In a scathing report released Tuesday morning, Canada’s Auditor General Karen Hogan revealed troubling financial irregularities and oversight failures in the federal government’s handling of the ArriveCan application contractor. The investigation uncovered that GC Strategies, the two-person IT staffing company that received over $20 million in federal contracts, was charging Ottawa up to $1,400 per day for some subcontractors—then paying them less than half that amount.
“What we’ve found represents a systemic breakdown of controls that were supposed to protect public funds,” said Hogan during her press conference. “The financial management practices surrounding these contracts demonstrated an alarming disregard for proper procurement processes.”
The audit found that GC Strategies effectively operated as a middleman, marking up subcontractor rates by an average of 130%, with markups reaching as high as 230% in some cases. For every $100 the government paid to GC Strategies for IT services, only $43 on average reached the actual workers performing the tasks, according to the report.
The controversy surrounding ArriveCan—initially developed as a mandatory COVID-era border screening tool—has been building since CO24 News first reported on cost overruns in early 2023. What was originally budgeted as a $80,000 project ultimately ballooned to over $54 million in total expenditures.
“The Canada Border Services Agency failed to maintain proper documentation justifying the selection of GC Strategies for these contracts,” Hogan noted. “This absence of records raises serious questions about the integrity of the procurement process.”
Public Services and Procurement Canada has now barred GC Strategies from receiving any new government contracts pending a comprehensive review. The RCMP has also launched a criminal investigation into potential fraud related to the ArriveCan contracts, as reported by CO24 Politics last month.
Conservative opposition leader Pierre Poilievre called the findings “the most flagrant example of government waste” in recent Canadian history, demanding accountability from Prime Minister Justin Trudeau’s government.
“This represents a fundamental breakdown in responsible spending of taxpayer dollars,” said Deputy Auditor General Andrew Hayes. “We found no evidence that anyone verified whether the rates being charged were reasonable or competitive with market standards.”
The findings come amid broader concerns about federal procurement practices, as recent CO24 Business analysis shows government outsourcing to private contractors has increased by 32% since 2019.
In response to the report, the Treasury Board has announced immediate changes to contracting protocols, including mandatory competitive bidding for all IT services above $25,000 and enhanced verification of subcontractor arrangements.
As Parliament debates potential legislative changes to prevent similar situations, the question remains: How did a two-person company with minimal infrastructure secure such lucrative government contracts with so little oversight, and what does this reveal about the vulnerabilities in Canada’s procurement system?
