Executive Summary

Introduction

Western Economic Diversification Canada's ("WD") Audit and Evaluation Department ("Audit and Evaluation") conducted a risk-based review of the department's Projects Monitoring and Payment (M&P) function with the assistance of KPMG LLP ("KPMG"). This report presents the findings and recommendations from the review, and outlines the WD's planned actions to implement the recommendations.

The review was conducted in two phases. This report presents the findings and recommendations from the second and final phase of the review. It follows an interim report that outlined the project background, Phase 1 approach, risks and risk ratings. The contents of the Phase 1 report are not replicated in this report.

Overall Assessment

WD relies extensively on M&P to help ensure the department complies with government regulations. However, the level of control that M&P provides is largely a function of the substantial experience of its staff. Recent turnover in senior staff and anticipated retirements makes the need to formalize controls an imperative.

M&P is operating without a current mandate, and has defaulted to practices that have "worked" historically. Specifically, M&P focuses its efforts on verifying and approving claims. This emphasis may not be consistent with WD's expectations for M&P. For example, WD wants M&P to spend more effort proactively monitoring projects and possibly performing project evaluations.

Overall, WD has an opportunity to reduce risks associated with the M&P function by:

Clarifying its mandate;
Dedicating greater management attention to the function; and
Reviewing, standardizing and documenting its policies and procedures.

Recommendations

The recommendations presented in the report address specific control deficiencies noted in Appendix A: Findings by Risk. This report recommends that WD:

Develop a department-wide risk management framework;
Design a project performance measurement function;
Complete the development and implementation of Results-Based Management and Accountability Frameworks (RMAFs) and Risk-Based Audit Frameworks (RBAFs) for all its programs;
Define standards for monitoring and claims verification activities;
Develop and maintain standard policies and procedures for M&P across all regions;
Clarify the intent and process for involving M&P in the review of draft contribution agreements;
Identify and address training requirements for M&P;
Define and implement a central coordinating role for the M&P function;
Develop operating standards and performance measures for M&P;
Implement a quality assurance review process and conduct periodic internal audits of M&P;
Address the recommendations from the Audit of the Community Futures Program (Grant Thornton, 2003) and consider their applicability to all types of service delivery partners;
Improve its management information reporting capabilities;
Consider implementing a project management system; and
Review the structure of M&P, and its staffing levels and mix.

The steering committee is committed to implementing the above recommendations and has developed a high-level action plan to address them.

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