Criteria: has established clear direction, roles and responsibilities for Monitoring and Payments; and that required resources are available, and effectively and efficiently managed.
WD performed its monitoring and payments responsibilities primarily through its four regional offices in British Columbia, Alberta, Saskatchewan and Manitoba. Headquarters provided corporate advice, policies and guidelines.
A committee of Directors General and program directors constituted a center of expertise on grants and contributions and provided advice on all facets of project management including monitoring and payment activities. A monitoring and payment working group existed and collaborated with the Director Generals’ Committee in formulating policies, guidelines, and implemented relevant standard practices and processes.
Monitoring and payment officers received adequate training to effectively perform their duties. The department has developed policy manuals, guides, forms, instructions and training material to assist staff with their tasks and these tools are readily available to staff through the intranet and other avenues. The departmental project management system is primarily used as a repository for project administration documents including progress reports, contribution agreements, and amendments.
Criteria: Risk-based approaches have been adopted in monitoring and delivering projects under the various transfer payment programs; management has put in place monitoring activities and reporting mechanisms that enable compliance with funding agreement.
Funding agreements have been standardized in wording and were consistent with the program terms and conditions for the six programs examined. An appropriate funding agreement was used in each of the sample projects examined. Special conditions and reporting requirements were added where necessary, to manage the unique risk of individual recipients or projects. We found the statement of work schedule included in funding agreements to be a useful control tool as it highlighted key elements such as cash flow, milestones, performance indicators, project activities, special conditions and reporting requirements.
There was evidence in project files that indicated officers were actively engaged with the recipients through regular correspondence, telephone conversation, reviews and discussion of recipient progress report and claim. Site visits were limited to instances deemed necessary based on assessed project risk. Staff used standardized templates for risk assessment, progress reporting, and claim payments, resulting in consistency across programs and regions.
The regions contracted out recipient audits for high risk ranked projects in managing risk. In addition, headquarters randomly selected low and moderate risk projects for additional claims audits to be performed by the regions. For the audit period examined, the regions performed recipient audits based on the 2005 departmental recipient audit policy, which was in place up to March 2011. Effective in 2011-12, the department has developed a new Control Based Monitoring Framework to replace this recipient audit policy. This audit did not examine the new framework.
There were 595 amendments to funding agreements in the 151 project files examined. Over 90% were for cash flow re-profiling and extension of project completion dates. Most of the amendments occurred in the later part of the fiscal year, as project progress and completion dates become better known.
The department has yet to automate some monitoring and payment processes. We found that this function relied heavily on labour intensive routine manual processes performed by both the recipient and departmental staff. Opportunities exist to automate some routine processes of the monitoring and payments function, and that would further reduce recipient administrative burden and possibly free up staff time to perform other monitoring activities.
A range of infrequent exceptions were found within the project files examined. The exceptions were assessed to be minor based on magnitude and the relatively immaterial dollar amounts involved. They were:
Recommendation # 1: The department should assess the automation of routine monitoring and payments processes where clear recipient and/or staff efficiencies can be gained.
Recommendation # 2: The department should consistently demonstrate that all aspects of special conditions have been fully met on a timely basis to effectively mitigate unique project risks associated with those special conditions.
Criteria: That appropriate information and expectations are communicated to recipients; that appropriate cash management practices were applied to meet the objective and requirements of the Policy on Transfer Payments; and that project cash management and payments complied with the Financial Administration Act.
When an agreement was signed, the department sent the recipient a formal letter highlighting the provisions of the agreement and a claim package, forms and guidelines on progress reporting. The letter provided instructions to the client to contact officers when clarification is needed. It was evident on files that respective managers and project officers met regularly to discuss client issues. Most issues identified on files were cleared within a reasonable period of time.
The sample payments examined had the approval of staff with proper financial signing authority. Project payments were made in accordance with the Financial Administration Act, the Treasury Board Policy on Transfer Payments and departmental policy.
To manage multi-year funding agreements, the department had established cash flow budgets specific to individual projects and re-profiled the funds as required by the recipients. Advances examined in the audit period were proper and appropriately accounted for within the required dates. Adequate follow-up activities were demonstrated in two instances noted where advances were overdue.
To minimize administrative burden on recipients, the department has implemented two claim processes: comprehensive and expedited. The expedited option reduced the amount of documentation and verification based on risk. Most of the payment claims examined after April, 2010 had adopted the expedited claim option due to their lower level of risk. This reduced administrative burden some recipients faced and minimized the staff time required.
In a few instances, claims were paid before the progress reports were submitted. Project officers explained that they were familiar with the clients and they continued monitoring the progress reports. In all final payments examined, the officers had received the final reports before the final claims were paid. The department had consciously decided to adopt the “reimbursement of eligible expenditures” option from the three funding options allowed under the Treasury Board Directive, namely: a) achievement of the pre-determined performance expectations; b) reimbursement of eligible expenditures; or c) a costing formula. While the basis for making contribution payments is acceptable, it may present a challenge in measuring performance and demonstrating value for money especially for some projects where the milestones and outputs are intangible.