HUMA Committee Report

One of the keys to sound financial management is to ensure that the appropriate financial management personnel are in place and equipped with the resources to do their jobs. The 1999 internal audit bluntly concluded that "controls can be more effective". The failure to maintain financial monitoring, however, uncovered an extremely serious situation: eight out of ten files did not show evidence of financial monitoring and that when conducted, financial monitoring could not demonstrate that monies were used for their intended purpose.

Given the potential erosion of public confidence in the financial management of HRDC's grant and contribution programs, the Committee believes that greater transparency and information will help to rebuild that confidence.

During our hearings, the Committee heard from the Auditor General and the Canadian Comprehensive Auditing Foundation — La Fondation canadienne pour la vérification intégrée (CCAF-FCVI) about the need for modern comptrollership. The Treasury Board expressed its commitment to ensure that departments have sound financial management practices in place. The Association of Public Service Financial Administrators (APSFA) presented a brief and documentation indicating that many public service positions of a financial nature have been cut and that others have been filled by incumbents who do not meet the selection standards for the Financial Management Group established by the Public Service Commission. This has resulted in a dilution of their professionalism and cast some doubt about whether the government in general, and HRDC in particular, has the professional resources to manage its financial operations, specifically HRDC's grant and contribution programs. The Committee also finds that it is good practice and a prudent use of resources to have financial managers involved in the programs and in project management from the time when a program is being developed.

The 1999 internal audit report also cited HRDC staff reductions as jeopardizing a key practice for ensuring financial integrity, namely a segregation of duties. Normally, a project officer who initiates a payment should not approve the same payment. The internal audit found that staff reductions resulted in "many project officers handling and controlling a grant or contribution project from application to termination with little or no involvement from managers or fellow project officers."

In its Action Plan to address the need for greater financial supervision of grants and contributions, HRDC promised to conduct an inventory of all existing departmental tools, to analyze the gaps and to develop standardized generic tools. The Action Plan also committed HRDC to put in place a new financial system by April 2000. By 1 October, the Department proposed to have a plan so that in three years it will have a system that tracks the performance history of project sponsors and to integrate financial systems with program administration systems. This is further discussed in the next section.

In the Committee's view, action to put in place adequate tools is long overdue. Our witnesses from other granting bodies and foundations, as well as research grant administrators and experts, told us that while HRDC's problem is far from unique, the Department has been slow in responding to the need for better tracking and monitoring systems. They also told us that the information required for financial tracking and monitoring can be used for outcome research and evaluation. An integrated information system could mean that with standardized common data elements, applicants are spared filling out the same forms many times and funders of all types (not just HRDC) can find out where their money is going. Some of this information could be made available to the public so that greater transparency would result.

This Committee is also aware that there may be elements of financial administration that require further study and recommendations and we would hope that the Auditor General can address these in his audit of HRDC's grants and contributions that will be made public this autumn.

Better tracking and integrated information systems could go a long way to meet the difficulties in record-keeping that the Information Commissioner of Canada outlined when he appeared before this Committee. Incomplete records have unquestionably played a part in the sloppy administration of the department's grant and contribution programs. Again, evidence from organizations outside the federal government led us to the conclusion that the technology to keep adequate records not only exists, it has been used elsewhere and it has proven effective. HRDC must also deal with the challenge of reconciling systems that are both financially accountable in a transparent way and of respecting the privacy rights of its clients.

Corporate memory, however, is another side of the question of understanding and evaluating the records that exist. Throughout our hearings, this Committee constantly heard from senior managers (former and current) of HRDC that they had been unaware of certain past activities or actions. This not only impeded our study but also made it clear to us that the corporate memory of HRDC has not been adequately protected and used in a way that would have minimized the grants and contributions issue, or even prevent it from reaching such large proportions.