Executive Summary

The audit of the Community Adjustment Fund (CAF) and Recreational Infrastructure Canada (RInC) initiatives included in the Economic Action Plan (Budget 2009) was identified in the approved Western Economic Diversification Canada (WD) 2009 – 2012 Risk Based Audit Plan. This is a system-under-development audit designed to provide early and timely feedback to management on their program design and controls. The audit was commenced within six months of the initiatives being announced.

The purpose of the audit is to provide audit assurance to the Deputy Minister on the new control frameworks designed for the CAF and RInC initiatives. The Budget 2009 objective was to get money flowing quickly and lawfully. This audit examined WD’s controls and processes for CAF and RInC against that objective.

The audit examined elements in the initial development and implementation stages of the two initiatives. The audit examined the effectiveness of activities undertaken between the January 27, 2009 announcement and June 30, 2009. The audit included examination of organizational structures, program design, systems readiness, eligibility screening, due diligence, compliance, communications, monitoring, and reporting. Internal Audit was able to review the program design and the first intake process for both initiatives against these attributes.

Findings

Overall, WD has incorporated the lessons learned from 22 years of experience in delivering grants and contribution programs. WD management modified existing systems and processes to address the unique challenges and risks associated with CAF and RInC.

In the short period of time between January and June 2009, WD designed and initiated CAF and RInC programs in order to achieve their stated goals of economic activity, job creation and/or job maintenance.

As part of this development process, WD focussed on program design, deployment of resources, engagement of staff, expedited eligibility assessment, ministerial liaison, training, and community outreach.

WD has effectively implemented RInC and some funds have begun to flow to selected recipients. WD used its past outreach and experiences gained from delivering infrastructure programs to facilitate an early kick-start to the program. As of the end of audit fieldwork on August 31, 2009, WD had completed due diligence on over 95% of the projects in the first tranche of RInC allocations. WD’s internal reports showed that RInC was over subscribed. As of August 31, 2009, the government had not yet allocated the second tranche of RInC to WD.

WD’s design of CAF was sound. Internal Audit tested the framework and tools that were developed for the first intake and determined that they worked effectively.

CAF projects are varied in nature and the due diligence assessment takes longer than RInC projects. WD had yet to expend significant funds at the time of this report even though substantial amounts have been financially committed in the government accounting system.

The overwhelming volume and varied quality of over 2,600 applications received for both CAF and RInC created challenges for WD in the areas of information technology, rigorous monitoring, staffing and training, strain on core programs, continued outreach, and communications.

The large volume of applications required prolonged and extra-ordinary staff efforts to expedite the approval process over such a short period of time. Since there is no flexibility in cash re-profiling for CAF and RInC, WD must now shift adequate attention to the monitoring process now that projects have been approved. Due to the timing of this audit, Internal Audit was not able to assess any of the monitoring process.

Opportunities for improvement have been documented in the report. It was apparent that discussions were already occurring to deal with these challenges and solutions may be in place by the time this report is published.