HUMA Committee Report

During its hearings, the Committee spent considerable time listening to HRDC explain, and to some other witnesses evaluate, remedial measures that the Department is proposing to improve its administration of grants and contributions. These are set out in Strengthening Grants and Contributions, the HRDC Action Plan. Key elements of the plan are outlined below.

Current and future project payments must meet financial and program requirements. HRDC took an essential step by issuing a directive that directors and NHQ directors general must certify that each project file under their responsibility meets five key financial criteria before future project payments will be made. These include making certain that:

In addition, HRD will not approve any new contracts unless the files contain an application/proposal, appropriate assessments (e.g. environmental assessment, pre-screening and search for outstanding debts) and a recommendation for approval that includes a rationale.

The Committee is satisfied that these steps address many of the administrative and financial shortcomings that were identified in the 1999 internal audit.

The Minister informed the Committee that of the 459 files in the audit sample, 37 were subjected to a follow-up review. The Committee has remarked on the fact that this review was behind schedule. The Action Plan set a completion date of 18 February 2000, but the review was not finalized until 14 March 2000. This follow-up review found that three projects contained HRDC internal accounting errors, one project had unverifiable expenditures of $83,100; another had $6,529 of ineligible expenses, and six projects finished with overpayments. The overpayments associated with these projects were determined to be $226,369.51, of which all but $640.21 was recovered.

In addition to this follow-up, HRDC has begun to review all active contribution agreements to ensure that the files meet essential financial and program criteria. A regional executive head or assistant deputy minister must sign off on this review. This review must be completed by 30 April 2000. According to the Action Plan, corrective measures will be taken as required.

The Action Plan also promised that by 29 February 2000, HRDC would develop a low cost approach for reviewing any closed files at risk of not conforming to financial rules. This screening method will be applied to files that were closed in 1998-99 and 1999-00. Any problems identified by this review must be resolved by 31 August 2000.

All cases of suspected fraud or illegal activity will be referred to the police.

The Department has undertaken to provide clear direction and expectations to all employees involved in grants and contributions programs. By the end of February, all program managers and program officers were to receive initial training about the five basic financial criteria outlined above. The former Deputy Minister of HRDC told the Committee that during his tenure, a $5 million internal reallocation was made for staff training but he did not specify that this was related to grants and contributions nor did he say that it was directed at ensuring compliance with appropriate administrative tools. The Department has recognized that more training should be put in place so that:

• By 31 March 2000, all program delivery staff will have attended a workshop on program management;
• By the end of May 2000, staff will be provided with better tools to simplify management and program monitoring;
• A grants and contributions management Web site for HRDC program delivery staff was to have been developed and ready for testing by the end of February 2000;
• By 31 March 2000, HRDC will hold the first of a series of focus groups with program and financial staff to determine their needs; and
• By 30 June 2000, an independent consultant will assess workloads and staff capacity to determine classification, training, staff and other resource needs.

The Department has made temporary resources available to ensure that enough support exists to implement the Action Plan. In March 2000, it was to have prepared and submitted to Treasury Board a request for additional resources for, among other things, new computer systems to check project sponsors’ histories with HRDC and additional human resources required for good administration. Three computer information systems will assist staff in project management and control so that by April 2000 a new financial system will be available to track daily financial transactions. By 1 October 2000, a three-year plan will set out the elements of a computer system that tracks the performance history of HRDC project sponsors and another computer system to link HRDC financial and program administration systems. By October 2000, employees will be trained on how to better use existing information systems to monitor contracts and identify overpayments and outstanding debt to HRDC.

This Committee is aware that the implementation of any Action Plan would be incomplete without mechanisms to ensure that it is put in place. Accordingly, HRDC has proposed that implementation of the Action Plan should be a basic job requirement of all departmental executives (EXs) and other managers involved in managing grants and contributions. Consequently, they will not be eligible for performance bonuses for work related to implementing the Action Plan.

All computer user codes not assigned to a specific HRDC employee will be deactivated and HRDC will reduce the number of user codes in its financial system from 193 to 30 by 29 February 2000. No user will have more than one active code after 29 February 2000, and duplicate, redundant or unnecessary user codes will be eliminated by 31 May 2000.

The National Grants and Contributions Performance Tracking Directorate (Finance and Administration Group — Internal Audit Bureau) was established in September 1999 and was fully staffed by November 1999. It will issue national reports on a monthly basis beginning in February and regional reports every quarter beginning in April. Effective May 2000, quarterly reports to the Minister will be made public. Progress will be based on the same criteria that were used in the internal audit. Every month, the Directorate will select a representative sample of projects to analyze and also conduct on-site visits and interviews with HRDC local, regional and national staff. The Committee was told that in the coming year the sample selected for this purpose will be four to five times larger than the one selected for the internal audit. This should yield a much richer database for drawing conclusions on administrative management. A follow-up on audit results will also be tracked and timely corrective action will be taken when necessary.

The Committee supports the quick preliminary action taken by HRDC's senior managers in addressing the issues raised in the audit. The Director General of HRDC’s Internal Audit Bureau told the Committee that planning for remedial action began in June 1999 prior to the completion of the IAB's work as soon as management learned about the preliminary findings. HRDC senior managers decided to establish a directorate to track and monitor progress as well as to create a national working group to develop a more comprehensive response.

The Department's Action Plan addresses the immediate and longer-term problems identified in the 1999 internal audit report. HRDC managers informed the Committee that the responsible officials consulted with the Treasury Board's Comptrollership Standards Advisory Board, the Office of the Auditor General and obtained an independent assessment of the Action Plan from Deloitte Touche, a private sector management consulting company.

The Committee received evidence that this Action Plan is a significant step forward. In his assessment, the Auditor General of Canada informed the Committee that "…this [Action Plan] is a very thorough plan for corrective action to address the immediate control problems that were identified. Some longer-term actions are also included that further strengthen the approach. As we conduct our own audit in HRDC, we intend to assess the Department’s progress in implementing the plan." The Clerk of the Privy Council expressed that he was "… satisfied that there will be good management taking place as a result of this audit." The President of the Treasury Board told the Committee that the plan is a good one and "…the Secretariat has endorsed it as a credible means of rectifying the issues identified." The Minister of Human Resources Development made a commitment to the Committee to ensure the timely implementation of the Action Plan.

To ensure that the administrative improvements outlined in the Action Plan are durable in the long haul, the Committee expects that Treasury Board, the central agency of the federal government responsible for providing money to departments and ensuring that it is appropriately spent will play a much larger role than it has taken in the recent past.