BACKGROUND
In 1999, Human Resources Development Canada — subsequently divided into Human Resources and Skills Development Canada (HRSDC) and Social Development Canada — undertook an internal audit of selected programs funded through grants and contributions. The purpose of this audit was to determine whether these programs were being well managed. The results of the internal audit, released on 19 January 2000, uncovered significant administrative shortcomings in seven program areas involving expenditures of more than $1 billion in the fiscal year 1998-1999.1 HRSDC’s response to address these administrative problems was contained in its February 2000 six-point Action Plan.2
One of the six points in the Action Plan was to review by 31 May 2000 the Department’s accountability structures and work processes, including, for example, segregation of duties and post-audits relating to grants and contributions, to ensure clarity and effectiveness. The Committee was told on 8 March 2005 that the services of two consulting companies — PricewaterhouseCoopers and Kroll Lindquist Avey — were retained to provide advice on enhancing the administration of grants and contributions. According to our testimony, PricewaterhouseCoopers recommended that the grants and contributions process be automated; that HRSDC specialize process tasks, such that steps are assigned to staff with core competencies; and that HRSDC concentrate key process steps in central delivery points to enhance the efficiency of management. Kroll Lindquist Avey recommended, among other things, that HRSDC implement a publicly transparent process for selecting project sponsors.3 These recommendations led to the development of the Specialization and Concentration Initiative (SCI).4 The first phase of the SCI was implemented on 16 February 2004 with the announcement of the following four national directives:
| | • | Increase transparency by formalizing the use of a call-for-proposals process for selecting sponsors for projects valued at $500,000 and more;5 | |
| | • | Strengthen program integrity by including a mandatory audit clause in contribution agreements with HRSDC funding at or above $350,000; | |
| | • | Ensure due diligence by instituting an internal review committee process; and | |
| | • | Segregate duties within the management of a project’s lifecycle.6 | |
The Committee was told that these four national directives apply to specific programs and regions of the country. The contribution programs affected by these directives include: Employment Assistance Services; Labour Market Partnerships (including Youth Awareness); Research and Innovation; Targeted Wage Subsidies (agreements for multiple individuals); Job Creation Partnerships (agreements for multiple individuals); Self-employment (agreements with organizations); Career Focus (agreements with organizations); Community Coordinators agreements (i.e., Skills Development, Targeted Wage Subsidies and Self-employment); and Skills Link (agreements with organizations).
According to information provided to the Committee by HRSDC, the four national directives that were announced on 16 February 2004 do not apply to full transfer Labour Market Development Agreements (LMDAs) with provincial and territorial governments, partnership agreements with Aboriginal organizations, and programs that have an agreement with or for an individual. The federal government has concluded full transfer LMDAs with New Brunswick, Quebec, Manitoba, Saskatchewan, Alberta, the Northwest Territories and Nunavut. Under these agreements, provinces and territories assume responsibility for the design and delivery of active employment measures similar to the Employment Benefits and Support Measures that are provided under Part II of the Employment Insurance Act.
We were also told that HRSDC delivers grant and contribution funding totalling some $2.7 billion, of which about 22% ($591 million) is covered under the four national directives that were announced on 16 February 2004. Of this, about $226 million is subject to the call-for-proposals directive. While it would appear that these directives are applicable to a small proportion of HRSDC’s total contribution funding, the disruptive impact of these administrative measures as expressed by many of those who appeared before the Committee was widespread.
The impacts of the changes in the department’s policies and procedures have been felt across the country … Most of the impacts we’ve seen are being concentrated in Ontario and British Columbia, where there are no devolved arrangements for employment and skills development. However, the department’s stated intent is to extend these procedures to all of its contracting of any value, such as, for example, in youth programs. Therefore, the impact has been felt and will be felt in other provinces. Our members in Manitoba, Nova Scotia, and Quebec have been sharing their concerns about this situation.
The impact of these changes in the department’s approach to communities has been most harshly experienced by unemployed Canadians, who have not been able to access supports needed because of the disruption to their local services.
The impact has also been felt … by community non-profit organizations that provide a continuum of services based on local priorities, assets, opportunities, collaboration, and innovation. This sector and these organizations represent a tremendous investment of people’s time and expertise in building better communities and meeting the needs of Canadians in their local areas. (Rupert Downing, Canadian CED Network)7
| 1 | The Standing Committee on Human Resources Development and the Status of Persons with Disabilities undertook an extensive study of this issue and tabled two reports in the House of Commons: Ensuring Accountability: An Interim Report on the 1999 Internal Audit Report on Human Resources Development Canada Grants and Contributions (April 2000) and Seeking a Balance: Final Report on Human Resources Development Canada Grants and Contributions (June 2000). |
| 2 | The six main components of the Action Plan are: (1) ensure payments meet financial and program requirements; (2) check and correct problem files; (3) equip and support staff; (4) ensure accountability for results; (5) get the best possible advice available; and (6) report progress to public and staff. For a summary of the Action Plan see: http://www.hrsdc.gc.ca/en/cs/comm/grants/reports/audit/strengthening_2000.shtml. |
| 3 | House of Commons, Standing Committee on Human Resources, Skills Development, Social Development and the Status of Persons with Disabilities (hereafter referred to as HUMA), Evidence, 1st Session, 38th Parliament, Meeting No. 22 (11:05 to 11:10), Tuesday, 8 March 2005. |
| 4 | According to HRSDC’s 2003-2004 Performance Report, the Specialization and Concentration Initiative consists of three phases. Phase one was introduced on 16 February 2004. The Committee is unclear as to why it has taken so long to implement this component of the Department’s six-point Action Plan. Phases two and three will be ongoing and will involve the development and implementation of optimal models for service delivery. |
| 5 | The Committee was told that the call-for-proposals process may also be used for projects under the $500,000 threshold, an issue that is further explored elsewhere in this report. (see Recommendation 10) |
| 7 | House of Commons, HUMA, Evidence, 1st Session, 38th Parliament, Meeting No 25 (11:55), Thursday, 24 March 2005. |