Audit of Grants & Contributions
Advances, Loans, Receivables and Unamortized Discounts
Executive Summary
Audit and Evaluation Branch
September 2003
1.0 Executive Summary
1.1 Introduction
Effective April 1, 2001, the department was required to implement full accrual accounting because of the financial information strategy (FIS). This resulted in significant changes in systems and procedures to ensure that revenues and expenses were properly captured in the period in which they became realizable or payable rather than when funds were received or cheques issued. Departments were required to report specific balance sheet items arising from Grants and Contributions (G&Cs) such as advances, accounts receivable, allowance for doubtful accounts, loans and unamortized discounts.
The Audit and Evaluation Branch (AEB) decided to audit the repayable contribution agreements for the major programs because of the difficulties and risks of implementing FIS and the substantial dollar amount of the G&Cs programs in the department. The programs selected were those which had significant repayable contribution agreements and included: Aboriginal Business Canada (ABC), Federal Economic Development Initiative for Northern Ontario (FedNor and Community Futures), and Information Highway Application Branch (IHAB). Also included in the audit is Program Policy Management Directorate (PPM) who administers sunsetted programs and the benefits phase projects for Technology Partnerships Canada (TPC). Since the Comptroller is also active in the processing of invoices and payments related to these agreements, we included these activities as part of the audit. The audit also covered advances from ABC, FedNor, IHAB, and the Ice Storm Relief Program.
1.2 Overall Assessment
We found that in the first year of reporting under FIS more work was required to accurately report the advances, receivables, loans and unamortized discount account balances. Hence, we are unable to provide assurance on the amounts reported for advances, receivables, loans and unamortized discount at March 31, 2002. However, to ensure more accurate reporting for the fiscal year ended March 31, 2003, the Comptroller has been taking significant action to resolve the difficulties of implementing FIS.
While the structure for monitoring and managing receivables is adequate for unconditionally repayable contributions, not all program areas have developed systems to deal effectively with conditionally repayable agreements. Specifically they are lacking systems to ensure consistent monitoring of timely reporting and repayment. This could result in the department not receiving monies due per the agreements.
We recommend that the department review the roles and responsibilities related to monitoring of the benefits stage of all conditionally or unconditionally repayable contribution agreements with the intended objective of improving the effectiveness and efficiency of these processes and of clarifying the accountabilities for their management. (Recommendation #1).
Other Findings
Our findings show that the managing and reporting of advances, receivables, loans, allowance for doubtful accounts for both receivable and loans required by FIS is not well understood by many who have the responsibility for its application. (Recommendations 3 to 7 and 10).
The financial reporting of advances and unamortized discount as of March 31, 2002 did not comply with FIS requirements (Recommendations 3 to 5, 11 and 13).
Our review of the planned procedures for advances and allowance for doubtful accounts for both receivables and loans for year end March 31, 2003 shows that a comprehensive review of the data is planned by the Comptroller in conjunction with the program areas which should generate reporting that complies with FIS and more accurately reflects the balances at the March 31, 2003 year end.
We did not find documented approval of authority to suspend interest in overdue accounts receivable. The Comptroller should also examine the feasibility of calculating all interest (simple and compound) in IFMS to eliminate manual calculations and possible errors (Recommendation #15).
We recommend that the Comptroller foster an improved understanding of the application of accounting principles and practices required under FIS for G&Cs, both within the Comptroller’s Branch and across all implicated sectors (Recommendation #2).
Information Systems
Some of the reporting problems at fiscal year end March 31, 2002 stem from deficiencies in the ability of the contribution management system and the financial reporting system to track and report information required for FIS. Specifically, the contribution management system does not distinguish between amounts advanced for the current fiscal year and amounts advanced for the new fiscal year. The financial reporting system does not have a sub-ledger for tracking the balances of individual loans that make up the Industry Canada portfolio of loans. (Recommendation 8 & 9).
The current contribution management system (CMIS) is being replaced by a new contribution management system (GCMS) in the coming year.
We recommend that the Comptroller should address these issues on a priority basis in the new contribution management system (Recommendation 14 ).
Audit of Grants & Contributions Advances, Loans, Receivables and Unamortized Discounts — Final Report (PDF, 223KB, 25 pages)
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Date Created: 2004-01-15
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