Audit of the Aquaculture Innovation and Market Access Program

Project Number 6B235
Internal Audit Report
March 9, 2012

Table of Contents

1.0 EXECUTIVE SUMMARY

The Aquaculture Innovation and Market Access Program is a contribution program that uses a nationally competitive process with calls for proposals issued on an annual basis. The Program is based on priorities established in consultation with provinces, territories and sector stakeholders and focuses on short duration projects with demonstrable industry-wide benefits.   

Under this Program a maximum of $4.5 million in Fisheries and Oceans Canada contribution funds is expected to be available annually to support innovation initiatives, and a maximum of $0.2 million in Fisheries and Oceans Canada contribution funds is expected to be available annually to support market access initiatives.

The overall goal of the Aquaculture Innovation and Market Access Program is to leverage investment from the private sector to improve the competitiveness, innovation, management and environmental performance of the Canadian aquaculture industry. 

The audit assessed the level of compliance of the Aquaculture Innovation and Market Access Program with approved authorities and terms and conditions, as well as the adequacy of the governance practices to effectively manage and deliver the Program.

Based on the audit findings, our opinion is that, overall the Aquaculture Innovation and Market Access Program is compliant with approved authorities, terms and conditions, and that the governance practices are adequate to manage and deliver the Program. However, there are administrative aspects that are used to support the governance practices that need to be strengthened. Specifically:

  • Elements within the Program’s documentation need to be improved to demonstrate compliance with the Program’s terms and conditions and the Treasury Board Directive on Transfer Payments.
  • Financial controls need to be strengthened to further enable and support the monitoring associated with the budgeting, forecasting and processing of the Program funds to ensure the accuracy of the financial information.
  • The administrative elements that support project selection, approval and monitoring processes need to be strengthened to ensure that the Program maintains sufficient documentation on file (at the national and regional level) to demonstrate due diligence.
  • A risk management strategy that identifies, assesses, and proposes mitigation measures for categories of risks relevant to the Aquaculture Innovation and Market Access Program, at both the program and project level, needs to be developed and implemented to ensure that decision making is risk-based, documented and consistent for the achievement of the Program’s objectives and outcomes.
  • The monitoring and reporting activities performed by Program representatives at national headquarters need to be enhanced to ensure that the performance results that are being achieved through the funded projects are identified, consolidated and assessed to determine if the Program is achieving its objectives and contributing to the Department’s priority of delivering an integrated fisheries and aquaculture program.

Improving these administrative aspects of the Program’s governance practices will further strengthen the Program’s documentation and demontrate the due diligence that is being taken to effectively manage and deliver the Program within approved authorities and terms and conditions.

Management is in agreement with the audit findings and recommendations.  Action plans have been developed by Management and have been included in the report to address the recommendations.

2.0 BACKGROUND

The Aquaculture Innovation and Market Access Program is a contribution program that uses a nationally competitive process with calls for proposals issued on an annual basis. The Program is based on priorities established in consultation with provinces, territories and sector stakeholders and focuses on short duration projects with demonstrable industry-wide benefits. The goal of the Aquaculture Innovation and Market Access Program is to leverage investment from the private sector to improve the competitiveness, innovation, management and environmental performance of the Canadian aquaculture industry.

Under this Program a maximum of $4.5 million in Fisheries and Oceans Canada contribution funds is expected to be available annually to support innovation initiatives, and a maximum of $0.2 million in Fisheries and Oceans Canada contribution funds is expected to be available annually to support market access initiatives.

In the last 3 years, the Department has received 243 project proposals for the Aquaculture Innovation and Market Access Program.  During this time, the Program has funded 93 projects related to innovation initiatives and 12 projects related to market access initiatives for a total of 105 projects.  The Program’s total contribution of $15.1 million towards funded projects over the past 3 years has stimulated $48.4 million in investment from private and other government sources.

3.0 AUDIT OBJECTIVE

The objective of the Audit of the Aquaculture Innovation and Market Access Program was to provide assurance that:

  • The Program is compliant with approved authorities and terms and conditions; and
  • The governance practices are adequate to effectively manage and deliver the Program.

4.0 AUDIT SCOPE

The scope of the audit included an assessment of the effectiveness and appropriateness of the management practices related to the delivery of the Aquaculture Innovation and Market Access Program. To this end, the scope considered all relevant systems, records, personnel (including all regions and national headquarters) related to the delivery of the Program for the period of 2008-09 to 2010-11.

5.0 AUDIT APPROACH

The audit was conducted in accordance with the Treasury Board Policy on Internal Audit and in compliance with generally accepted auditing practices.

The examination phase of this audit commenced in July 2011 and concluded in October 2011. The examination employed various techniques including interviews, review of financial and non-financial documentation and of a sample of project files/records, and analytical reviews.
The audit criteria selected for the engagement were based on the Office of the Comptroller General’s Audit Criteria related to the Management Accountability Framework: A Tool for Internal Auditors and applicable Treasury Board policies and directives for transfer payments.

A non-statistical risk-based sample was used by Internal Audit to determine the sample size and select the funded and not-funded projects to be examined during the audit.

The risk-based sample selected for the funded projects consisted of 45 projects that totalled $8.3 million in Program funding which represented 55% of all the funds committed for the period under examination.   

The risk-based sample selected for the not-funded projects consisted of 15 projects that totalled $7.2 million in requested Program funding which represented 18% of all the funds requested for the period under examination.

6.0 AUDIT FINDINGS

It is acknowledged that the terms and conditions for the Aquaculture Innovation and Market Access Program came into effect on June 5, 2008 and were developed based on the June 1, 2000 Treasury Board Policy on Transfer Payments.

The new Treasury Board Policy on Transfer Payments and the Treasury Board Directive on Transfer Payments came into effect on October 1, 2008.  Although this new policy states that “terms and conditions approved before October 1, 2008, remain in effect until the earlier of their expiry date or the date of a decision for continuation or amendment made under this policy,” the requirements that are set out serve as the basic underlying factors for success of any program that wants to continue its operations from that date in terms of its design/approach, accountability, and overall management framework. 

This section provides the observations and recommendations resulting from the audit work carried out.  While the audit was conducted based on the lines of enquiry and audit criteria identified in the planning phase, this report is structured along the following main themes:

  • Program Design;
  • Financial Controls;
  • Project Approval and Monitoring;
  • Risk Management; and
  • Performance Measurement.

For conclusions by audit criterion, please refer to Appendix A.
 
Based on the audit work performed and our professional judgment, the risk associated with each observation was rated using a three-point scale. The risk ranking (high, moderate, low) is based on the level of potential risk exposure we feel may have an impact on the achievement of Fisheries and Oceans Canada objectives, and is indicative of the priority Management should give to the recommendations associated with that observation. The following criteria were used in determining the risk exposure level:

High

Controls are not in place or are inadequate.

Compliance with legislation and regulations is inadequate.

Important issues are identified that could negatively impact the achievement of program/operational objectives.

Moderate

Controls are in place but are not being sufficiently complied with.

Compliance with central agency/departmental policies and established procedures is inadequate.

Issues are identified that could negatively impact the efficiency and effectiveness of operations.

Low

Controls are in place but the level of compliance varies.

Compliance with central agency/departmental policies and established procedures varies.

Issues identified are less significant but opportunities that could enhance operations exist.

6.1 PROGRAM DESIGN

To support the objectives of the new Treasury Board Policy on Transfer Payments, the Treasury Board Directive on Transfer Payments provides operational requirements (accountability, transparency, and effective control) for departmental managers who have been assigned responsibilities for the management of transfer payments. The Directive notes that departmental managers who have been assigned responsibilities for the management of transfer payment programs are responsible for ensuring the preparation of the terms and conditions and funding agreements for the transfer payment program, and that administrative processes and procedures for the delivery of the program are standardized within the Department.

Observations
Low Risk

6.1.1  Practices and Procedures

For the most part, the Program has sufficient and appropriate practices and procedures in place to ensure that the program delivery is consistent with established Program terms and conditions and complies with the Treasury Board Policy on Transfer Payments. With that being said, there are aspects within the Program’s documentation that are used to support the practices and/or procedures that need to be strengthened.

As part of the development of administrative processes and procedures for the delivery of the Aquaculture Innovation and Market Access Program, the audit determined that Program representatives at national headquarters created a number of key documents as a means of documenting all of the key aspects of the Program in terms of its administrative requirements on project applicants, project recipients, and program administrators who have been assigned roles and responsibilities for the delivery of the Program.

Comparison of those documents with the Program’s terms and conditions found that one or more of the key terms and conditions were not reflected in the Program’s documentation and are considered essential to the delivery of the Program.

Interviews with the Regional Aquaculture Coordinators, who are responsible for delivering the Program within their respective region, confirmed that they are aware and often refer to one or more key Program documents to perform their duties. One region has gone further to develop a standard operating procedures document to complement the Program’s key documents and provide regional staff with additional guidance on the administration of the Program within their specific region.

For the most part, the audit found that the processes implemented by Program representatives who have been assigned roles and responsibilities to deliver the Program were consistent with the Program’s terms and conditions. With that being said, the following exceptions were identified:

  • There was insufficient evidence in the Program file to demonstrate that the project prioritization criteria were reviewed annually by the Departmental Aquaculture Management Committee; and
  • The Terms of Reference to support the roles and responsibilities of the Regional Review Committees and the National Review Committee need to be finalized and approved by the Committees’ members.

Given that the Program documents are relied upon for Program delivery, there is a risk that if they are not updated to include all of the key Program terms and conditions there may be misinterpretations by Program stakeholders that may result in a range of consequences that include, for example, inconsistent practices across regions or ineligible costs being submitted for reimbursement. This will further ensure continued effective and efficient management of the Program.

Recommandation Management Action Plan

R-1. The Senior Assistant Deputy Minister, Ecosystems and Fisheries Management should ensure that the following improvements are made to the Program’s documentation:

  • All of the key Program terms and conditions are reflected in the Program’s key documents.
  • The annual review performed by the Departmental Aquaculture Management Committee on the Program’s project prioritization criteria should be documented and retained on file.
  • The Terms of Reference to support the roles and responsibilities of the Regional Review Committees and the National Review Committee need to be finalized and approved by the Committees’ members.







The Program’s key documents (e.g. management framework and contribution agreement template) will be revised to reflect all of the key Program terms and conditions.  Revisions will take place on the document’s risk based priority ranking.
Due Date: April 1, 2012

Annual review on Program’s project prioritization will be documented and retained on file.
Due Date: September 15, 2012

The Terms of Reference to support the roles and responsibilities of the Regional Review Committees and the National Review Committee will be finalized and approved by the Committees’ members.
Due Date:  April 1, 2012

Office of Primary Interest: Executive Director, Aquaculture Operations
Due Date: April 1, 2012; September 15, 2012; and April 1, 2012, respectively.

6.2 FINANCIAL CONTROLS

As part of ensuring that transfer payments are paid to recipients (proponents of funded projects) in a prudent, efficient manner that supports the achievement of the Program’s objectives and recognizes risks, it is essential for departmental managers who have been assigned responsibilities for the management of transfer payment programs to implement financial controls that enable the processing and monitoring of accurate financial information throughout the life of the transfer payment program.

Observations
Moderate Risk

6.2.1  Financial controls for the budgeting, forecasting and utilization of Program funds

The Program’s financial controls are performing in a manner that enables the utilization of Program funds; however, the controls need to be strengthened to further enable and support the monitoring associated with the budgeting, forecasting and processing of the Program funds to ensure the accuracy of the financial information.

The delegation of financial signing authority constitutes a key financial control that plays an essential role in the expenditure process and achieving departmental and government priorities and objectives. In this regard the audit found that, for the selected Program project files, the payments received the appropriate approval from the duly authorized signing officer for Financial Administration Act section 34, as specified in the Department's delegation of financial authorities.  With that being said, there was insufficient evidence in the selected Program project files to support the verification or due diligence work performed or the rationale that was used to support the recommendation to reimburse costs that were not specified in the contribution agreement or amendment.

As part of the financial monitoring of the utilization of Program funds it was determined that Program representatives at national headquarters have implemented a Program payment tracking system using Excel worksheets and further reviewed the expenditures towards the end of the fiscal year using financial reports created from the Department’s Material Reporting System. However, the audit found that there was insufficient evidence in the Program file to indicate that the Program payments recorded in the worksheets were reviewed and reconciled against the Department’s financial system on a monthly basis to ensure that the payments were accurately recorded in terms of financial coding, amount and proponent.

Analysis of the Program’s key documents that are relied upon to deliver the Program revealed that the aforementioned elements within the Program’s financial controls were a result of the documentation not going beyond defining the financial controls in terms of roles and responsibilities to include any requirements for the project file or tools, such as checklists and reconciliation procedures, that facilitate and further demonstrate the monitoring associated with the budgeting, forecasting and processing of the Program funds.

The audit also found that the allotment and project financial coding segments used at the inception of the Sustainable Aquaculture Program were sufficient to trace the allocation and expenditure of the contribution portion of the Aquaculture Innovation and Market Access Program funding. These segments, however, were not sufficient to enable the auditors to trace the allocation and expenditure of some of the salary and non-salary portion of the funding.  As a result, for the period examined by the audit, the auditors were unable to clearly determine whether the salary and/or non-salary funds were allocated and expended to the deliver of the Program as defined in the Program’s approval documentation. To respond to this challenge, it is acknowledged that for the current fiscal year, Program representatives at national headquarters have consulted with Finance and have identified a business line financial coding segment that is also to be used when recording the Program-related salary and non-salary expenditures. This will enable Program representatives at national headquarters to track all expenditures related to the Program.

Analysis of the contribution portion of the Program expenditures, for each of the fiscal years included in the audit, revealed that the annual total expenditures were within the total annual appropriation that was allocated to the Department for the Program in the amount of $4.7 million per year. With that being said, further examination of the Program expenditures by project category revealed that the expenditures for each of the project categories (innovation and market access) exceeded the specified allocations defined in the Program’s terms and conditions. It is acknowledged that approval from Treasury Board was obtained in fiscal year 2009-10; however, there was insufficient evidence in the Program file to demonstrate that approval was obtained in fiscal years 2008-09 and 2010-11 for the reallocation between the project categories.  As a result, there is a risk that the Program’s expenditures by project category for these fiscal years are not in full compliance with the specified allocations defined in the Program’s terms and conditions.

Recommandation Management Action Plan
R-2. The Senior Assistant Deputy Minister, Ecosystems and Fisheries Management, should ensure that tools are in place, such as checklists and reconciliation procedures, that facilitate and further demonstrate the monitoring associated with the budgeting, forecasting and processing of the Program funds.

Monitoring tools, such as checklists and reconciliation procedures will be developed and implemented to facilitate and demonstrate the monitoring associated with the budgeting, forecasting and processing of Program funds.

Office of Primary Interest: Executive Director, Aquaculture Operations
Due Date: April 1, 2012
Recommandation Management Action Plan
R-3. The Senior Assistant Deputy Minister, Ecosystems and Fisheries Management should ensure that collaboration with Finance representatives continues, in that the elements of financial controls are implemented for the Program to enable and support the processing and monitoring of accurate financial information throughout the life of the Program.  Topics for collaboration can include, but are not limited to, the following:

1.  maintenance of financial coding segments; and
2.  consultation with Treasury Board representatives regarding:

a.  the need to trace the allocation and expenditure of the salary and non-salary portion of the Program funding; and

b. the permissibility within the existing Program terms and conditions to reallocate between the budget allocations that have been established for the innovation and market access project categories.

Program representatives from national headquarters will continue to collaborate with Finance representatives on strengthening those elements of the Program’s financial controls that support the monitoring activities associated with the budgeting, forecasting and processing of Program funds, and ensuring the accuracy of the financial information.

Office of Primary Interest: Executive Director, Aquaculture Operations
Due Date: April 30, 2012

6.3 PROJECT APPROVAL AND MONITORING

The new Treasury Board Directive on Transfer Payments notes that departmental managers who have been assigned responsibilities for the management of transfer payment programs are responsible for “ensuring that the level of monitoring of recipients and the reporting required from recipients, including the degree of certification or audit assurance required from the recipient on any reports, reflects an assessment of the risks specific to the program, the value of the funding in relation to administrative costs, and the risk profile of the recipients.”

Observations
Low Risk

6.3.1  Projects are selected, approved and monitored in accordance with program terms and conditions and relevant Treasury Board policies

For the most part, the projects within the Aquaculture Innovation and Market Access Program were selected, approved and monitored in accordance with Program terms and conditions and relevant Treasury Board policies. However, the administrative elements that support these processes need to be strengthened to ensure the Program maintains sufficient documentation on file (at the national and regional level) to demonstrate due diligence.

Through a review of the selected funded and not-funded project files from the Program, the audit found that the selection and approval of the projects generally met the established criteria, and the corresponding contribution agreements for approved projects were signed by persons with delegated signing authority.  However, the selection and approval decisions were not well documented.

In regards to the monitoring of compliance of funded projects following the signing of the contribution agreements, interviews with Program representatives revealed that the Regional Aquaculture Coordinators or their delegated representatives monitor the compliance of the funded projects in their respective region by requesting updates from the project proponent, conducting site visits and reviewing progress reports submitted by the project proponent with their request for payment. However, the file review found that there was insufficient evidence on the project files, located at national headquarters, to demonstrate the regional monitoring that is taking place.

The lack of documentation to walk readers through the Program’s selection, approval, and compliance monitoring processes reduces the Program’s ability to clearly demonstrate or reconstruct its due diligence and account for the funding and monitoring decisions that have been made.  As a result, there is a risk that Program representatives at national headquarters may have insufficient documentation that demonstrates and supports that the Program funding was used for intended purposes and achieved stated objectives.

Finally, as part of determining whether the funded projects were properly completed and closed, the audit examined the payments for the selected project files to determine whether or not an overpayment had occurred. Through this examination it was determined that there were instances where an overpayment had been issued to the proponent and that there was insufficient information in the project file to indicate whether or not the overpayment had been recovered. It was further determined that most of the overpayments were caused by the issuance of interest that had been inappropriately added to a payment by the Department’s financial system. Although the amount of interest added to these payments was found to be minor considering the Department’s materiality threshold, there is a concern that project proponents have received Program funds for which they are not entitled to under the Program’s terms and conditions.  As a consequence, there is a risk that the collaborative relationship between the project proponent and Program representatives at national headquarters and in the regions may be jeopardized when measures are taken to recover these monies. Representatives from the Department’s Office of the Chief Financial Officer acknowledged that this is an area for improvement in the Department’s payment process and are taking measures to prevent the issuance of interest on future transfer payments.

Recommandation Management Action Plan
R-4. The Senior Assistant Deputy Minister, Ecosystems and Fisheries Management, should ensure that documentation requirements are strengthened in support of project selection, approval, and compliance monitoring processes to further demonstrate the due diligence and account for the funding and monitoring decisions that have been made.

The administrative elements associated with documentation requirements will be strengthened to support the project selection, approval, and compliance monitoring processes to ensure that the Program maintains sufficient documentation in the project files located in national headquarters and in the regions.

Office of Primary Interest: Executive Director, Aquaculture Operations
Due Date: July 1, 2012
Recommandation Management Action Plan
R-5. The Chief Financial Officer should, in consultation with departmental managers who have been assigned responsibilities for the management of transfer payment programs, determine what measures can be taken to prevent the issuance of interest on future transfer payments, and what training/guidance needs to be provided to program administrators who are responsible for entering these transactions into the Department’s financial system for payment.

Accounting Operations, National Capital Region, will perform a review of the current recipient/supplier information in the departmental financial system to ensure the payment terms are accurate and to, if applicable, disable the "Allow Interest Invoice" option. In addition, a monthly review of the payment-on-due-date listing will be implemented to avoid the issuance of interest on future transfer payments.

The National Capital Region training for Administrative / Financial Assistants will be updated to provide guidance/procedures to the employees responsible for entering these transactions.
Office of Primary Interest: Director General, Financial and Materiel Management Operations
Due Date: March 31, 2012

6.4 RISK MANAGEMENT

To support the objectives of the new Treasury Board Policy on Transfer Payments, the Treasury Board Directive on Transfer Payments provides the operational requirements (accountability, transparency, and effective control) for departmental managers who have been assigned responsibility for the management of transfer payments. In this regard, the Directive notes that departmental managers with responsibility for the design (or redesign) of a transfer payment program are expected to assess and document their consideration of the “risks specific to the transfer payment program, the potential risks associated with applicants and recipients, and the measures that will be used to manage these risks.”

The Directive further indicates that the assessment of the risks specific to the transfer payment program and the risk profile of the recipients are to be utilized by departmental managers to establish the level of monitoring of recipients and their reporting requirements.

Observations
Low Risk

6.4.1  Risk management strategy to identify and manage risks

The most recent document that included risks relevant to the Aquaculture Innovation and Market Access Program is the March 2009 draft version of the integrated Results-based Management and Accountability Framework and Risk- based Audit Framework for the Sustainable Aquaculture Program. Although this document identifies, assesses and proposes mitigation measures for categories of risks relevant to the Aquaculture Innovation and Market Access Program, it does not consider the specific risks that may have a direct impact on achieving the Program’s objectives and how they are to be integrated into the Program’s decision-making activities.

As part of the governance structure created for the Program, the audit found that there are two departmental committees that meet regularly and include the Program as a discussion item.  Review of the meeting agendas and records of decision from these committees found that there was some evidence to indicate that the risks specific to the Program were being discussed on a project or issue basis.  However, there is no evidence to indicate that the overall risk management strategy for the Program was being discussed.

In addition, interviews with the Regional Aquaculture Coordinators confirmed that there was no formal risk management strategy for the Program that had been documented or communicated to them. They indicated that they manage the risks specific to the Program based on their experience and knowledge as part of managing the approved projects that have received funding in their respective regions. These risk decisions, however, were not formally documented and retained in the project files maintained by Program representatives at national headquarters.

Given that a risk management strategy for the Program and corresponding risk profile of the recipients and/or projects were not clearly defined at the onset of the Program, there is a risk that Program representatives at national headquarters and in the regions may not be taking an informed risk-based approach to their decision making that is documented and consistent for the achievement of Program objectives and outcomes. In addition, Program representatives at national headquarters and in the regions may be expending more effort in less risky areas while missing major risks.  Through enhanced focus on key risk areas, Program Management will allocate its efforts on areas of greatest payback.

Recommandation Management Action Plan
R-6. The Senior Assistant Deputy Minister, Ecosystems and Fisheries Management should, in collaboration with the Chief Risk Officer, develop and implement a risk management strategy for the Program that includes both the program and project levels.

For 2012-13, a risk management strategy is being developed to identify, assess and propose mitigation measures for risks at the project level
Due Date: March 1, 2012

Given that the program is due for renewal in 2013, the consideration of risk at the program level will be undertaken as a full comprehensive risk management strategy.  The strategy will be developed to identify, assess and propose mitigation measures for Program risks

Due Date: March 31, 2013
Office of Primary Interest: Executive Director, Aquaculture Operations
Due Date: March 1, 2012 and March 31, 2013, respectively.

6.5 PERFORMANCE MEASUREMENT

The objective of the new Treasury Board Policy on Transfer Payments is to ensure that transfer payment programs are managed with integrity, transparency, and accountability in a manner that is sensitive to risks, and are designed and delivered to address the government priorities in achieving results for Canadians. To this end, the Policy notes that among the responsibilities of the Deputy Head is the responsibility for “ensuring that a performance measurement strategy is established at the time of program design, and that it is maintained and updated throughout its life cycle, to effectively support an evaluation or review of the relevance and effectiveness of each transfer payment program.”

To support the objectives of the new Policy on Transfer Payments, the Treasury Board Directive on Transfer Payments notes that departmental managers who have been assigned responsibilities for the management of transfer payment programs are responsible for ensuring, “through the timely assessment of recipient reports and other monitoring activities deemed necessary, that the recipient of a contribution has complied with the obligations and performance objectives in the funding agreement.”

Observations
Low Risk

6.5.1  Performance measurement strategy to effectively measure and monitor the achievement of program objectives

Although the Aquaculture Innovation and Market Access Program has a performance measurement strategy to measure and monitor the achievement of the Program’s objectives, there is a need to further strengthen the monitoring and reporting activities performed by Program representatives at national headquarters to ensure that the results that are being achieved through the funded projects are identified, consolidated, assessed, and integrated into the Program’s decision making, and are communicated internally and/or externally.

Analysis of the performance indicators specifically defined for the Program in the integrated Results-based Management and Accountability Framework and Risk-based Audit Framework for the Sustainable Aquaculture Program revealed that all of the indicators were aligned with departmental objectives and can be considered both measurable and achievable.

As a means of assessing the Program’s performance reporting of the results achieved from the projects funded, the audit reviewed the external postings in both official languages of the final reports prepared by project proponents on the Department’s Internet site, internal communications to Senior Management, and the Department’s performance report for the periods covered by the audit.  The audit found, however, that there was no process in place to synthesize the final reports that were received from the recipients as a means of using the information for performance reporting.  Program representatives at national headquarters recognize that the results achieved through the Program’s funding have not been synthesized and communicated externally or internally to Senior Management and are now taking corrective measures.  This will help position the Program for continued success, in identifying and measuring initiatives that work best to meet intended outcomes.

Recommandation Management Action Plan
R-7. The Senior Assistant Deputy Minister, Ecosystems and Fisheries Management should strengthen the monitoring and reporting activities to ensure that the results that are being achieved through the funded projects are identified, consolidated, assessed, and integrated into the Program’s decision making, and are communicated internally and/or externally. 

As part of the Program’s monitoring and reporting activities performed by national headquarters a process will be developed and implemented to synthesize the results achieved through the Program’s funded projects, and communicate this information internally to Senior Management for Program decision making, as well as externally.

Office of Primary Interest: December 31, 2012
Due Date: Executive Director, Aquaculture Operations

7.0 AUDIT OPINION

Based on the audit findings, our opinion is that, overall the Aquaculture Innovation and Market Access Program is compliant with approved authorities and terms and conditions, and that its governance practices are adequate. However, there are administrative aspects that are used to support the governance practices that need to be further strengthened. Specifically:

  • Elements within the Program’s documentation need to be improved to demonstrate compliance with the Program’s terms and conditions and the Treasury Board Directive on Transfer Payments.
  • Financial controls need to be strengthened to further enable and support the monitoring associated with the budgeting, forecasting and processing of the Program funds to ensure the accuracy of the financial information.
  • The administrative elements that support project selection, approval and monitoring processes need to be strengthened to ensure that the Program maintains sufficient documentation on file (at the national and regional level) to demonstrate due diligence.
  • A risk management strategy that identifies, assesses, and proposes mitigation measures for categories of risks relevant to the Aquaculture Innovation and Market Access Program, at both the program and project level, needs to be developed and implemented to ensure that decision making is risk-based, documented and consistent with the achievement of the Program’s objectives and outcomes.
  • The monitoring and reporting activities performed by Program representatives at national headquarters need to be strengthened to ensure that the performance results that are being achieved through the funded projects are identified, consolidated and assessed to determine if the Program is achieving its objectives and contributing to the Department’s priority of delivering an integrated fisheries and aquaculture program.

Improving these administrative aspects of the Program’s governance practices will further strengthen the Program’s documentation and demontrate the due diligence that is being taken to effectively manage and deliver the Program within approved authorities and terms and conditions.

8.0 STATEMENT OF ASSURANCE

In my professional judgment as Chief Audit Executive, sufficient and appropriate audit procedures have been conducted and evidence gathered to support the accuracy of the opinion provided and contained in this report. The extent of the examination was planned to provide a reasonable level of assurance with respect to the audit criteria. The opinion is based on a comparison of the conditions, as they existed at the time, against pre-established audit criteria that were agreed on with Management. The opinion is applicable only to the entity examined and within the scope described herein. The evidence was gathered in compliance with Treasury Board policy, directives and standards on internal audit and the procedures used meet the professional standards of the Institute of Internal Auditors. The evidence gathered was sufficient to provide Senior Management with proof of the opinion derived from the internal audit.

APPENDIX A – AUDIT CRITERIA

Based on a combination of the evidence gathered through documentation examination, analysis and interviews, each of the audit criteria listed below was assessed and a conclusion for the audit criteria was determined using the following definitions:

Conclusion on Audit Criteria Definition of Opinion

1

Criteria Met - Well Controlled

Well managed or no material weaknesses noted, controls are effective.

2

Criteria Met with Exceptions – Controlled

Requires minor improvements.

3 Criteria Met with Exceptions - Moderate Issues Requires improvements in the areas of material financial adjustments, some risk exposure.
4 Criteria Not Met – High Impact –Significant Improvements Requires significant improvements in the area of material financial adjustments, serious risk exposure.

The following are the audit criteria and examples of key evidence and/or observations noted which were analyzed and against which conclusions were drawn. In cases where significant improvements and/or moderate issues were observed, these were reported in the audit report.

Audit Criteria Conclusion on Audit Criteria Examples of Key Evidence/ Observation

Line of Enquiry 1 – Program Design

Provide assurance that the Department has sufficient and appropriate practices and procedures in place to ensure that the program delivery is consistent with established Program terms and conditions and complies with the Treasury Board Policy on Transfer Payments.

Criterion 1.1: Practices and procedures are documented, communicated and understood.

2

6.1.1

Criterion 1.2: Processes are consistent with the Program’s terms and conditions and relevant policies and regulations.

2

6.1.1

Criterion 1.3: Oversight body(ies) is/are appropriate to meet the needs of the Program. 2 6.1.1
6.4.1
Criterion 1.4: Program staff has the knowledge, training, information to manage projects funded under the Program. 2 6.1.1
6.2.1
6.3.1

Line of Enquiry 2 – Financial Controls

Provide assurance that the Program’s financial controls for the budgeting, forecasting and utilization of Program funds are functioning as intended.

Criterion 2.1: Payments meet relevant policy requirements (e.g. the new Policy on Transfer Payments). 2 6.2.1
Criterion 2.2: Management reviews and compares actual expenditures against the budget on a quarterly basis and uses this information for decision making. 2 6.2.1
Criterion 2.3: Aquaculture Innovation and Market Access Program expenditures conform to the Program’s terms and conditions. 3 6.2.1

Line of Enquiry 3 – Project Approval and Monitoring

Provide assurance that projects are selected, approved and monitored in accordance with the Program’s terms and conditions and relevant Treasury Board policies.

Criterion 3.1: Projects are properly selected and approved based on established criteria. 2 6.3.1
Criterion 3.2: Contribution agreements are properly prepared and authorized. 2 6.3.1
Criterion 3.3: Payment transactions are properly authorized, accurately coded, and recorded in a timely manner to support information processing and reporting purposes. 2 6.2.1
Criterion 3.4: Projects are monitored to ensure recipient compliance. 2 6.3.1
Criterion 3.5: Projects are properly completed and closed. 2 6.3.1

Line of Enquiry 4 – Risk Management

Provide assurance that the Program has a risk management strategy to identify and manage risks, and consideration of risks is integrated into the decision-making and program-planning activities.

Criterion 4.1: The Program has an appropriate risk management strategy and the identified risks have been communicated. 2 6.4.1
Criterion 4.2: An appropriate control framework to monitor and respond to changing risks that properly engages/informs management. 2 6.4.1

Line of Enquiry 5 – Performance Measurement/Management

Provide assurance that the Program has a performance measurement strategy to effectively measure and monitor achievement of the Program’s objectives.

Criterion 5.1: The Program has an appropriate performance measurement strategy that is well communicated and monitored. 2 6.5.1
Criterion 5.1: Key performance indicators are measured and management monitors actual performance to planned results that properly engages/informs management. 2 6.5.1

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