Interim Funding of the Canadian Council for Donation and Transplantation (CCDT) - Health Canada 2003-05-08

Executive Summary

The objective of the audit was to assess the adequacy of the Management Control Framework (MCF) in place to provide interim funding to the Canadian Council for Donation and Transplantation (CCDT). Specifically, the audit assessed the extent to which the MCF is designed to ensure that:

• management practices are in compliance with policies, guidelines and instructions of Parliament, central agencies and the Department in the area of financial and administrative management;
• contractual documentation, evidence of receipt of services, deliverables and proper procedures to authorize payment; and,
• where necessary, recommendations to improve controls was provided.

The audit work covered the period from April 2001 to February 28, 2003. Recommendations for improvement are made to ensure better financial management of the interim funds. However, these improvements may also be applied when the Contribution Agreement is signed.

This audit did not examine the role and mandate, structure, operations, or the deliverables of the CCDT.

Background

In September 1999, the Federal, Provincial and Territorial (F/P/T) Ministers of Health agreed to formulate a coordinated F/P/T strategy to improve the organ and tissue donation and transplantation system in Canada. A key component was to establish a Canadian Council for Donation and Transplantation (CCDT).

The Treasury Board Secretariat (TBS) approved a contribution to the Canadian Council for Donation and Transplantation on April 11, 2002. As part of the contribution agreement, the Minister of Health was "to enter into an accord with the provincial and territorial Ministers of Health wherein F/P/T governments jointly indemnify the members of the Council and its working groups.....".

Funds were to come from existing Health Canada reference levels and provided through a Contribution Agreement to cover eligible expenses and an in-kind contribution of administrative services via a secretariat located in and staffed by Health Canada.

The interim funding of the operations of the Canadian Council for Donation and Transplantation (CCDT) has been provided by the Biologics and Genetic Therapies Directorate (BGTD) to Health Canada, Alberta Region Office in lieu of a contribution agreement with the CCDT.

To date, the Contribution Agreement has not been finalized because the above accord was not signed. In order to maintain the momentum of the work that was being done, Health Canada provided, and continues to provide interim funding to the CCDT and the Secretariat until such time as the Contribution Agreement is finalized.

It should be noted that the reasons why the Contribution Agreement was not finalized and signed is not in the scope of this audit.

As detailed in the TBS submission, the mandate of the CCDT is to provide advice to the federal, provincial and territorial (F/P/T) Conference of Deputy Ministers of Health in support of their efforts to coordinate F/P/T activities relating to organ and tissue transplantation.

Accountability for the management and monitoring of all CCDT contribution agreement funds within Health Canada rests with the Assistant Deputy Minister (ADM) of the Health Products and Food Branch (HPFB) and is delegated to the Director General, Biologics and Genetic Therapies Directorate (DG, BGTD). The DG, BGTD has entered into an memorandum of understanding with the Regional Director General of Alberta/NWT Region with respect to the operation of the Secretariat of the CCDT.

Key Findings

The unique interim funding arrangement has raised issues related to the roles and responsibilities. In the absence of a signed Contribution Agreement, accountability and authority could not be transferred to the recipient. As a result, the Council has relied on and involved the Secretariat in their work in a capacity (roles and responsibilities of the Secretariat) that have evolved and changed from those initially envisioned in the TB Submission. The CCDT relied on the Secretariat for work that they may have otherwise commissioned. Examples of this is accounting services, research & analysis, and managing contractors and deliverables.

According to the BGTD, the expectation was for the Secretariat to carry out only an administrative support to the CCDT, regardless of how the funding was provided.

The review of the financial information and documentation revealed some non compliance issues and weak management practices in several areas.

Hospitality forms detailing expenditures were not always documented and supporting documentation was incomplete.

Inappropriate use of the purchase card was contravention of the Acquisition Card Policy. The issue of using the card for travel-related purchases was supposed to be stopped in October 2002 however some travel-related purchases were still observed on the Mastercard statements up to February 2003.

The audit found that there were weak financial management controls in the contracting processes. Some invoices included costs prior to the start date of the contracts, some invoices had extension errors and the FAA, Section 34 approval was affixed prior to the end of the period being invoiced. These errors may mean that funds were over expended on these invoices. Efforts were undertaken to improve contracting practices with the implementation of a Contract Review Committee in January 2003.

There were two instances involving payments for professional training and development for CCDT which could be interpreted as ineligible expenditures as defined in the TB Submission, Appendix A. International travel of two Secretariat employees to attend donation and transplantation conferences is another instance where it is difficult to determine if the role of the Secretariat entitles its staff to this type of training. Required approvals were not evidenced in documents reviewed.

Council members perceive the payment of honoraria as compensation which was not envisioned by the TB Submission. The misunderstanding between honoraria and compensation may also impact Health Canada's arms' length relationship to the Council. There is also a discrepancy in the TB Submission as to whether honoraria was eligible to both the council and work group members.

Financial reporting for the CCDT has been spread over a number of cost centres in Ottawa and Alberta. Therefore it is difficult for any of the interested parties (BGDT, the Secretriat, CCDT) to readily obtain accurate financial cumulative costs. Without accumulating the costs, any financial information presented to the CCDT is inaccurate and not reflective of the true cost of the CCDT. Based on the sample of expenditures reviewed, costs were incurred for CCDT and Health Canada activities as outlined in the TB Submission.

Conclusions

From our findings, the Secretariat should have played a larger role in maintaining good financial management controls and ensuring compliance, however, it would appear that their involvement in the work of the CCDT preoccupied time and resources.

Based on the audit findings, systems, processes and controls were not functioning as intended, limited information compromises the decision-making process and the overall situation places the CCDT and the Alberta/ NWT Region in a moderate risk exposure.

Better reporting structures, an approved budget and increased financial management controls are required to strengthen accountability.

Recommendations

It is recommended that

1. In order to establish better accountability during the interim period through the responsible ADM, the Secretariat should have a functional reporting relationship to the DG, BGTD and the role of the Secretariat in ensuring compliance with the TB Submission should be documented in the MOU and reflected in performance objectives.
2. The DG, BGTD and the RDG, Alberta/NWT should define and document in the Memorandum of Understanding (MOU) how funding will be provided for the operations of the CCDT and the Secretariat and any requirements, in addition to those included in the TB Submission, that are to be met as a condition of funding. Additionally, this should include the preparation of a full budget for the operations of the Secretariat and for the CCDT for the approval of the ADM, HPFB.
3. The Secretariat should implement better controls over its financial management practices in the following areas:
   
   
   1. Hospitality Approval Claims,
   2. Travel Expenditures,
   3. Diligent use of the purchase card,
   4. Diligent contracting processes; and.,
   5. International travel.
4. The Secretariat be responsible to manage and monitor compliance of honoraria in accordance with the TB Submission. In addition, the Secretariat of the CCDT should prepare an annual budget for honoraria that relates to the scheduled meetings and conference calls of the CCDT members. Payments of honoraria should be based on actual meetings referenced back to those planned and included in the approved budget.
5. The Secretariat's monthly financial reports and budget variance analysis should include only the portion of the contribution amount that is earmarked for the CCDT and the Secretariat and the DG, BGTD should be responsible for reporting cumulative amounts to the ADM, HPFB on a regular basis.