIB-related procurement, could potentially enhance the program’s ability to identify and address barriers to Indigenous business participation and respond to specific concerns that may arise, such as those related to regional disparities and challenges.

Recommendations

  1. The Assistant Deputy Minister of Lands and Economic Development should establish a formalized system for tracking and integrating Indigenous stakeholder feedback, and create a process to act on recommendations from the Director General 5% Interdepartmental Working Group. These actions should contribute to aligning program adjustments with a long-term strategy to address the evolving needs of Indigenous businesses and their communities, ensuring sustainable improvements and lasting impact.

4. Conclusion

The audit found that the Procurement Strategy for Indigenous Business plays an important role in advancing Indigenous economic participation and that foundational elements are in place, including governance structures, verification mechanisms, and secure data tracking. The responsible directorate has made progress in engaging Indigenous stakeholders and tracking overall performance against procurement targets.

However, opportunities remain to strengthen the integrity and effectiveness of the program. Key areas for improvement include standardizing verification procedures, formalizing staff training and oversight, enhancing fraud detection and risk management practices, and improving mechanisms for monitoring, reporting, and stakeholder feedback integration. Addressing these gaps will support greater transparency, consistency, and long-term impact for eligible Indigenous businesses.

5. Management and Action Plan

Recommendation 1

The Assistant Deputy Minister of Lands and Economic Development should finalize and standardize verification guidelines and procedures, ensuring comprehensive documentation and consistent application across all cases, alongside the implementation of a structured, ongoing training program to equip staff with up-to-date knowledge on verification criteria, including complex cases (e.g., joint ventures).

Action

As part of the directorate’s actions to enhance the integrity of the Indigenous Business Directory work is underway to:

  • 1.1: develop business verification guidelines for program staff, including a checklist and approval template / record of decision for new registrations and ongoing compliance reviews.
  • 1.2: develop and implement standardized processes for document retention of applications, compliance reviews, audits, and other supporting documentation.
  • 1.3: develop training materials and implement a training plan for employees to understand program eligibility, business structures, identifying indicators of fraud.

Responsible Manager (Title)

Assistant Deputy Minister, Lands and Economic Development

Planned Implementation Date

Second Quarter , 2025-26

Recommendation 2

The Assistant Deputy Minister of Lands and Economic Development should enhance monitoring and misuse prevention efforts by increasing the frequency of audits, implementing fraud detection mechanisms and formal risk assessments specific to PSIB, and formalizing non-compliance reporting systems to ensure more robust oversight and reduce the risk of misuse.

Action

As part of the directorate’s actions to reduce the risk of misuse of Procurement Strategy for Indigenous Business (PSIB), work is underway to:

  • 2.1: complete biennial eligibility verifications of all businesses registered on the Indigenous Business Directory to ensure business continues to meet PSIB eligibility criteria (51% Indigenous owned and controlled).
  • 2.2: engage with other government departments and contracting authorities to ensure their understanding of PSIB compliance before a contract is awarded, monitoring PSIB compliance during the work of a contract, and options for post-award audits; identifying circumstances in which they should request an audit.
  • 2.3: engage with other government departments to develop risk-based processes for detecting and reporting supplier misrepresentation or suspected fraud.

Responsible Manager (Title)

Assistant Deputy Minister, Lands and Economic Development

Planned Implementation Date

Fourth Quarter, 2025-26

Recommendation 3

The Assistant Deputy Minister of Lands and Economic Development should enhance existing efforts by formalizing a structured approach to reviewing data trends, strengthening the tracking mechanisms for reporting timeliness and refining notification processes for other government departments (OGDs) regarding potential delays. Given the scale of reporting across 96 departments, a scalable and proportionate approach should be explored.

Action

As part of the directorate’s actions to formalize a structured approach, the Reporting and Data Team will:

  • 3.1: Finalize the Standard Operating Procedures (SOPs) to concretize:
    • 3.1.1: the steps involved with the bi-annual review of data trends.
      • 3.1.1.1: Implement the formal, bi-annual review of reported data trends upon receipt of planning and results data each year.
  • 3.1.2: the steps associated with notification and communication of information with other government departments.
    • 3.1.2.1: Implement a formalized tracking system to monitor reporting timeliness, leveraging existing networks (e.g., the Indigenous Procurement Coordinators Network) and communication channels (e.g., emails) to proactively diffuse information, manage expectations, and keep stakeholders informed.
    • 3.1.2.2: To ensure compliance with reporting requirements, communication will be initiated with the Indigenous Procurement Coordinators Network one week after the reporting deadline has passed. Reports will be accepted up to one month after the initial deadline. A final reminder email will be sent one week prior to the extended deadline. Any reports not received by the extended deadline will be escalated via email to the Senior Designated Official level (e.g., Chief Financial Officer).

Responsible Manager (Title)

Assistant Deputy Minister, Lands and Economic Development

Planned Implementation Date

SOPs Development: First Quarter, 2025-26

Implement the SOP and related Changes: Second Quarter, 2025-26

First Full Cycle Completed: Second Quarter, 2026-27

Recommendation 4

The Assistant Deputy Minister of Lands and Economic Development should establish a formalized system for tracking and integrating Indigenous stakeholder feedback, and create a process to act on recommendations from the Director General 5% Interdepartmental Working Group. These actions should contribute to aligning program adjustments with a long-term strategy long-term strategy to address the evolving needs of Indigenous businesses and their communities, ensuring sustainable improvements and lasting impact.

Action

As part of the directorate’s actions to strengthen tracking and incorporating feedback from Indigenous partners, work will be done to:

  • 4.1: Leverage the existing tracker to continue to collect feedback received from engagement and outreach activities.
  • 4.2: Leverage feedback received at the Co-Development Table (led by Indigenous Services Canada) and the Director General 5% Interdepartmental Working Group (led by Public Services and Procurement Canada) to determine Indigenous procurement strategies, reporting, and data.
  • 4.3: Co-develop an effective feedback loop to ensure accountability to partners, thus informing and focusing the Government of Canada’s commitments.

Responsible Manager (Title)

Assistant Deputy Minister, Lands and Economic Development

Planned Implementation Date

Continue Implementing the Tracker and related Changes: First Quarter, 2025-26

First Full Cycle Completed: First Quarter, 2026-27

Annex A: Audit Criteria

To ensure an appropriate level of assurance to meet the audit objectives, the following audit criteria were developed to address the objectives.

Audit Criteria

1. Integrity and Compliance of Eligibility Verification

Procedures for Indigenous business status are comprehensive, effectively implemented and supported by accurate and complete record-keeping, ensuring documentation is reliable and that controls are sufficient to prevent exploitation of the Procurement Strategy for Indigenous Business (PSIB) by non-Indigenous businesses.

  • 1.1 The documentation required for verifying Indigenous business status is accurate, complete, consistently applied.
  • 1.2 Verification procedures adhere to established guidelines and standards, ensuring that all criteria for Indigenous business status are met.
  • 1.3 Controls are effectively in place to detect and prevent non-Indigenous businesses from exploiting the PSIB, including regular audits and monitoring activities.

2. Monitoring and Reporting

Monitoring and reporting practices by the Transformative Indigenous Procurement Strategy Directorate (TIPS) ensure accurate, timely and reliable data collection on contracts awarded to Indigenous businesses, supporting compliance with the 5% mandatory minimum target, while maintaining robust record-keeping controls. Although TIPS is responsible for accurately reporting the data received from other governmental departments, it is not accountable for any gaps or errors originating from the source data provided by those departments.

  • 2.1 The data collected on contracts awarded to Indigenous businesses is complete, accurate and free from errors to the extent that TIPS can control, ensuring reliable reporting to stakeholders, while monitoring practices are in place to identify and rectify any potential discrepancies in data.
  • 2.2 Reporting on contracts awarded to Indigenous businesses is conducted within established timelines, ensuring stakeholders receive up-to-date information for informed decision-making, supported by regular monitoring of reporting timelines.
  • 2.3 The controls related to record-keeping are robust, effectively managing all records to ensure accurate tracking and retrievability of data, with monitoring mechanisms in place to assess the effectiveness of these controls.

3. Alignment of Program Benefits and Target Population Impact

The program's implementation aligns with its objectives and target population, measures its impact on Indigenous businesses and incorporates feedback to ensure the program is meeting its objectives.

  • 3.1 The program's implementation strategies and activities are documented, measurable and directly aligned with its specific objectives for supporting indigenous businesses.
  • 3.2 Target population feedback is collected, analyzed and used to inform program adjustments and ensure that the benefits of the program address the needs and are realized by the indigenous people.

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