HRSDC PTD 2004/2005

Executive Summary

1. Objective

   The principal objective of this report is to:

   • provide Human Resources and Skills Development Canada (HRSDC) senior program management with an assessment of their department's performance on the administration of grants and contributions;
   • assess the extent to which Regions and NHQ are adhering to the national directives and guidelines, operational manual, Treasury Board Transfer Payment and Financial Administrative Services Policies on grants and contributions;
   • assess and verify financial documentation to support the payments made by HRSDC to ensure these payments adhere to the agreements and terms and conditions of the program; and
   • identify and report on any significant areas of risk that should be addressed in order to continue to strengthen the administration of grants and contributions.
   
   
2. Background

   Human Resources Development Canada established the National Grants and Contributions Performance Tracking Directorate (PTD) in the fall of 1999 to support the work of strengthening the administration of grants and contributions in the department.
   
   In December 2003 Human Resources Development Canada was divided into two new departments, Social Development Canada (SDC) and Human Resources Skills Development Canada (HRSDC). The PTD is part of the shared corporate Financial and Administrative Services Branch of SDC which provides services to both departments.
   
   As part of the Grants and Contributions Internal Control Framework, the PTD provides a quality control mechanism to measure the administration of grant and contribution programs.
   
   The PTD's mandate is to:

   • provide assurance that grant and contribution funds are being managed and expended in accordance with program terms and conditions;
   • highlight key areas of risk and provide guidance on approaches to mitigate those risks;
   • contribute to knowledge transfer throughout the Departments; and
   • coordinate activities with other monitoring and audit functions carried out within the Departments and by external agencies to ensure adequate coverage, without duplication of effort.

   PTD reviews provide senior program management with ongoing detailed information on the level of compliance with required administrative standards for grants and contributions.
   
   In October of 2001, HRDC's Internal Audit and Risk Management Services audited the work of the PTD and concluded: "PTD review methodology is applied fairly and consistently and a high level of reliance may be placed on the information produced by PTD".

3. Scope and methodology

   For all national results released in this report, samples were drawn from the grant and contribution program population of Labour Market, Youth, Aboriginal, Learning and Literacy, Human Resources Partnerships, Strategic Policy, Official Language Minority Communities, Homelessness and Labour. Provincially managed programs, individual income support payments, individual Skill Development agreements and Summer Career Placement files have not been included in the review sample.

   The files selected for this Annual PTD National Report 2004/2005 were grant and contribution files with a start date between July 1, 2003 and June 30, 2004 drawn from a total population of 10,636 agreements representing a total agreement value of $1,323,370,112 in the following programs:
   
   

   	Population		PTD Sample
   Programs	Number of Agreements	Agreement Amounts	Number of Agreements	Agreement Amounts
   Labour Market	7413	$519,279,192	115	$20,060,488
   Youth	1822	$111,666,917	44	$4,715,168
   Aboriginal	206	$347,881,140	0	$0
   Learning and Literacy	507	$51,696,856	16	$1,481,295
   Human Resource Partnerships	144	$88,185,352	3	$2,368,745
   Official Languages for Minority Communities	17	$8,736,700	1	$196,650
   Homelessness	509	$194,486,173	20	$54,822,205
   Labour	18	$1,437,782	1	$73,625
   Totals :	10,636	$1,323,370,112	200	$83,718,176

   
   
   This Annual PTD National Report 2004/2005 provides a:
   
   
   1. National File Review Analysis by Business Process & Detailed Results (Appendices 1 & 2)

      On February 16, 2004 four new Specialization and Concentration directives were announced. Based on the sample dates, the majority of files included in this report were exempt from the requirements of these directives.

      Reviews were completed on 200 files and included activities completed on the files up to the date they were requested from the area responsibility centre by PTD. The sample was requested in four draws as follows:
      
      1st draw - February 05, 2004 (start dates of July 01 to September 30, 2003)
      
      2nd draw - March 17, 2004 (start dates of October 01 to December 31, 2003)
      
      3rd draw - July 13, 2004 (start dates of January 01 to March 31, 2004)
      
      4th draw - December 10, 2004 (start dates of April 01 to June 30, 2004)

      The file reviews were completed between February 2004 and May 2005. The review included a comprehensive assessment of departmental programs, including all phases of the project life cycle (i.e., application, assessment, recommendation and approval, agreements, payments, monitoring, close out, compliance with terms and conditions, as well as general administration).

      The PTD methodology and sampling techniques used enable most results to be extrapolated to the grant and contribution population as a whole. This report provides file review results related to 92 compliance questions. In 70 of the compliance questions reported, the compliance rate results can be extrapolated to the full population with a confidence level of 90% and a precision of + or - 5% or better.

      For another six of the compliance questions (highlighted with grey shading in Appendix 1), the precision is + or - 7%. In the remaining 13 compliance questions, the results can only be presented for information purposes. These results cannot be extrapolated with a high degree of confidence due to the low number of responses applicable to these questions.

      All PTD results shown have been subjected to a rigorous quality control and validation process. The results of all completed file reviews have been thoroughly assessed by an independent quality control unit within PTD. Following the quality control review, all file observations have been validated through management responses provided by the area responsibility centre. Management included plans for corrective action.

      To analyze and report on file review results, the PTD used its database to sort results by business process and to consolidate results for each assessment question/criterion. In addition, comparable compliance results from PTD's previous report have been added to the database in order to measure and track trends related to the ongoing administration of departmental grants and contributions.

   2. National Financial Review Analysis (Appendix 3)

      This analysis summarizes the results of the financial reviews conducted by the PTD.

      In August 2004, PTD signed a Memorandum of Understanding with the Labour Market and Official Language Minority Communities Directorate to conduct 50 on-site financial verification reviews per year (ending March 31, 2006) with an agreement dollar value between $50,000 to $350,000.

      The objective of the PTD financial verification process is to ensure that the expenses claimed by sponsors were actual and incurred expenditures, allowable as per the agreement, and supported by adequate documentation. PTD financial reviews involve verifying the amount claimed for reimbursement by the sponsor against their financial records (e.g. general ledgers, payroll, invoices, bank statements, cancelled cheques) and the agreement.

      Of the 200 files in the national random sample, 50 files were randomly selected for which financial verifications were conducted. On-site financial visits to sponsors were conducted between September and October 2004 and between February and March 2005.

      A total of $6,571,776 in claimed expenditures was reviewed.

4. General Conclusions

   4.1 - National Results:

   The review performed by the PTD for this report shows continued achievement of high levels of compliance to Departmental and Treasury Board policies and procedures. This sustained compliance in the management and administration of grant and contribution programs at the national level is demonstrated by a compliance rate of 90% or above for 76 of the 79 statistically valid review results.

   PTD would like to draw attention to those areas requiring particular attention in order to meet the standards set by senior management. Statistically valid compliance results fell below 90% in the following three statistically valid review questions:
   
   Payments Phase

   • Reimbursed expenses are allowable according to departmental policy; program Terms and Conditions and the Agreement (89.8%) Omissions and clerical errors in the receiving and checking of payment claims to ensure that all claimed costs conform to the eligible expenses outlined in the agreement were identified. Based upon documents included in the file PTD identified payments made in excess of attached invoices, for expenses claimed twice, for expenses prior to the agreement start date, for expenses that were not project-related, for expenditures that were not allowed according to Terms and Conditions and for GST/HST to which the sponsor was not entitled. More care must be exercised in reviewing financial documentation submitted by the recipient to ensure expenses are eligible before payment proceeds.

   Monitoring Phase

   • A risk assessment and Monitoring plan, completed prior to Agreement start, is on file (84.7%) In August 2003 with the implementation of version 1.6 in the CSGC, the system functionality made it mandatory to assess a project's risk prior to the Agreement start date. The majority of observations raised concerned the fact that although a risk assessment was completed prior to agreement start date, a schedule of monitoring visits had not been completed at the time PTD reviewed the files

   General Administration phase

   • Participant data is captured for the Accountability Framework (87.6%) The participant intervention data was not entered into the Accountability Framework.

   4.2 - Financial Verification Results:

   Of the 200 files in the national sample selected for this report, 50 files were randomly selected for an on site financial review of claims submitted by project sponsors. At the time of selection, these 50 files had claimed expenditures of $6,726,083. PTD reviewed 97.71% of the claimed expenditures, a total of $6,571,776.

   Financial observations involving identified or potential adjustments have been raised. Overall results of the financial reviews are as follows:

   • $6,537,185 of expenditures reviewed were determined to be eligible expenditures in accordance with the agreement;
   • $34,591 was identified as requiring adjustments and is specifically detailed in Appendix 3.

   The financial verification results are based on corrective action undertaken by the HRCCs following PTD observations and recommendations.