Follow-up Audit of Grants & Contributions
Advances, Loans, Receivables and Unamortized Discounts
Audit and Evaluation Branch
Industry Canada
January 30, 2005
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) conducted an audit in 2003 to evaluate monitoring and management of receivables, provide assurance of the integrity of the G&Cs advances, loans, receivable and unamortized discount account balances for the fiscal year 2001-2002 and transactions and opening balances for 2002-2003 including compliance of these assets and contra accounts with the FIS requirements; report on the issues associated with the lack of synchronization of the two main information systems (CMIS & IFMS) used to administer and report on the financial transactions of the G&Cs; and assess the IFMS program/process for calculating the interest due on overdue accounts. The audit report including 15 recommendations was issued in September 2003.
In June 2004, the Audit and Evaluation Branch undertook a follow-up audit to assess the progress that had been made on the 15 recommendations and to provide assurance of the integrity of the G&Cs advances, loans, receivable and unamortized discount account balances for the fiscal year-end 2003-2004. In addition, the follow-up audit also sought to provide assurance that the forecasted cash flows of the G&C programs appear to be reasonable.
As in the original audit, the programs and directorates selected for review in the follow-up audit were: 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 follow-up 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.
1.2 Overall Assessment
We found that progress had been made in reporting under FIS for receivables, loans and unamortized discount account balances. However, we are unable to provide assurance on the amounts reported for advances, loans and unamortized discount at March 31, 2004 (Refer to sections 5.1 and 5.2).
Many of the fifteen recommendations made in our September 2003 report have been implemented or partially implemented. There were only three recommendations without significant implementation in progress (Refer to section 5.3).
We found the methodology used by PPM and TPC to forecast near term repayments was reasonable and the cash flows forecast for 2004/05, 2005/06 and 2006/07 were reasonable. We have made four recommendations on the process (Refer to 5.4).
Final Report (PDF - 129KB - 27 pages)
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Date Created: 2005-10-21
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