The Hydrogen Early Adopters (h₂EA) program invests in showcasing Canadian industry using and applying hydrogen technologies, encouraging industry leaders and competitors to work together. The program encourages the awareness and acceptance of these groundbreaking technologies through their installation and demonstration in transportation, residential and commercial power generation applications.

Funding of $60 million over five years (2003-04 through 2007-08 inclusive) was approved as part of the Technology and Innovation Initiative. The h₂EA program is administered through Technology Partnerships Canada (TPC), a Special Operating Agency of Industry Canada.

To date the h₂EA program has invested in four demonstration projects totaling over $22 million. Related contribution agreements have been signed with four corporate consortia in order to demonstrate hydrogen technologies and showcase Canadian capabilities at locations across Canada. A fifth contribution agreement was approved by TPC; however, this project was terminated by the corporate consortium prior to any funding and was subsequently terminated.

1.2 Objectives and Scope

The objectives of the audit, listed below, are described in the Risk Based Audit Framework (RBAF) developed for the program:

The adequacy of program and financial controls to identify and assess risks over selection, approval payment and review of eligible projects or activities and the program’s operations;
The propriety of transactions;
The economy, efficiency and administrative effectiveness of program operations and delivery systems; and,
The compliance with the Terms and Conditions of the program and Treasury Board Secretariat policies and procedures.

The scope of this engagement covered program administrative and operating procedures in place within the h₂EA program since its inception in 2003-04. Our testing included each of the four outstanding contribution agreements under the h₂EA program; however, since all four projects are still ongoing, we were not able to assess the process of final payment or close-out procedures. In addition, re-payment issues were not addressed as no repayment is expected under the h₂EA program.

1.3 Audit Approach

The methodology was consistent with the Treasury Board Guide on the Audit of Federal Contributions, relevant sections of the program’s RBAF and Generally Accepted Auditing Standards. The approach was risk-based and tailored to the four audit objectives identified in the Section 2.2. Our audit methodology was comprised of three distinct phases: planning, audit and reporting. Each phase was designed to provide a flexible approach that is adaptable to the specific audit objectives of the engagement.

1.4 Conclusion

During the course of our audit we noted that specific controls were in place within the h₂EA program. These controls ensure compliance with the terms and conditions of the program while allowing flexibility to accommodate the dynamics of the hydrogen industry. The program audit identified areas where improved documentation and formalization of processes could strengthen operational effectiveness and efficiency of the program. Specifically, we noted instances where procedures were not consistently carried out in accordance with the policies described in the RBAF, Results Based Management and Accountability Framework (RMAF) and TBS guidelines.

Outlined below is a summary of the administrative and operational recommendations related to the h₂EA program for consideration by management.

1.5 Recommendations

Outlined below is a summary of the administrative and operational recommendations related to the h₂EA program for consideration by management.

Technology Partnerships Canada should:

Ensure that the proposal checklist is completed on a consistent basis and that they are maintained on file for each submitted investment outline; and the minutes of staff meetings related to the evaluation process are maintained;
Continue to clarify and document the process related to Section 34 account verification and ensure that unit performing this verification has up-to-date signing authority cards;
Continue to remind recipient of the requirement to submit claims no later than 45 days after the end of the claim period;
Continue to formalize and document the risk assessment and recipient audit planning process; and
Highlight and communicate lapses in approved funding and any identified barriers to the achievement of program strategic objectives to senior departmental management to ensure visibility and the development of an appropriate course of action.

Final Audit Report (PDF - 91 KB - 26 pages)

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