Western Economic Diversification Canada
www.wd-deo.gc.ca
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Observations and Recommendations
Governance and Risk Management
Criteria: It was the audit expectation that the Executive Committee had formalized risk exposures and defined context and corporate practices for managing CAF & RInC risks. Regions and branches understand their roles and accountability and have in place risk management processes tied to strategic corporate plans and CAF-RInC objectives. Delegations of authorities are in place for CAF and RInC.
In order to secure the appropriate Treasury Board program authorities, WD identified the key risks and proposed mitigation strategies to address the risks involved. In designing the programs, management quickly secured the necessary delegation of authorities and the program authorities to spend the money. WD developed the program objectives, outcomes, eligibility criteria and approval processes.
There was substantial management and staff consultation and engagement through all levels of the organization during the development of the program criteria, tools, and staff training modules. Authority, responsibility and accountability was clarified and communicated through similar means. The auditors found evidence of the roles of both headquarters and the regions during the program design stage and also during the implementation of the first intake stage.
The department’s Executive Committee were actively engaged and involved. The auditors examined evidence of regular Executive Committee updates and discussions on the new initiatives.
The Minister approved and announced all CAF and RInC projects during the audit period. WD staff and management performed their due diligence and made recommendations on all projects prior to forwarding them to the Minister’s office for approval. Given the high volume and relatively low dollar value of many of these projects, the current decision-making/delegation model is very time intensive for both departmental and Ministerial staff. The auditors noted a frequent submission of recommended projects and extensive communications process between the department and the Minister’s office that enabled project decisions to be made effectively.
Program Design
Criteria: It was the audit expectation that consultations with the Regions happened and sufficient resources were devoted for the analysis and role out of policy options on CAF and RInC. Related experiences and lessons learned from other programs were applied. Consistent and functional methodologies for assessment, priority setting, selection, documentation, authority, responsibility and accountability were clear, communicated and met regional needs.
The auditors found evidence that staff and stakeholders were heavily engaged in the design and development of the program tools. Regional situations and concerns were addressed while ensuring consistency in the program design and implementation across all regions.
The design and roll-out of new programs requires considerable dedicated resources. Staff were recruited and/or deployed to successfully develop the guidelines and tools for CAF and RInC.
Management and staff confirmed to auditors that lessons learned from previous contribution programs, monitoring activities, impact studies and evaluations helped in developing and modifying project assessment processes and contribution agreements.
Where necessary, the expertise and information holdings of other agencies, such as Statistics Canada, were obtained. The critical program tools (eligibility screening criteria, and project approval records) worked when applied to the first intake of both initiatives. These tools enabled a standardized assessment of all projects and documented the projects’ economic stimulus activity, project quality, cash flow needs, job creation or maintenance, and impacts.
Capacity and Resources
Criteria: It was the audit expectation that sufficient human resources, information and technology systems, tools and accommodations are in place.
Regional offices and headquarters developed human resource plans and modified existing organization structures in order to cope with expected demands of the new initiatives. Management analyzed current and future competency and training needs and incorporated them into the plans. Plans were put into place to secure sufficient additional office space to accommodate the new staff.
Regions and headquarters used a variety of staffing models. Generally, CAF and RInC units were comprised of a mix of new and experienced staff. For example, the BC region reassigned staff to CAF and RInC from programs that had ended or were winding down. This enabled the region to efficiently deploy experienced staff. The remaining regions had to attract a mix of staff from within and outside the organization.
Regions that employed fewer experienced staff for CAF and RInC found the learning curve to be steeper and experienced delays in the initial project assessment and due diligence processes.
Moving existing staff from other parts of the organization into CAF and RInC could leave a residual gap in core programming needs. Management will need to ensure that CAF and RInC success does not jeopardize WD’s core initiatives. At this point, senior management remains confident that both the core programs and the new initiatives will be delivered successfully by year-end.
Management determined the new information management and technology needs for CAF and RInC. Management decided to modify its existing systems to capture CAF and RInC project data (Project Gateway) and generate reports (Infoquest). Due to the short time frame, some of the required system changes were not completed in time for the first intake. As a result, the regions had to manually input the data into their own spreadsheet instead of into the existing system. According to management, by August 31, 2009 over 90% of the project applications had been entered into the corporate database.
Because of the initial lag to populate Project Gateway with the new data, management was not able to produce some system-generated reports. Instead, some corporate reports were compiled from regional “manual” data. Management is currently addressing this gap in order to effectively manage CAF and RInC data collection and reporting needs.
Recommendation # 1 Although CAF and RInC projects are a departmental priority, WD management needs to maintain adequate resources and focus on its core programs.
Recommendation # 2 WD management needs to complete the proposed and required system changes as soon as possible to address all new CAF and RInC data collection and reporting needs for both regions and headquarters.
Clarity, Eligibility, and Communications
Criteria: It was the audit expectation that processes and information exist to enable clients’ understanding of the priorities, eligibility criteria, and expected results of these programs and that these factors were clearly communicated. Transparent lines of communication exist between WD, users and stakeholders. Efficient processes exist to take in, assess and recommend approval for applications received.
In May 2009, once the programs had been developed, WD posted program information on its public website. There was information on the key priorities, expected results, eligibility criteria, application requirements, and frequently asked questions. WD provided contact information for all regions and headquarters.
In addition, the regions and headquarters undertook outreach activities involving presentations, meetings, community mail-outs and funding partner engagement to market the initiatives.
During the initial intake, the auditors confirmed screening was done against the posted eligibility criteria on all applications and sufficient due diligence was completed for approved projects. Internal Audit verified 12 of 55 approved projects as of June 30 2009 against the selected audit criteria. Internal Audit also verified 10 applications that were not recommended for approval against the selected audit criteria.
WD regions received over 2000 inquiries from communities and stakeholders who expressed interest after learning about the initiatives from the website and the media. Management updated its public website to facilitate the dissemination of information and also to enable applicants to complete and submit applications online in PDF format or by fax and mail. Over 90% of the applications were received by fax or PDF attachment submitted on-line.
Management adopted existing service standards for the processing and approval of CAF and RInC applications. Due to the early stages of these initiatives, Internal Audit was unable to assess performance against these standards.
As of August 31 2009, WD had not sent rejection letters to applicants. Rejections will come in two stages. Firstly, after the initial screening for those projects that do not meet the criteria. Secondly, once all the funding has been allocated to the top priority projects. WD needs to communication decisions on a timely basis or order to avoid damaging public perception and negatively impacting WD’s client service reputation.
Recommendation # 3 WD should communicate funding decisions, both positive and negative, to applicants on a timely basis.
Reporting and Performance
Criteria: It was the audit expectation that appropriate and timely financial results and performance data are documented and reported to management and central agencies on a timely basis. Reporting requirements are relevant, understood, reasonable, and communicated to stakeholders.
Despite some of the systems limitations outlined in section 4.3, WD submitted its two quarterly reports and templates on CAF and RInC on time as required by central agencies for parliamentary reporting purposes. Reporting templates for recipients to submit quarterly progress reports are under development. WD will have to ensure that communication with and monitoring of recipients is stepped up to meet this new reporting requirement.
The job creation measurement indicator is calculated during the project assessment and it is incorporated in the recipient contribution agreement as a reporting requirement during actual project implementation. The measure is good for determining economic activities and the impact of job creation or maintenance; however, management may need to conduct some internal and external education on the collection and use of this indicator.
Compliance
Criteria: It was the audit expectation that Treasury Board policies and directives are followed. Recipient project contribution agreements are consistent with program authorities
Internal Audit saw evidence that the Treasury Board requirements had been integrated into processes and controls developed for CAF and RInC. Internal Audit will assess this further in future audits.
The recipient contribution agreements reflected the terms and conditions of the program authorities for the initiatives. Administrative requirements on recipients in the contribution agreements were consistent with the program authorities and are required to ensure effective control. They were considered reasonable and proportionate to the level of risk, materiality of funding and the risk profile of the recipients for the audit sample of 12 project files examined.
Financial and Cash Management
Criteria: It was the audit expectation that financial forecasts and cash flows are prepared and monitored on a regular basis and realignments made where warranted. Policies and procedures have been established and documented regarding transaction management practices, and financial authorities are known and understood by personnel.
WD financial systems were modified to capture information on CAF and RInC in order to enable reporting to central agencies and senior management. As of the end of August, WD had committed over 90% of its first tranche of RInC funding and a significant portion of its CAF funding. At the same time, WD had spent very little actual cash due to the early stages of most projects.
To date, most of management’s attention has been focused on planning and project assessment. Going forward, that management attention will have to focus on active monitoring of the projects, given the fact that the funds cannot be re-profiled from one fiscal year to another. This “use it or lose it” provision will require more active monitoring than is currently needed for WD’s core programs.
There is need for management to be on top of the monitoring early in order to minimise lapsing CAF and RInC funds since they cannot be re-profiled and to enable re-allocation of funds to other projects or regions in need of cash flow. Management explained that additional personnel are being added to the monitoring and payment function and this will be a priority once all the project assessment is complete. Training will be needed for both new and existing staff since the “use it or lose it” requirements of CAF and RInC demand more proactive cash flow monitoring rather than WD’s customary practice of waiting for payment claims.
Recommendation # 4 WD needs to develop rigorous monitoring processes designed around the unique elements of the CAF and RInC initiatives. WD staff need to be adequately trained on those new processes.
Partnerships
Criteria: It was the audit expectation that WD leveraged, where appropriate, collaborative opportunities to enhance economic stimulus opportunities. Consultation with existing provincial, municipal, and other federal organizations have been utilized and/or new ones formed.
Internal Audit found substantial evidence that WD had consulted with different groups in order to market CAF and RInC in the short window between February and June 2009. This is reflected in the overwhelming number of applications received and the variety and nature of applications.
Through CAF and RInC, WD built on existing provincial partnerships as well as creating new partnerships such as the third party delivery arrangement with Northern Development Initiative Trust (NDIT). This arrangement with NDIT was created to improve delivery efficiency and effectiveness for WD in affected remote communities in northern British Columbia. Internal Audit examined the NDIT contribution agreement and underlining administrative documentation requirements and determined that effective controls have been agreed upon to ensure reasonable mitigation of the level of risks associated with third-party delivery.
Discussion with management indicated that the outreach focus was on provincial, municipal, non-profit organizations and known partners in the traditional core WD program. It was difficult to forge new alliances in the short period of time required to deliver the program. It was not clear if the outreach activities touched all communities and/or industries impacted by the economic downturn.
