ARCHIVED - Horizontal Internal Audit of the Grants and Contributions Management Control Framework in Large Departments and Agencies— Phase 1

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Detailed Findings and Recommendations

Finding 1: Management Control Framework

We examined management control structures with respect to grant and contribution programs across government and within LDAs to assess any systemic issues related to the implementation of Treasury Board Policy on Transfer Payments (2008). We assessed roles and responsibilities identified in the policy and how they were applied in the administration of grants and contributions. We also examined the design of monitoring and reporting processes used to evaluate the grant and contribution programs as a whole and how these provided feedback to management. Finally, we examined the control framework designed to meet Treasury Board policy requirements, including the standardization of program administration, and TBS's role in enabling the sharing of best practices across organizations.

It is management's responsibility to define systems and processes that enable managers to be involved in critical decision making, to ensure that controls are in place to mitigate risks, and to monitor program results. Monitoring and reporting processes provide information to enable oversight by management to ensure that the program is on track to achieve its expected results. Program administration frameworks support governance bodies by ensuring that controls are in place to respect government-wide policy requirements and to mitigate other defined risks.

No systemic weaknesses were identified in the implementation of the policy in LDAs.

We did not identify any systemic weaknesses in the implementation of the Policy on Transfer Payments (2008) in LDAs. The policy is principles-based and provides a reasonable framework for roles and responsibilities between central agencies and individual departments and agencies. The policy and its associated directive require a minimum set of controls that should be standardized to ensure that grants and contributions are managed with integrity and transparency, and in a manner that is fair and sensitive to risks. The policy ensures that senior management has accountability for critical decision making and oversight over the program results

For LDAs that encounter challenges in implementing the Policy on Transfer Payments, TBS enables collaboration between organizations to share good practices and provides interpretation and guidance where needed.

Roles, responsibilities, and accountabilities are generally well defined and communicated. However further work is still required.

Most LDAs have defined and provided guidance on roles, responsibilities and accountabilities for the management of grants and contributions. These activities have been facilitated through the provision of training both at the departmental and government-wide levels. Some LDAs have developed a vision document for their grant and contribution programming; are using their intranet as a central source of information; and as a best practice, are imbedding available guidance within transfer payment systems. All LDAs examined have a centre of expertise or coordinating body for transfer payment administration. In most cases, these centres play a leading role in coordinating guidance for transfer payment administration. However, in some LDAs the roles and responsibilities of the centres could be strengthened and better communicated to ensure their effectiveness and to prevent inconsistencies or duplication between various areas of the organization providing grant and contribution programming

LDAs have developed performance measurement strategies but ongoing monitoring needs to be strengthened.

Most LDAs have developed performance measurement strategies to monitor and report on the achievement of objectives in their grant and contribution programs. In most LDAs these strategies include a plan for the formal evaluation of programs on a five-year cycle. It was noted that for some programs examined, performance was not monitored on an ongoing basis. Furthermore, some LDAs have not developed tools to consistently track ongoing performance and were not providing timely reporting to senior management to support program management. As a result, these LDAs cannot ensure on a timely basis that their grant and contribution programs are meeting objectives because decision makers are not receiving regular performance information to adjust programs when necessary.

LDAs are making progress towards standardization.

It is imperative that management understand the control frameworks used within their organizations to ensure they are designed to mitigate risks and allow for appropriate oversight where warranted. Standardized administrative control processes enable greater efficiency and control to ensure that risks are mitigated, opportunities are considered and that oversight can be performed in a consistent and transparent manner. Most LDAs are making progress toward standardization of administration within their grant and contribution programs, but the level of maturity varies by organization. Most LDAs have developed common business processes, including standardized templates to ensure transparency and consistency in decision making.

We noted two initiatives that are having positive impacts on efforts toward standardization and are deserving of consideration as good practices. First, a centre of expertise or equivalent body with the responsibility to ensure a consistent approach to administering grants and contributions across an organization has led efforts in most LDAs, and centrally at TBS, toward standardization. Second, the use of automated transfer payment systems, where standardized business processes can be implemented and enforced through the use of automated controls, is also considered a best practice in standardization that could be leveraged by LDAs that do not currently have such systems in place.

Recommendations

• 1. LDAs should consider strengthening the roles and responsibilities for grants and contributions across the organization, and the communication of the roles and responsibilities for their centre of expertise on grants and contributions or equivalent body.
• 2. LDAs should develop the tools required to collect and analyze program performance information on an ongoing basis.

Finding 2: Program Administration

We examined how programs were publicly promoted, and the extent to which the program information was published. We examined whether LDAs had established appropriate approval structures and controls for determining recipients of grant and contribution programs. These structures and controls included tools or templates to ensure fair and transparent project assessments.

Departments and agencies publicly promote program descriptions, eligibility requirements, and assessment criteria to give eligible recipients the information needed to be approved by the program. Approval structures ensure that recipient selection and project funding levels are determined in a fair and transparent manner.

Programs have an open and accessible promotion process.

Most LDAs are promoting programs through an open and accessible process. Most LDAs are making descriptions of their programs, including application and eligibility requirements, publicly available on their website, through press releases and through community or regional outreach activities. Some LDAS are in the initial stages of considering an electronic interface with potential recipients, allowing applicants to apply online to programs. Implementation of such an interface is considered a good practice because it helps streamline the application process for recipients and prevents re-entry of information by the organization.

Control processes are in place over recipient selection.

All LDAs have set up transparent control processes to oversee the selection of recipients. These processes include the use of working groups, peer groups, and review committees to oversee the process, and the appropriate separation of duties between application, assessment and approval processes. In some cases, as a good practice, unsuccessful applicants are being notified.

Finding 3: Risk-Based Monitoring of Recipients

We examined strategies and processes used by LDAs to assess recipient risk to determine monitoring and reporting requirements. We also examined how a recipient's assessed risk level affected their monitoring and reporting requirements and whether it followed the departmental strategy or methodology for risk assessments of recipients.

Performing risk assessments of recipients of contributions provides a basis for determining the amount and frequency of monitoring activity and reporting requirements that may be necessary to ensure that recipients are meeting the terms and conditions of their funding agreements. Using risk assessment information to inform recipient monitoring requirements helps focus limited resources on high-risk areas to achieve greater efficiency and ease monitoring and reporting burdens for lower-risk recipients. Recipient monitoring and reporting are essential to ensure that recipients are continuing to meet the terms of their funding agreement and are achieving program objectives.

Recipient risk assessment strategies have been developed but not applied.

Most LDAs have developed strategies to assess recipient risk to help determine appropriate levels of monitoring and reporting requirements for a recipient. Most LDAs have begun a process to implement risk assessments of recipients using tools such as standardized templates. However, most LDAs have not applied different monitoring and reporting requirements for recipients based on their assessed risk. Low- and medium-risk recipients face a higher administrative and reporting burden than is required. LDAs could achieve greater efficiencies in recipient monitoring by applying risk-based requirements for monitoring. LDAs could also reduce the reporting burden on recipients by ensuring that all requested reports provide sufficient information to program officers to ensure value in program delivery. Assessing recipient risk to enable flexibility in monitoring and reporting requirements can contribute to streamlining and greater efficiency of administrative practices.

We noted a good practice whereby an automated transfer payment system guides program staff through the assessment of recipient risk in a consistent and transparent manner and then determines the monitoring and reporting requirements. These requirements were then flagged by the system before contribution payments were made.

Recommendations

• 3. LDAs should implement appropriate monitoring and reporting requirements for recipients based on risk assessment strategies.

Finding 4: Reform

We examined the progress that LDAs have made in meeting the new requirements of the Policy on Transfer Payments. Notably, we reviewed any efforts made to collaborate across departments and agencies, to implement recipient service standards and to engage recipients in making improvements to grant and contribution programs. We also looked at TBS's role in leading and enabling LDAs toward reform initiatives.

Collaboration across organizations helps LDAs to share good practices and identify common recipients, with the goal of reducing the reporting burden and adopting a more citizen-focused approach to the administration of grants and contributions. Such collaboration includes the harmonization of transfer payment programs by aligning or integrating those programs that contribute to similar objectives or serve the same recipients. Service standards, once established, can be used as measurable performance indicators to improve efficiency and program delivery. The engagement of stakeholders helps ensure the continued relevance of grant and contribution programs and facilitates improvements in efficiency and effectiveness.

Some progress has been made toward collaboration, but more work is required for progress to be achieved.

Most LDAs have begun to consider coordinated recipient administration and audits within their organization and with other funding providers, such as other federal departments and agencies. Most LDAs have also begun to use similar terms and conditions in their recipient agreements across programs where applicable. Furthermore, TBS is working with large departments to address the policy and reform objectives for harmonization through the dissemination of information across government and by encouraging the streamlining of administrative practices.

Service standards are in the early stages of implementation.

Most LDAs have developed a service standard implementation strategy. Some LDAs are establishing service standard targets. Some LDAs have developed processes or systems for tracking the review and approval of applicants and recipients to establish their service standards targets. A good practice was noted in some LDAs that have begun to publish service standards

Recipients are being engaged on an informal basis for feedback to make program improvements.

Most LDAs were actively engaging with recipients through client surveys, workshops, and focus groups. In some cases the engagement was being done informally through ongoing relationships and dialogue. LDAs could strengthen this process by publicly reporting on actions taken as a result of recipient engagement.

Management Action Plans

The findings and recommendations of this audit were presented to the seven LDAs included in the scope of the audit as well as TBS in their role as a central agency. The Internal Audit Sector of the Office of the Comptroller General has asked each LDA that participated in the audit to prepare a detailed Management Action Plan.

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