Observations and Recommendations

The observed conditions discussed below were analyzed based on the described audit criteria, and were assessed in relation to key risks and management control elements.

Governance & Administration

Criteria: An active, functional and appropriately composed Management Committee and Joint Secretariat exist to carry out the infrastructure program. Appropriate sub-committees are established. A Strategic or Business Plan exists to provide direction in the delivery of the program and is communicated to stakeholders for intended purposes. Policies and procedures exist to guide employees and clients in delivery of programs. There is an effective organizational structure, which collectively possesses sufficient knowledge, experience and dedicated time and resources to deliver the programs.

In all four western Provinces, Management and Oversight Committees were appropriately composed of federal, provincial, and municipal representatives to make appropriate decisions to achieve intended program objectives.

Meetings were held as necessary and were considered adequate and well attended. Meetings were in person, by teleconferences, or by way of exchange of emails. The minutes reviewed indicated management is informed about unusual matters, significant variances, environmental issues and community concerns. The co-chairs signed management committee decisions and recommendations.

All regions have set up Joint Secretariat offices that collectively administer and manage the programs and projects. The offices are resourced and staffed with federal and provincial personnel as required in the agreements. Cooperation and collaboration is evident in the documentation reviewed. Appropriate working-level sub-committees have been struck as needed to handle responsibilities such as screening, ranking and selection of projects, environmental assessments and communication.

Committee membership vacancies were filled within a reasonable time period, communicated and documented appropriately as required by the agreements. In two regions (Manitoba and Alberta), documentation to confirm the appointment of the current complement of federal members was not available during the audit. The auditors found examples where documents had not been updated for new appointments and where INFC had not responded to vacancy notifications.

The federal-provincial agreements provide the mandate and enabling provisions for program guidelines. The Joint Secretariats and WD have done a good job of adhering to the requirements of the federal-provincial agreements and using the guidelines provided as their operating tools. However, there are no formal regionally approved terms of reference nor business or strategic plans as to demonstrate modern management practices for a mature program that has been in operation since 2000.

Key WD-INFC and Joint Secretariat staff retired in 2008 in two regions. Functional organizational charts did not exist to describe the roles and responsibilities that needed to be replaced. Maintaining a functional organization chart and accurate job descriptions are good management practices. These should be reviewed on a regular basis.

Recommendation #1: WD's Management Committee representatives, in collaboration with their provincial counterparts, should consider developing a regional business plan. The business plan would communicate strategic direction, provide some metrics for measuring performance, and promote visibility of the infrastructure programs.

Recommendation #2: WD's Management Committee representatives, in collaboration with their provincial counterparts, should develop and approve terms of reference for the various sub-committees in order to define roles and responsibilities of each sub-committee created.

Recommendation #3: In Manitoba and Alberta, WD Management needs to work with INFC to formalize the current Management Committee appointments in compliance with the provisions in the federal-provincial agreements.

Risk Management

Criteria: A mechanism exists to systematically identify, assess, monitor and report on risks facing the program. A risk-based approach to monitor contribution agreements exists and is followed.

The auditors found evidence that the management committees regularly assess risk. The management committee meeting minutes indicated that the committees candidly discuss, among other items: audit plans, project audit and monitoring reports, environmental issues outstanding, annual and periodic reports, municipality concerns, INFC concerns, interpretation issues, project delays, project or program extensions, and variances. Required actions had been assigned and followed up at subsequent meetings. Meeting documentation and accompanying background material indicated that the management committee is provided with timely, reliable and relevant financial and operating information ahead of meeting schedules.

Time delays are a significant risk to infrastructure projects. In reviewing project files and other documents, recipients' main concerns centered on delays in receiving money after the initial infrastructure announcements had been made by the federal government. Delays contribute to cost overruns, and can threaten projects through skilled-labour shortages and equipment scarcity. Environmental risks and poor weather may also cause problems and other project pitfalls. The sheer number of stakeholders involved including politicians from various levels of government, staff and clients as well as challenging factors such as completing environmental assessments also contribute to delays.

It was evident that delays are discussed at management meetings. However, there was no evidence of formalized and functioning tools like lag-time service standards to measure day-to-day performance and critical paths. There is a need to measure outputs, targets and performance during the different phases of a project. An attempt by the auditors to analyze the reports for sample projects in SIMSI was not meaningful or successful because the definition of fields in the report was not consistent and varied from office to office. This would make benchmarking and the use of service standards very difficult and likely ineffective without first developing some guidelines.

Employees often attend management committee meetings to provide regular updates on projects status and communicate unusual matters. Employees at the federal and provincial level are capable, experienced and knowledgeable. This enhances risk mitigation in program delivery and facilitates the recipients' desire for quick and competent services. The one exception is that turnover of staff at INFC has posed some challenges to provide consistent support to federal and provincial staff in the regions.

The use of auditing can help mitigate some risks associated with complex and expensive projects. The Joint Secretariats all have audit plans in place. Results of completed audits have been reviewed and no significant problems were noted. As recommended in WD's 2006 audit, all regions, except for Saskatchewan, have adopted a formal Risk Based Audit Framework to support the manner in which certain projects have been selected in ICP and MRIF for environmental and financial audits.

In Saskatchewan, audit plans and required annual reports for MRIF have yet to be produced despite the recommendation in the last internal audit. Limited staff, retirements and workload issues posed some challenges in this region. The Saskatchewan region has since filled the positions and complimented the program with additional staff in order to address these gaps.

Recommendation #4: WD Management should work with INFC to develop strategies to help mitigate the risks associated with project delays.

Recommendation #5: In Saskatchewan, WD Management needs to work with its provincial counterparts to complete the outstanding audit plans and MRIF annual reports.

Financial Management

Criteria: Proper financial systems and controls are in place and are effective. There is appropriate segregation of duties and the delegation of authorities is appropriate and effective for program delivery. Payments are subject to control, verification, and eligibility test. An accurate Other Government Department (OGD) suspense account is effectively maintained to facilitate the flow of funds between federal departments.

The INFC financial management guide to Federal Delivery Partners has been in draft for some time now but it is widely used by WD. The guide assists in the preparation of budgets, cash forecasts, year-end payables, funds re-profiling and suspense account information. When program staff encounter unusual financial issues, such as reallocations, re-profiling, and schedule changes, these are communicated to INFC for resolution.

Required financial reports and information were submitted on time. There was no exceptions feedback report from INFC regarding forecast or other report submissions, which indicates that INFC had no problem with the reports submitted.

The Joint Secretariat monitoring and payment processes in place were sound and usually detected and corrected any ineligible claims submitted. Ineligible claims were few and exceptional. Segregation of duties was adequate and delegated authorities were appropriate for the level of operation.

Sample transactions from the OGD suspense account were examined and supporting documents reviewed, and no exceptions were found. Payments were made in accordance with the Financial Administration Act and Treasury Board Policy on Transfer Payments.

Funding limitations, as agreed to by the federal and provincial parties, were adhered to. Cost overruns were not funded and the recipients were advised of this at the outset of the projects.

Stewardship & Project Management

Criteria: Operational authorities, roles and responsibilities are clear, communicated and understood. WD’s accountabilities as defined in MOU are communicated by way of tasks, policy documents and interactions with provincial and INFC staff. There is dedicated monitoring and payment function within the Joint Secretariats. Monitoring is conducted on a regular basis for both financial and non-financial requirements.

Program guidelines, forms, links and procedures were posted on the Joint Secretariat public website. The information detailed the project application process, approval process contribution agreement administration process, and claims and reporting requirements. Applications were also available in hard copies.

Documentation from project review and ranking meetings confirmed that projects were reviewed and ranked against the mandatory screening criteria and categories. Recommendations for funding were presented to Management Committees for approval.

Procedure manuals and checklist were developed in most regions for staff use that outlined procedures for processing payment claims and the type of support documentation required. Procedures have been updated periodically to suit the program in question. When required, environmental reports and certifications were received before payments were processed.

In Manitoba and British Columbia, the auditors discovered five ICP projects that were approved five years ago but had not started. The funds were being reserved for the projects, but no funds had been expended yet. Some risks are associated with this approach: other ranked projects possibly had to forego funding and these five projects being in jeopardy due to rising costs and scarcity of tradesmen. Staff informed the auditors that once the projects are announced they cannot be pulled back or the funds reallocated. The issue of time delays is discussed more in section 4.2 of this report.

A representative sample of MRIF, ICP and CSIF project files was selected and verified against over twenty audit attributes. Similarly, external audits conducted on CSIF projects, MRIF and ICP were reviewed and discussed with the auditors involved. The Joint Secretariat has ensured that recipients and applicants comply with the terms and conditions of contribution agreements. Any exceptions noted from our sample tests were judged to be minor and inconsequential.

Information & Performance Reporting

Criteria: The Shared Information Management System for Infrastructure (SIMSI) is populated with relevant and reliable information on a timely basis. Processes and systems exist to support the roll-up and continuity of information systems within SIMSI, Provincial database, and WD systems. Financial and non-financial performance results are documented and communicated to the required management level and stakeholders on a timely basis.

The Joint Secretariats populated the SIMSI database as required. British Columbia and Saskatchewan populated and utilized SIMSI as the powerful project management tool that it was intended to be. Those regions were able to resolve most of the technical challenges that arise in SIMSI on the day-to-day basis. Data capture and input was timely and up to date. In BC and Saskatchewan, reliable project management reports were produced using SIMSI instead of an alternate application or local system. Alternatively, Alberta and Manitoba used a spreadsheet or localized database to capture and report project management information. The auditors assessed the periodically generated information to be reliable and meeting the Secretariats’ needs. However, two of the four western regions are using two systems to manage infrastructure program information.

INFC likely has to address some of the system challenges in SIMSI that staff identified. Those include the inability to roll-up certain project and performance information such as intended benefits, criteria, up-to-date financial information, forecasting and chronology of event dates. Some of the expected sequential dates on SIMSI Status Dates reports were questionable (e.g., announcement or environmental dates preceding approval date). Some people interviewed felt that staff turnover in INFC has been a contributing factor preventing keeping SIMSI updated to fully serve regional needs.

Performance data collected at the time of project application were numerous, unclear, and difficult to quantify or summarize efficiently in the final report upon completion of the project. In the federal-provincial agreements, there was a requirement that any material change to project outcomes as described in the contribution agreement needs to be reviewed by the Management Committee. However, some contribution agreements do not list the numerous benefits. The auditors felt it would be difficult to report on program performance in cases where performance information was missing, unclear or was changed significantly.

Recommendation #6: WD Management, in collaboration with their provincial counterparts, should determine what business needs are currently not being met by SIMSI. WD Management should then communicate those issues to INFC in order that system enhancements are made.

Recommendation #7: WD Management, in consultation with INFC, should review performance data collection processes and data quality to ensure that appropriate performance data is being collected that will help INFC report on and evaluate program results being achieved.

Communication

Criteria: The program and its intended purpose have been formally communicated to stakeholders. Performance results of the program/projects are communicated to stakeholders. Avenues for feedback from stakeholders are created and used to drive operational planning and future INFC initiatives. There is compliance with Communication guidelines in the MOU.

Communication was coordinated with all levels of government involved. Parties to the agreements and the recipients communicated effectively in announcing the projects. Communication events included sod-cutting, newspaper articles and town hall meetings. Communication products tended to almost exclusively focus on the funding announcement prior to project initiation. The auditors found limited evidence of any communications materials aimed at telling results achieved, success stories and lessons learned.

CSIF projects involved significant funding levels and the parties collaborated effectively to give it the public visibility it deserves. Under ICP, project announcements were done in multiple batches due to relatively smaller contributions. For the most part, MRIF project announcements were done individually causing a strain on communications resources. The auditors did not assess the efficiency and effectiveness of the latter approach, but the officers interviewed indicate that the individual announcement can contribute to project delays and can have an impact on service standards due to logistic challenges.

Cities with active CSIF projects disclosed funding in their respective annual financial reports.

Recommendation #8: WD Management, in collaboration with their provincial counterparts and INFC, should assess the efficiency and effectiveness of alternative communications methods and techniques and consider increasing post-project completion communication coverage.

Compliance

Criteria: Signed Provincial Agreements, project contribution agreements and MOUs exist and are complete with schedules and guidelines. Project contribution agreements are consistent with TB decisions and the federal-provincial agreements. There is an environmental management system in place and compliance appears appropriate. Payments comply with provisions of the Financial Administration Act (FAA) and the Policy on Transfer Payments provisions.

The contribution agreements entered with recipients were consistent with the federal-provincial agreements. Funds were approved for intended target areas and their sub-categories such as green projects, local government capacity building, and communities with populations under 250,000.

The auditors sampled a number of contributions and no ineligible costs came to their attention. In the cases where recipients included ineligible costs in their claims, program staff detected and corrected them. These instances were found to be the exception rather than the norm. No material payments were made to recipients prior to completion of the environmental review. Assessed deviations at the initial stages of the programs were minor and inconsequential. Funding limitations and contributions were adhered to through the sound payment and monitoring processes in place. Project funding complied with the various program and agreement terms and conditions in place.