HUMA Committee Report

According to the first quarterly Progress Report on the Action Plan, HRDC has completed its review of all active files. The Department also intends to conduct a review of closed files and is currently developing a cost-effective approach for doing so. According to the Action Plan, all files closed in 1998-99 and 1999-00 should be reviewed and completed (including follow-up action) by 31 August 2000. Based on the results of this review, HRDC will determine if it is beneficial to extend its file review to earlier periods.

HRDC’s active file review concluded on 30 April 2000. This review consisted of checking 16,971 files on grants and contributions worth $1.35 billion to ensure that established program requirements and file management standards are being met. Of these files, an adjustment or overpayment was identified in only 22 instances. The dollar value of adjustments and overpayments identified in these files was $749,864 or less than 0.1% of the total value of projects subjected to this review. According to the Progress Report, only $2,426 remains to be recovered.

The Committee understands that there are several cases pending where misspending is alleged. These cases are being investigated by the proper authorities and if someone is trying to defraud the government appropriate action will be taken. While these matters are well beyond the purview of this Committee, it should be noted that HRDC grants and contributions were properly spent in an overwhelmingly vast majority of cases.

In the past, many years would elapse before a follow-up internal audit would be conducted. This will not be the case with the 1999 internal audit, as HRDC is conducting an ongoing follow-up audit. In September 1999, responsibility for this was given to the National Grants and Contributions Performance Tracking Directorate and it was fully staffed by November 1999. According to the inaugural Progress Report, the Tracking Directorate only reviewed an initial sample of 76 active files and concluded both that all of the files in the sample respected the five essential financial criteria outlined in the Action Plan and that all of files had been reviewed as required. Subsequent reports are expected to include a more comprehensive treatment of new contract activity. The Minister of HRDC told the Committee that the Tracking Directorate cost about $0.7 million in 1999-00 and is expected to cost some $2 million in the current fiscal year.

We recommend that:

This Committee should review quarterly Progress Reports to the Minister and the forthcoming (October 2000) value-for-money audit conducted by the Office of the Auditor General of Canada.

HRDC should continue to operate its National Grants and Contributions Performance Tracking Directorate until it observes, for a sufficient period of time, results that are within established acceptable performance levels. Thereafter, the Internal Audit Bureau should conduct a bi-annual audit of these grants and contributions.

To enhance public confidence, HRDC should ensure that it meets the deadlines contained in its Action Plan and that the public be fully informed in a timely manner of HRDC’s progress in improving the administration of grants and contributions.

B. Strengthening Treasury Board’s Role in Overseeing Grants and Contributions

As the financial general manager of the federal government, the Treasury Board has a great interest in promoting a system that strengthens the government's ability to promote good administration practices for managing grants and contributions. The Committee was advised that Treasury Board’s current approach in this regard is to issue guidelines, then expect departments to adopt them and carry them into practice. We were told that over the years, the Treasury Board has shifted away from an approach that involves issuing directives requiring a department to act to one that entails directives on good practice, with the expectation, of course, that these good practices will be adopted and rooted in ongoing activities. While the Committee does not want the Treasury Board to micromanage federal government departments, it believes that the Treasury Board should bolster its oversight function.

The Committee is truly at a loss to explain the extent of inertia that had existed in HRDC and its predecessor, Employment and Immigration Canada, in responding to problems identified in previous internal audits of grants and contributions. This was evident from our meeting with the Auditor General who said that:

I cannot help but express frustration with the way the government manages grants and contributions in general. Our audit work in various departments back to 1977 has identified persistent shortcomings, from problems in compliance with program authorities to weaknesses in program design, instances of poor controls, and insufficient measurements in reporting of performance. We continue to face the same kinds of problems each time we audit grant and contribution programs.

One mechanism to address this inaction would be to require departments and agencies to prepare an action plan to alleviate problems identified in internal audits of grants and contributions and to submit these plans to the Treasury Board to monitor their implementation. Treasury Board could take the necessary and appropriate action when departments fail to achieve the desired results.

It is the Committee’s opinion that one of the key features of good project management is a comprehensive contribution agreement that outlines program eligibility criteria, expected results and rules with respect to spending and non-compliance. As discussed elsewhere in this report, the terms and conditions of the Transitional Jobs Fund left much to be desired, especially in relation to selecting eligible regions. The Committee suspects that some of the problems associated with this program might have been avoided had the rules been more comprehensive and clearer. The Auditor General unambiguously stressed the need for greater Treasury Board involvement in establishing the terms and conditions that individual programs must meet.

Soon, the Treasury Board will make public its new policy on transfer payments. While the Committee was unable to ascertain the extent to which the Treasury Board intends to become more active in the development of terms and conditions and monitoring its new transfer payment policy, this Committee strongly supports movement in that direction. In addition, the Treasury Board must be prepared to take meaningful action against departments that fail to comply with its policies on grants and contributions.

The Committee heard the challenge from Dr. Gillian Kerr urging the government to seize the opportunity and exhibit leadership in coordinating and harmonizing its databases. She told us that:

…it’s a wonderful time to start dealing with this problem. This is an incredible opportunity to fix the system for the Canadian charitable sector, as well as for the different levels of government, at the same time to develop information tools that can benefit charities, as well as making the whole sector more accountable and more transparent to the public. …What I would really encourage you to think about is an integrated information system, probably on the web, so having parts of it public and available to the public and parts of it private and available to funders, and start developing standardized definitions of common data elements so that agencies don’t have to fill out the same things over and over again in different ways, but also so that you can instantly grab huge amounts of information about where money’s going, where it’s being spent, where it’s being invested and what kinds of impact it’s having.

The Committee agrees that the argument in favour of resources to coordinate and harmonize databases that contain information of recipient organizations is timely. The integration of databases would increase the accountability for and efficient administration of grants and contributions. It would also ease the unnecessary administrative burden placed on recipient organizations which are required to regularly provide identical information in differing forms for various applications.

We recommend that:

The Treasury Board should require all government departments to prepare an action plan with deadlines to address problems identified in future internal audits on grants and contributions. The Treasury Board should use the tools at its disposal to ensure that these plans are implemented and that all financial and administrative problems involving grants and contributions are satisfactorily addressed.

The Treasury Board should become involved to a greater extent in establishing the terms and conditions of grant and contribution programs and should ensure that there is a strengthened and more comprehensive transfer payment policy in place.

The Treasury Board should strengthen its oversight function and become more active in monitoring adherence to a strengthened transfer payment policy and be prepared to use the tools at its disposal to enforce compliance.

The Treasury Board should re-evaluate its ‘use it or lose it’ policy and review its guidelines and regulations that deal with lapsing program funds in order to avoid year-end pressures to disburse funds in a manner that can result in administrative and financial mismanagement.

Treasury Board should develop information management policies and rules with regard to the maintenance and accessibility of electronic records.

Treasury Board, in collaboration with other key government departments, should develop a plan for the system-wide coordination and harmonization of financial databases for organizations that receive grants and contributions.