Management control framework for grants and contributions

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Management control framework for grants and contributions

Content:

• Scottish Public Finance Manual
• International Monetary Fund
• Framework for Identifying Risk in Grant and Contribution Programs
• Navigation
• Audit of the Management Control Framework for the Gas Tax Fund
• Public financial management
• Internal Audit of Grants and Contributions
• Meeting of foreign experts - Analysis of Public Financial Management and Control

Scottish Public Finance Manual

In , approximately 67 percent of total expenditures were grants and contributions. The objective of the audit was to assess whether appropriate grants and contributions oversight and monitoring are in place and operating effectively to support the achievement of departmental objectives. The audit focused on grants and contributions management, operational practices and controls at the departmental, program and project levels, including both centralized and decentralized programs.

The scope excluded Vote 10 contracts and repayable contributions. Partially Met - There is some evidence to support the audit expectations defined in the criteria but improvements are required. Not Met - There is insufficient evidence to support audit expectations defined in the criteria. The department has a grants and contributions framework for oversight and monitoring, however the framework is made up of three different program delivery frameworks each with a different set of processes and practices.

There is an opportunity to optimize the transfer payment function to provide better line of sight on the entire portfolio. Opportunities exist in the areas of horizontal governance, risk management practices, financial controls, monitoring and performance measurement. The audit was conducted in conformance with the Institute of Internal Auditors' International Standards for the Professional Practice of Internal Auditing and with the Treasury Board Policy and Directive on Internal Audit as supported by the results of the external quality assurance assessment.

The policy and directive set out clear roles and responsibilities for Ministers, Deputy Heads and departmental managers in the design, delivery and management. Grants and contribution agreements that provide official development assistance are also subject to the Official Development Assistance Accountability Act.

There are three different types of transfer payments see text box. At that time, senior management in the newly created department, Global Affairs Canada, saw an opportunity to adopt a streamlined approach to international engagement by strengthening the alignment between foreign affairs, trade and development transfer payment objectives.

More details about this expenditure by business line, branch and transfer payment category are presented in Appendix B. In , the Office of the Chief Audit Executive conducted an audit examining the harmonization process between the three business lines for grants and contributions. Some of the findings from that audit continue to exist today such as those related to governance, risk management and monitoring. In particular, harmonization has been challenging because of the systemic differences between the program delivery frameworks.

As well, coordination is complex as the grants and contribution programs are delivered across 12 branches. This section sets out the key findings. It is divided into five areas: governance and oversight; investment planning; compliance with the Financial Administration Act; program and project monitoring; and, program reporting.

Recommendations are provided, where appropriate. Details related to the audit approach are included in Appendix A. The government is committed to ensuring that transfer payments are managed in a manner that respects sound stewardship and the highest level of integrity, transparency, and accountability.

An effective governance framework should be designed to support these overall objectives. The department has a decentralized governance framework for grants and contributions. Two key committees — the Policy and Programs Committee and the Director General Program Committee provide guidance and direction amongst other areas of responsibility.

The Policy and Programs Committee is chaired by an Assistant Deputy Minister ADM , and provides a challenge function, leadership, strategic guidance, advice and decisions on programming issues including programming integration and excellence , and the implementation of the delivery and results agenda for the department. The Director General Program Committee is a forum for information sharing as well as a venue to discuss issues related to programming, delivery and results across the department.

Officials seek input from the Committee on program policies or initiatives under development. While both committees typically recommend next steps and action items, there was no evidence of a formalized tracking process for records of decision.

There was also no clear guidance regarding which projects and programs are expected to be presented at each committee. Stakeholders interviewed noted that project and program managers are responsible for self-identifying the projects and programs to be presented to the committees, if at all.

As well, the Terms of Reference and governance procedures for both the committees do not outline a process for escalation of higher-risk topics from program level to the committees nor standardized grants and contributions performance reporting and risk reporting. Such reporting could provide additional context to senior management, and allow committees to proactively identify and mitigate risks. At the program level, committees are in place to varying degrees to act as a challenge and guidance function for proposed projects.

These committees are led by either a Director General, Director or Deputy Director, and serve respective programming areas, such as:. Similar to the corporate-level committees, there was limited documentation on monitoring of committee recommendations and feedback at the program and project levels. Interviews with stakeholders highlighted that collaboration and communication among committees at this level is limited, particularly between business lines. While these committees may encourage horizontal information sharing, committee members interviewed noted a lack of a centralized system or repository to support relevant, timely oversight and issue resolution.

This increases the risk that grants and contributions are being managed and delivered inconsistently across the department. Overall, a governance and oversight structure exists however, the department would benefit from enhancing the governance to have a senior level corporate committee focused on grants and contributions especially given the horizontal transformation initiatives underway including the IT development of a new grants and contributions management system see Recommendation 1.

The Grants and Contribution Management Bureau is the functional authority responsible for the management control framework including governance, fiduciary risk management and financial internal controls including securing delegated transfer payment and financial signing authorities from Treasury Board Secretariat.

The Bureau was created in to provide centralized guidance and coordination for all Branches responsible for international assistance programs.

It provides guidance, advice, tools and training to program branches on how to operationalize international assistance including streamlining, simplifying and harmonizing programming approaches. This Branch designs, delivers and coordinates strategic policy advice on current and emerging foreign policy, economic diplomacy and international assistance matters, in addition to other responsibilities.

The branch delivers grants and contributions in relation to research and knowledge, and for Canadian contributions to certain international organizations. Twelve program branches administer grants and contributions. Program branches are accountable for all projects funded with transfer payment funds. Each branch is thematically aligned with certain key departmental and Government of Canada priorities.

Program branches oversee grants and contribution planning, management and administration at the operational level, and interact directly with in-field project officers as a first point of contact. Consistent with the findings of the Audit of the Harmonization of the Grants and Contributions Program Administration , differences in the delivery frameworks and approaches continue to exist among the three business lines.

For staff that work on International Assistance transfer payments a placemat has been developed which clearly defines the roles and responsibilities for Project Officers, Financial Analysts and Contract Officers. A similar tool would benefit those staff that work on foreign affairs and trade transfer payments. While the department is in the process of finalizing and implementing the harmonization vision that was identified in , it has been three years and there is a risk that inconsistencies and inefficiencies continue.

There is a need to enhance the operating effectiveness of the governance at the corporate level to bring focussed attention to the transfer payment program and continue to work to have more consistent roles and responsibilities across business lines. The Assistant Deputy Minister of Corporate Planning, Finance and Information Technology and the Director General of the International Assistance Operations Bureau, in partnership with the relevant Assistant Deputy Ministers, should strengthen the operating effectiveness of the governance framework, including roles, responsibilities and accountabilities.

The common objective of the program investment planning process across the three business lines is to establish and communicate, through approved investment allocations, key priorities and programs for the upcoming year. The Corporate Planning, Finance and Information Technology Branch and the International Assistance Operations Bureau lead the annual investment planning process for the development portfolio.

The foreign affairs and trade processes are distinct from program to program, and investments are mostly approved and managed through Treasury Board submissions. While these two business lines have an investment planning process that allocates program funding, documentation of the annual processes could be strengthened.

Stakeholders in all three business lines noted pressure stemming from the timing of annual investment processes, given the significant outflow of funding that occurs in a short period. As summarized in the figures below, over 45 percent of all transactions from to occurred in the fourth quarter of the fiscal year January — March.

Stakeholders interviewed noted that the significant outflow of funds in the fourth quarter might be attributed to various structural issues e. The bar graph illustrates the distribution of the total value in billions of transactions occurring per fiscal quarter fiscal years and combined across the three business lines Development, Foreign Affairs, and Trade.

It highlights that a greater proportion of the total value of transactions occurred in the fourth quarter of the fiscal year January — March. The bar graph illustrates the distribution of the number of transactions occurring per fiscal quarter fiscal years and combined across the three business lines Development, Foreign Affairs, and Trade. It highlights that a greater proportion of transactions occurred in the fourth quarter of the fiscal year January — March.

Overall, investment planning processes are in place for all three business lines. The risk related to in-year and year-end pressures will be the subject of a future audit related to resource allocation. The audit team performed walkthroughs, project file reviews and transaction testing to assess the completion of both Section 32 commitment of funds and Section 34 certification of work performed of the Financial Administration Act FAA.

The audit team sampled 64 transactions across all three business lines based on funding type grants, assessed contributions and non-assessed contributions. Walkthroughs with Project Officers indicated an inconsistent understanding of when a Section 32 approval should take place in the process.

It was also noted that the Section 34 due diligence supporting the process varied depending on the project. From the transaction testing, while 67 percent of the files were complete, one or more of the following issues were identified in 33 percent of the files sampled:.

Oversight and consistent application of Section 32 and 34 financial controls exist to support budgeting, planning, accurate commitments and payments. These controls also support the Program Officer due diligence function to pay for only eligible program activities that have been performed. It was noted during interviews and debriefings on the audit findings, that Program Officers might require additional or routine training to strengthen their capacity to properly perform Section 32 and Section 34 approvals, as well as to assess progress and to determine value for money components.

Monitoring requirements are largely driven by project risk profiles, determined at the project planning stage through the risk assessment tools and tolerance levels. While there were risk management processes in place for projects in each business line, there are currently no formal departmental-wide risk appetite statement s or risk tools or guidance to support a cohesive and consistent risk management approach for transfer payments.

As a result, the risk appetite at the program level is informally established. The department would benefit from having a consistent aggregation of risk information to provide insight across the branches as to high-risk programs and risk trends. For projects under this amount, the Project Officer and Program lead are responsible for exercising appropriate due diligence.

The risk tool, which requires Project Officers to assess key project and partner-related risk factors, produces an overall risk rating that drives administrative and monitoring requirements. Although the risk assessments are expected to be updated at least annually, Program officials stated that this is not a hard requirement and updates are not tracked.

The Foreign Affairs stream also has risk assessment tools that are used at the project initiation stage and define the frequency and design of monitoring activities. However, the approach taken depends on the bureau and program. For example, Peace and Stabilization Operations Program has designed its own risk management framework, risk management guide and risk tolerance strategy, which identifies administrative requirements depending on the overall risk level.

Project Officers use the Security and Stabilization Project Management Tool SSPMT to evaluate the risks and capture other assessments, in addition to the results of the fiduciary risk assessment specifically, the financial viability risk factor. The Trade stream uses a trade-developed assessment template completed at the outset of a project. Their risk assessment tools do not specifically address financial viability or fiduciary risk as a risk assessment factor. These areas are reviewed through past performance and recipient capacity.

Monitoring, performance and reporting requirements are based, to varying degrees, on the upfront project risk level identified. The table below summarizes the file testing results of completed risk assessments for a sample of non-assessed contribution projects due to their inherently higher risk , including whether resulting monitoring and reporting requirements were sufficiently and appropriately documented.

Overall, the approach to project risk management and subsequent monitoring is inconsistent across business lines and is not driven by a departmental-level risk management approach.

Project risk management is largely focussed on upfront due diligence, as opposed to risk management throughout the project lifecycle. As such, changes in project risk during the delivery of a project may not be identified and appropriately managed and monitored in a timely manner to support project success.

There is an opportunity to amalgamate best practices from the three business lines to identify a departmental approach see Recommendation 3.

Clearly documented and well supported monitoring requirements set expectations and capture the approach by which a project will be implemented in alignment with its risk profile.

International Monetary Fund

This guide is designed to help applicants prepare a project proposal for funding under the Contributions Program of the Office of the Privacy Commissioner of Canada OPC. Specific instructions for completing the application form as well as information about the assessment process are provided. Applicants should note that all information requested in the Guide, Application Form and Schedule B—Project Budget must be received by the Office before an application is considered complete. Only complete applications received at the above noted coordinates on or before the Program deadline will be considered.

Framework for Identifying Risk in Grant and Contribution Programs

Its stated mission is "working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world. It now plays a central role in the management of balance of payments difficulties and international financial crises. Through the fund and other activities such as the gathering of statistics and analysis, surveillance of its members' economies, and the demand for particular policies, [12] the IMF works to improve the economies of its member countries. Quotas, which are pooled funds of member nations, generate most IMF funds. The size of a member's quota depends on its economic and financial importance in the world. Nations with greater economic significance have larger quotas. The quotas are increased periodically as a means of boosting the IMF's resources in the form of special drawing rights. According to the IMF itself, it works to foster global growth and economic stability by providing policy advice and financing the members by working with developing countries to help them achieve macroeconomic stability and reduce poverty.

Navigation

Transfer payments are one of the Government of Canada's key instrments in meeting its broad policy objectives and priorities. Payments can be administered as either grants, which are unconditional transfers of funds to recipients or as contributions, which are subject to performance conditions specified in a funding agreement. This includes relevant documentation in place from April to March Sufficient and appropriate audit procedures were conducted and evidence gathered to support the accuracy of the opinion provided and contained in this report.

Audit of the Management Control Framework for the Gas Tax Fund

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Public financial management

OMB Circular No. A defines management's responsibility for internal control in Federal agencies. A re-examination of the existing internal control requirements for Federal agencies was initiated in light of the new internal control requirements for publicly-traded companies contained in the Sarbanes-Oxley Act of The circular also emphasizes the need for agencies to integrate and coordinate internal control assessments with other internal control-related activities. The revised circular is effective for FY Agencies should take steps in FY to prepare for its implementation. This Circular provides guidance to Federal managers on improving the accountability and effectiveness of Federal programs and operations by establishing, assessing, correcting, and reporting on internal control.

Internal Audit of Grants and Contributions

Transfer payments are transfers of money from the federal government to individuals, organizations or other levels of government, to further government policy or program delivery. To become compliant with the PTP, effective June 1, , TB approval was sought and obtained for a five year period covering April 1, to March 31, Since , Departmental budgets have declined and demands from external parties to develop solutions to common problems have increased. Greater emphasis has been placed on working with stakeholders and other interested parties, in order to facilitate the achievement of program objectives, and encourage greater involvement by and acceptance of responsibility for fisheries and oceans management.

Meeting of foreign experts - Analysis of Public Financial Management and Control

The purpose of this paper is to provide managers and staff of grant or contribution programs with a tool for identifying risk. Our intent is to complement and reinforce existing government policy and direction by helping managers think critically about their current practices. Grants and contributions are part of the category of expenditures called transfer payments. Transfer payments are transfers of money from the federal government to individuals and to organizations of various types, including businesses or other governments. The federal government does not directly receive goods or services in return.

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The Gas Tax Fund GTF Transfer Payment Program was established in to contribute to Canada's environmental objectives of cleaner air, reduced greenhouse gas GHG emissions, and cleaner water through targeted support for sustainable municipal infrastructure projects in Canadian communities. The audit found that the governance and accountability frameworks that were established for the GTF program were implemented through agreements that were negotiated, written and signed by the parties. The GTF Agreements were developed in a manner that respected the three levels of government Federal-Provincial-Municipal , and recognized the need to build strong partnerships that balanced the flexibility in delivering the program while establishing the conditions for governance and accountability. More specifically, the GTF Agreements entail a tripartite of roles and responsibilities where INFC designed and monitors the program, the provinces and territories or municipal associations implement and administer the program based on their jurisdictional requirements by receiving and redistributing the funds and managing the reporting on the fulfillment of their obligations and commitments, and the municipalities make the decisions on which eligible projects to invest in based on local priorities, manage the implementation of the eligible projects and report on results.