Archived – Audit of the Pacific Salmon Foundation & T. "Buck" Suzuki Environmental Foundation Contribution Programs

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Project Number 6B203
Final Audit Report
JANUARY 7, 2010

Table of Contents

List of Acronyms

DFO
Fisheries and Oceans Canada
FAA
Financial Administration Act
PAD
Program Approval Documentation
PSF
Pacific Salmon Foundation
PTP
Policy on Transfer Payments
RBAF
Risk-Based Audit Framework
RMAF
Results-Based Management and Accountability Framework
TBS
Treasury Board Secretariat
TBSEF
T. "Buck" Suzuki Environmental Foundation

 

1.0 Executive Summary

1.1 Introduction

The Pacific Salmon Foundation (PSF) is a federally incorporated non-profit organization, established in 1987, dedicated to promoting the conservation, restoration and enhancement of Pacific salmon for the benefit of present and future generations.  Operating independently from government, the PSF forges partnerships with communities, First Nations representatives, and non-profit organizations by acting as a funding mechanism for projects that are directed toward the same goals.

The T. “Buck” Suzuki Environmental Foundation (TBSEF) was established in 1981 to protect and conserve fish and fish habitat in British Columbia. The TBSEF works to ensure that fish-bearing marshes, streams, rivers, lakes and marine waters are not polluted, dammed, diverted, wasted or degraded. Through the direct connection to fisheries and salmon in particular, the Foundation takes a grassroots approach to public education on fish habitat protection involving fishing communities in positive contributions to sustain freshwater and marine resources for future generations.

The Foundations are funded via annual contributions from Fisheries and Oceans Canada (DFO).  The program authority is due for renewal at the end of the 2009-10 fiscal year and an internal audit is a condition of renewal.  As such the Audit of the PSF and TBSEF contribution programs were added to the DFO Multi-Year Risk-Based Audit Plan.

1.2 Objectives and Scope

The objectives of the audit were:

  • To provide assurance that the departmental management control framework for the PSF and TBSEF contributions are in place, appropriate and functioning.
  • To determine compliance with terms and conditions of the contribution program, regulatory policies and procedures for controlling transfer payments.

The audit engagement covered the 2005-06 to 2009-10 fiscal years. The audit work included detailed file review, document review and interviews with both program and finance officials. All payments made to PSF and TBSEF in the 2005-06 to 2008-09 fiscal years were reviewed due to the limited number of transactions. 

1.3 Statement of Assurance

In our opinion, the auditors have examined sufficient, relevant evidence and obtained sufficient information and explanations to provide sufficient assurance on the reported opinion or conclusions.

1.4 Summary of Observations and Recommendations

The Programs are managed and administered in compliance with the requirements of the terms and conditions of the Programs and the Treasury Board Secretariat Policy on Transfer Payments (TBS PTP)The management control frameworks for the Programs were found to be effective, and appropriate management practices were implemented with the exception of risk management practices.  It is recommended that:

  • The Regional Director General, Pacific should formally integrate risk management practices into the management of the Programs.  (medium significance)

2.0 Introduction

2.1 Background

The Pacific Salmon Foundation (PSF) is a federally incorporated not-for-profit organization, established in 1987, dedicated to promoting the conservation, restoration and enhancement of Pacific salmon for the benefit of present and future generations.  Operating independently from government, the PSF forges partnerships with communities, First Nations representatives and non-profit organizations by acting as a funding mechanism for projects that are all directed toward the same goals.

The T. “Buck” Suzuki Environmental Foundation (TBSEF) was established in 1981 to protect and conserve fish and fish habitat in British Columbia. The TBSEF works to ensure that fish-bearing marshes, streams, rivers, lakes and marine waters are not polluted, dammed, diverted, wasted or degraded. Through the direct connection to fisheries and salmon in particular, the Foundation takes a grassroots approach to public education on fish habitat protection involving fishing communities in positive contributions to sustain freshwater and marine resources for future generations.

In June 1992, a contribution program for the PSF Community Salmon Program was established with Fisheries and Oceans Canada (DFO).  The Program Approval Documentation (PAD) was approved by the Treasury Board Secretariat (TBS) and subsequently renewed in 1996 and in 2005. The 2005 PAD also established the Program Authority for the TBSEF. The PAD expires March 2010 and requires that an internal audit be undertaken as a condition of renewal for the Programs.  

Funding for the Programs is to be fully offset by incremental revenue deposited to the Consolidated Revenue Fund through the sale of stamps by DFO: 

  • Commercial fishers purchasing their commercial fishing licenses are required to purchase the Commercial Fisheries Conservation Stamp at a cost of $10.  Fishers must choose to direct Stamp proceeds to support the PSF, the TBSEF, or both Foundations equally.
  • Recreational fishers purchasing their recreational fishing licences are required to purchase the Recreational Fisheries Conservation Stamp at a cost of $6. From the first 262,800 Stamps sold, $1 is directed to the PSF.  When the total number of Stamps sold exceeds 262,800, the PSF receives $4 from each of these Stamps. The PSF also receives $4 from each Stamp sold to individuals under the age of 16.

Given this funding mechanism, the dollar amount transferred each year to the PSF and TBSEF varies depending on the number of Stamps sold and to which organization commercial fishers choose to support.  The following table depicts the annual amounts transferred to the PSF and TBSEF for the four years for which we have reviewed transactions :

  2005-2006 2006-2007 2007-2008 2008-2009 Total
Pacific Salmon Foundation $ 396,366 $ 389,573 $ 380,877 $ 371,351 $ 1,538,167
T. “Buck” Suzuki Environmental Foundation $ 38,925 $ 33,570 $ 29,803 $ 28,605 $ 130,903
Total $ 435,291 $ 423,143 $ 410,680 $ 399,956 $ 1,669,070

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2.2 Objectives and Scope

2.2.1 Objectives

The objectives of the audit were:

  • To provide assurance that the departmental management control frameworks for the PSF and TBSEF Contributions are in place, appropriate and functioning.
  • To determine compliance with terms and conditions of the contribution program, regulatory policies and procedures for controlling transfer payments.

2.2.2 Scope

The audit engagement covered the 2005-06 to 2009-10 fiscal years. The audit work included detailed file review, document review and interviews with both program and finance officials. All payments made to PSF and TBSEF in the 2005-06 to 2008-09 fiscal years were reviewed due to the limited number of transactions. 

2.3 Methodology

The audit team carried out its engagement in accordance with the Government of Canada Internal Auditing Standards, as set out in the TBS Policy on Internal Audit.  The engagement included interviews with departmental officials responsible for the development and implementation of the Programs as well as an examination of the Programs’ documentation.  Detailed file review was conducted to provide assurance related to the processes utilized to certify payments and the compliance with applicable policies and the Programs’ terms and conditions. 

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3.0 Observations and Recommendations

The following sections present observations on the effectiveness of the PSF and TBSEF management control frameworks and compliance with regulatory policies and procedures.

To assist management in preparing its management action plan, the audit recommendation has been labelled according to the following three categories to reflect its degree of importance:

  • High significance – major control weaknesses and/or unacceptably high level of risk;
  • Medium significance – control weakness affecting operational efficiency and/or credibility; and
  • Low significance – control or process weakness contributing to inefficiency.

As the PAD expires March 31, 2010 and the Programs are due for renewal, observations, recommendations and the management action plan in this report have been developed to strengthen the Programs.

3.1 Management Control Framework

The management control frameworks for the Programs were found to be effective, and appropriate management practices were implemented with the exception of risk management practices.

A management control framework is understood as the suite of controls management has implemented to enable the administration of contribution agreements with the PSF and TBSEF. Controls are “any action taken by management, the board, and other parties to manage the risk and increase the likelihood that established objectives and goals will be achieved. Management plans, organizes and directs the performance of sufficient actions to provide reasonable assurance that objectives and goals will be achieved”[1].

In reviewing the management control frameworks for both Programs, no major deficiencies were found. The terms and conditions of the Programs, as well as their respective contribution agreements, clearly detail the expectations between DFO and the two parties.

Procedures detailing the project application, selection and approval are well documented for the PSF.  DFO Community Advisors are engaged in the Program.  They assist applicants in submitting project proposals to the PSF by ensuring that the proposals are cost-effective and will assist DFO and the PSF in reaching their objectives. On an annual basis, these applications are then reviewed using a clearly defined framework by a Project Selection Committee, which includes representatives of both DFO and the PSF. The Project Selection Committee then recommends projects for funding to the PSF Board of Directors. The proposed list of projects is then sent to DFO for final review and approval by the Director, Oceans, Habitat and Enhancement Branch. Once these projects are approved by the Director, a letter is sent to the PSF confirming the projects approved by DFO and the PSF may begin requesting funds from the contribution agreement. 

While the PSF transfers the contribution funds it receives to an ultimate recipient, the TBSEF uses the contribution funding on projects it reviews and approves according to a similar methodology as the PSF project selection and approval process. It should be noted that the project application, selection and approval process, as well as the level of detail provided by the Foundations in the submission of their reports are exemplary.

As part of the renewal process in 2005-06, a Results-Based Management and Accountability Framework/Risk-Based Audit Framework (RMAF/RBAF) of both the PSF and TBSEF was developed. Included in the RMAF/RBAF was a commitment to undertake recipient audits in 2007-08. Recipient audits provide independent assurance as to recipient compliance with terms and conditions. Recipient audits were not undertaken as DFO Program Managers believed the existing monitoring and control processes were sufficient. Program Managers also felt the close working relationship with both organizations served as an additional compensatory control. The results of this informal risk assessment were not documented.

The 2008 TBS Policy on Transfer Payments (PTP) places an increased emphasis on strengthening accountability for public funds and managing programs in a manner that is sensitive to risk.  As such, programs must be managed in a manner that accounts for risk. To ensure compliance with the new PTP, it is recommended Program Management integrate formal risk management practices into its management of the Programs.

Recommendation: (Medium Significance)

  • The Regional Director General, Pacific should formally integrate risk management practices into the management of the Programs, by documenting its assessment of risks from both likelihood and impact perspectives, identifying appropriate mitigation strategies, and ongoing monitoring.  (medium significance)

3.2 Compliance

The Contribution Programs comply with the terms and conditions of the Programs, regulatory policies and procedures for controlling transfer payments with minor exceptions that did not pose a significant risk.

Payments are generally in compliance with policies and procedures, with minor exceptions noted in the early years of the scope of the Audit. Management had taken the necessary actions to address these exceptions.

Multi-year contribution agreements are in place with the PSF and the TBSEF.  These agreements expire March 31, 2010.

The contribution agreement with the PSF included all mandatory clauses required by the PTP, with one minor exception that did not pose a significant risk to the Program.  Management should ensure that future contribution agreements contain all required clauses.

The contribution agreement with the TBSEF included all mandatory clauses required by the PTP.

The PSF and the TBSEF contribution agreements contained all clauses included in the Programs’ terms and conditions.

Recommendation:

  • As no major deficiencies posing significant risk to the Programs were identified, no recommendation is required.

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4.0 General Conclusion

The Programs are managed and administered in compliance with the requirements of the Programs’ terms and conditions and the PTPThe management control frameworks for the Programs were found to be effective given their dollar value, and appropriate management practices were implemented with the exception of risk management practices. 

5.0 Management Action Plan

Recommendation Management Action Plan Status Report Update
Actions Completed Actions Outstanding Target Date

The Regional Director General, Pacific should formally integrate risk management practices into the management of the Programs, by documenting its assessment of risks from both likelihood and impact perspectives, identifying appropriate mitigation strategies, and ongoing monitoring.  (medium significance)

Develop a risk assessment and management summary for the Programs.

Identify and assess potential risk areas, probability and impacts for the Programs.

Develop program and recipient monitoring and review plan for implementation in 2010/11.

 

 

Initial:
March 2010

Revised:


1The Institute of Internal Auditors, International Professional Practices Framework, January 2009, p. 40.