Audit of Grants and Contributions Programs within the Healthy Environments and Consumer Safety Branch

Report Summary

Introduction

The audit of Grants and Contributions (G&C) Programs within the Healthy Environments and Consumer Safety Branch (HECSB) was undertaken in accordance with the 2003-04 Risk-Based Audit Plan as approved by Health Canada's Audit and Evaluation Committee.

The Audit Operations Division (AOD) of the Audit and Accountability Bureau (AAB) initiated, beginning in fiscal year 2003-04, a series of audit engagements focusing on the management of G&Cs at the program level. AAB selected HECSB G&C programs for review in 2003-04.

The objective of the audit was to determine the extent to which G&C programs administered by HECSB are appropriately designed and implemented. Specifically, the audit assessed the adequacy of the Branch Management Control Framework (MCF) for the administration of its G&C programs and compliance with relevant government policies and legislation.

The audit focused on non-statutory G&C programs administered by HECSB. It included a review of the management controls in place at the Branch level as they pertain to the administration of its G&C programs, as well as program-specific controls. The audit was conducted in accordance with the Treasury Board Secretariat Policy on Internal Audit and associated standards. It consisted of the following phases: Preliminary Survey; Detailed Examination; and, Reporting and Communication.

Methodologies employed during the audit included process and documentation reviews, structured interviews, and a review of a sample of contribution files. While all grants and contributions were considered during the Preliminary Survey Phase of the audit, assessment focussed primarily on the two larger HECSB programs, specifically the Alcohol and Drug Treatment Rehabilitation (ADTR) Contribution Program and the Tobacco Control Program (TCP).

Key Findings

• ADTR Program Design: It was found that the level of administrative control that is required when using contributions as a funding mechanism does not match the risk profile of the ADTR Program. Further, it was found that the use of contributions has caused, and continues to cause, difficulties in obtaining territorial participation, policy compliance, and adequate project monitoring.
  • ADTR program recipients are provincial and territorial governments with established accountability and management structures. Risks associated with the use of funding under this program are therefore relatively low in comparison to other contribution programs. This assessment was also reflected in the Risk-Based Audit Framework prepared by the program, which indicated that compliance audits of recipients are not likely to be undertaken. Further, the federal share of provincial ADTR funding has been decreasing in recent years. As a result, the requirement to match federal funding under a contribution agreement has become less relevant as a means of inducing recipients to focus on specific priorities.
  • Since 1999, territorial governments have not taken part in the program. Based on project files and evaluation results reviewed by the audit team, this is partially due to the requirement for territories to match funds provided through a contribution agreement. Program staff have also encountered difficulties in negotiating contribution agreement clauses with provinces and in obtaining timely financial and performance information.
• HECSB G&C Roles and Responsibilities: A number of individuals and functions within HECSB are involved in the administration of G&Cs. It was found that, in some cases, roles and responsibilities were not clearly articulated, consistent, or well understood by staff, specifically: the coordination/preparation of Treasury Board Submission documents and the Branch audit and evaluation committee. Regarding the committee, it was found that the committee designated by the Branch to deal with compliance audits and evaluations requires strengthening in order to ensure that contribution audit plans, reports and action plans receive appropriate approval and oversight. The audit team has been informed that, at the time of this report, the Business Excellence and Accountability Services (BAES) unit is developing an accountability framework that is expected to address this issue.
• TCP contribution administration:
  • Over 90% of TCP agreements reviewed contained all required clauses. However, in only 65% of cases were all required appendices to the agreement found on file. Regarding the appendices available for review, explicitly defined eligible expenditures were most often missing.
  • The process for evaluating proposals within each TCP program office is not sufficiently defined, resulting in inconsistencies in approach between program consultants and, in some cases, incomplete documentation on file. With respect to renewals, in a small number of instances involving national Non-Government Organizations (NGOs), funding was renewed without documentary evidence of assessing the success of the preceding contribution. Such assessments are critical to support renewals and for assessing the effectiveness of completed contributions.
  • Approximately one third of the TCP contribution files reviewed did not contain a complete set of the financial and narrative performance reports required to be submitted by recipients, and in most instances there was little evidence of a challenge function on the part of program consultants to support certification under Section 34 of the FAA. Advance payments were found to comply with the TBS Policy on Transfer Payments.
• Non-recurring contributions: Occasionally, one-time opportunities arise for HC to fund worthy projects within the departmental mandate but which may not be compatible with the Terms and Conditions (T&Cs) of existing programs. To accommodate such cases, a generic set of departmental T&Cs has existed for a number of years. The audit team found that, as appropriate, HECSB use of this mechanism was limited. The two non-recurring contributions reviewed by the audit team were found to have been initiated under appropriate circumstances. Such contributions fall within the scope of the Treasury Board Policy Transfer Payments, however, it was found that they were not subject to the same level of controls or oversight as other transfer payments administered within the Branch.

Overall Conclusion

With a high level of assurance¹, it was found that several elements of the Branch Management Control Framework (MCF) for the administration of its G&C programs require attention, specifically, those pertaining to: G&C-related roles and responsibilities, contribution audit oversight; and contribution agreement administration. The audit findings point to control gaps that, if left unchecked, increase the risk that G&C-related objectives, such as transparency and diligent use of funds, will not be attained. The current initiative to strengthen an accountability framework within HECSB is recognized by the audit team as a positive initiative that may address some of the audit observations.

In terms of program design, it was found that the use of contribution agreements as the funding mechanism for the ADTR Contribution Program has contributed to problems experienced with recipient reporting, completeness of contribution agreements, and territorial participation in the program. Given the relatively small size of the ADTR Contribution Program and the fact that the audit did not address other departmental programs involving provincial recipients, a detailed assessment of design options may best be undertaken at the departmental level and in consultation with similar programs. AOD has discussed this issue with the Departmental Centre of Excellence on G&Cs, which may be in a position to lead such an assessment in the future. As an interim measure, the Centre of Excellence has committed to raising the issue for discussion by the Departmental G&C Steering Committee. Nevertheless, the program should continue to explore opportunities to assist the territories in securing funding in support of ADTR program objectives.

Recommendations

It is recommended that the Assistant Deputy Minister, HECSB ensure that:

1. options are explored by the ADTR program to assist the territories in securing funding in support of ADTR program objectives;
2. the roles and responsibilities of the various G&C functions be updated and clearly communicated as part of the Branch accountability initiative currently underway;
3. an active Branch audit and evaluation committee be established as per the requirements of HC policy;
4. the Standard G&C Operating Procedures recently developed within HC, as well as training and other guidance documents available through the Departmental Centre of Excellence on G&Cs, be adopted by HECSB to the extent applicable.