Operational Considerations

Treasury Board Approval

Upon acceptance of the recommended policies and processes contained in this report, WD will need to incorporate them into the WDP and ICIP RBAFs and formally document any policies that deviate from central agency guidelines.

Revised RBAFs

The RBAFs for WDP and ICIP must be revised to reflect the new contribution audit policies and processes. WD should consider developing a common policies and processes manual governing contribution audits for multiple programs. The individual program RBAFs could then reference the manual.

WD must submit the revised RBAFs and the new contribution policies to Treasury Board Secretariat for review and approval.

Policy Divergence

As part of its submission to Treasury Board Secretariat, WD should include a document that explains significant deviations between WD's policies and central agency guidelines. Some of these deviations are noted below:

Auditing of compliance. With respect to non-financial aspects of compliance, contribution audits will not result in an audit opinion and they will only address key areas of compliance as determined by WD;
Auditing of financial statements, financial reporting, and financial operations, including internal controls. Contribution audits will not include an audit of these items with the exception of financial reports used to report contributions and costs to WD.
Access to working papers. WD will not require access to the auditor's working papers.

Auditor Contract

WD should review its Memorandum of Agreement with CAC governing the conduct of contribution audits in light of the recommended policies. WD should make any revisions necessary to ensure the agreement is consistent with the policies, particularly with respect to the audit scope, approach and deliverables.

Sample Size Calculator

There are many variables involved in the calculation of required sample sizes for each stratum and for the sample overall. Similarly, a number of variables are used to determine an appropriate interval for selecting projects, should WD decide to use interval sampling. Many of the variables, such as risk ratings, forecast annual contribution amounts and the number of active projects, need to be updated before each sample is selected. As such, it is recommended that WD develop a tool to calculate sample size using a stratified sample variance formula, and determine an appropriate sampling interval. It is recommended that WD have the tool reviewed by a statistician.

Central Coordination and Monitoring

The contribution audit process should be centrally monitored and coordinated. This would include establishing processes to:
Maintain a central registry of projects;
Select projects to be audited;
Manage audit expenses;
Track the results of the audits, and identify trends and issues; and
Estimate and report overall compliance of projects with terms and conditions.

WD will need to define these centralized processes in terms of required roles and responsibilities, systems and reporting. The processes will have a number of implications for WD, including how it tracks projects (e.g. it will now have to record risk ratings), selects projects to audit (i.e. it will now be done objectively and centrally) and allocates its audit budget (i.e. regions will not be given budgets for audits).

However, it is still expected that the regional officers responsible for monitoring projects will receive a copy of audit results and will retain responsibility for deciding upon and taking any remedial action required.

Budget Requirements

WD's current budget outlined in the WDP and ICIP RBAFs for contribution audits for WDP and ICIP combined is $250,000. The budget necessary to implement the new policies and processes will depend upon:

The number of projects considered to be high risk as determined using a revised risk assessment tool;
The total number of active projects; and
The actual compliance rate experienced in the second stratum.

Based on historical data, the minimum required annual budget for contribution audits is estimated to be at least $175,000. Supporting calculations and assumptions are provided in Appendix D.

WD should review the budget estimate and revise it based on an actual determination of required sample sizes, and per audit costs.

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