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Foreign Affairs, Trade and Development Canada

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Early Implementation Audit of Global Commerce Support Program

September 2011

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Table of Contents

Executive Summary

In accordance with its approved Risk-Based Audit Plan for 2010-2011, the Office of the Chief Audit Executive conducted an Early Implementation Audit of the Global Commerce Support Program at the Department of Foreign Affairs and International Trade (DFAIT).

Why is this Important?

The Global Commerce Support Program (GCSP) was established on December 11, 2008 in an effort to be consistent with Canada’s international commercial policy framework, the Global Commerce Strategy (GCS). The GCSP is an approximately $6 million contribution program that amalgamates three components of funding to Canadian communities, national associations, and companies/researchers under one umbrella mechanism. The overall objective of the Global Commerce Support Program is to build a stronger and more competitive Canadian capacity to compete in the global economy. It allows clients to access three funding sources from DFAIT in order to attract foreign direct investment, to increase Canada’s business share in foreign markets, and to increase Canadian international commercialization and innovation.

Undertaking this work in the relatively early stages of the program will allow the results of this audit to be used to inform management of areas that require focused attention moving forward.

What did we examine?

The objective of this Early Implementation Audit was to provide assurance that:

i. An appropriate management control framework and processes are in place and operating adequately and effectively; and

ii. The program’s structure, policies, and procedures (while potentially not fully implemented at this point in time) are established to meet program objectives.

The audit’s planning phase utilized a risk-based approach to identify areas of higher audit priority in order to focus the audit team’s efforts in the audit examination phase. Based on the planning phase risk analysis, the higher priority risk areas which were examined included the following:

  • Governance and Strategic Direction;
  • Stewardship;
  • Operational Capacity;
  • Results and Performance; and,
  • Risk Management.

What did we find?

Throughout the audit fieldwork, the audit team observed several examples of how controls are properly designed and applied effectively. This resulted in several positive findings, examples of which are listed below:

The program has implemented leading practices with regards to simplifying program administration and providing citizen-centred services (both of which are concepts recommended within the Federal government’s 2006 Independent Blue Ribbon Panel report on grants and contributions programs1) as follows:

  • The program implemented a Common Administration Unit (CAU), as part of amalgamation. The CAU performs a pivotal role in the integration of the common processes between the three components, and is an example of a leading practice in improving operating efficiency by coordinating and streamlining common administrative processes to increase the potential for operating efficiencies as an amalgamated program; and,
    • The program utilizes online systems to allow potential recipients to submit applications for funding electronically (along with supporting documentation), thereby reducing the administrative burden on recipients and program staff;
    • Program delivery support mechanisms are in place to provide program staff with the training, tools, checklists, templates that are required to assist in the delivery of the program;
  • Positive feedback on client service delivery was noted through the Canadian Trade Commissioner Survey sent to Canadian partners and clients (completed March 2011);
  • A logic model, desired outcomes, performance measures and indicators have been developed for the program; and,

The audit team also identified the following areas where management practices and processes could be improved:

Reinvigorate the program’s governance structure to strengthen senior management oversight and tracking of key priorities, initiatives, and operating expenditures.

While a governance structure has been established for the program, one of its key elements, the Director General Steering Committee, has not consistently been operating over the audit’s timeframe. Given the nature of this newly amalgamated program, it is important that this governance mechanism serve as a key oversight body to identify, monitor, and report on key GCSP issues, risks, and related initiatives in order to ensure the program’s strategic priorities are being achieved.

In addition, while budgetary information is available at the Branch level, the audit noted that there is currently no practice in place to formally track and report on the cost of delivering the program (i.e. expenditures other than transfer payments) for the GCSP specifically. Given the current fiscal environment, having clear visibility to program salary and operating costs is critical. Additionally, given that one of the goals of the amalgamation of the three components was to achieve operating efficiencies, tracking overall program delivery expenditures is important to enable reporting on program costs and efficiencies achieved.

Improve the financial risk management strategy used to mitigate spending lapses.

The GCSP has faced challenges with lapsing funds, and to address this challenge, has adopted a risk management strategy of notional over-commitments. To date, this financial risk management strategy has not adequately mitigated the risk of lapses in funding. GCSP would benefit from additional examination and analysis of the potential contributing factors to the lapsing challenge, in order to implement required changes to its processes and/or procedures to prevent ongoing lapsing issues.

Improve controls and long-term planning for critical IM/IT supporting systems used by the program.

While the audit noted that the key supporting systems used by the program to receive and manage transfer payments are serving the program’s needs, interviewees noted concerns about their long-term viability. The audit noted that there is no long-term vision or plan for the replacement of these critical systems. Similarly, it was noted that the key financial monitoring tools used by the program are not integrated with the program’s supporting systems nor the department’s financial management system, which increases risks related to data integrity and accuracy.

Accelerate progress in implementing performance measurement practices to enable reporting of reliable performance information for use in strategic and operational decision making.

When established in 2008, the GCSP defined a set of key performance indicators which provide a good foundation for performance reporting. At this point in time, however, GCSP is still in the process of finalizing its practices and tools to collect performance information for the purposes of creating an annual performance report. In the current environment, it is imperative that the program accelerate its efforts in this area in order to be able to provide stakeholders with a performance report that demonstrates achievement of the program’s objectives, in order to support ongoing strategic and operational decision making.

Key Recommendations

1. Ensure formal Steering Committee meetings are re-implemented to identify, monitor, and report on key GCSP issues, risks and progress on key program initiatives in order to ensure strategic priorities are being achieved.

2. Develop a financial reporting mechanism to regularly report overall GCSP operating expenditures to enable ongoing monitoring of the actual operating costs to deliver the program (including analysis of operational savings achieved as a result of the creation of GCSP).

3. To further mitigate risks of lapsing funds, implement a more rigorous financial risk management strategy considering the following:

  • reviewing the degree of challenge provided to applicants’ estimated project/activity costs in the program’s application and adjudication processes;
  • factoring previous years’ lapsing trends and lessons learned into subsequent years’ GCSP budget allocation process;
  • developing a contingency list or providing additional funding opportunities for the Global Opportunities for Associations (GOA) component to enable funding of additional projects should funds become available within that component during the fiscal year; and,
  • reiterating the importance of proactively adjusting project forecasts to reflect individual project claim/expenditure patterns to-date and adjusting year-end project forecasts accordingly.

Once root causes for the lapsing issue are identified, the program should develop and implement strategies/mechanisms to ensure the full and effective utilization of program funds.

4. Work in collaboration with the department’s Information Technology and Grant and Contribution Centre of Expertise groups to identify future supporting system requirements for GCSP (operational as well as financial reporting), taking into account the long-term direction of the department with respect to grants and contributions supporting systems. In the interim, ensure appropriate controls/reconciliations are in place for supporting financial monitoring tools.

5. Accelerate efforts to prepare a meaningful and reliable performance report for GCSP which addresses the program’s key objectives and supporting performance measures, in order to assist senior management in making timely strategic and operational decisions.

Conclusion

Since creation in 2008, the Global Commerce Support Program (GCSP) has put in place a number of the key elements required to manage and deliver the program, including the Common Administration Unit and program delivery support mechanisms (such as training, tools, procedure guides, etc.). In addition, key elements have been defined such as a governance structure to manage the program and performance indicators to enable assessment of program results.

Having said that, GCSP needs to continue to build on progress made to date in order to strengthen and enhance the program, as follows:

  • Reinvigorate the program’s governance structure to strengthen senior management oversight and tracking of key priorities, initiatives, and operating expenditures;
  • Improve the financial risk management strategy used to mitigate spending lapses;
  • Improve controls and long-term planning for critical supporting systems used by the program; and
  • Accelerate progress in implementing performance measurement practices to enable reporting of reliable performance information for use in strategic and operational decision making.

It is important that the program address these areas to ensure it is effectively positioned to achieve its stated objectives and report on results.

Statement of Assurance

In my professional judgment as Chief Audit Executive, sufficient and appropriate audit procedures have been conducted and evidence gathered to support a high level of assurance on the accuracy of the information in this report. The results are based on a comparison of the conditions, as they existed at the time, against pre-established audit criteria that were agreed upon with management. The results are applicable only to the processes examined. The evidence was gathered in compliance with Treasury Board Policy, Directives, and Standards on internal audit for the Government of Canada.

Original signed by:

Yves Vaillancourt, Chief Audit Executive, September 7, 2011

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1.0 Background

In accordance with its approved Risk-Based Audit Plan for 2010-2011, the Office of the Chief Audit Executive conducted an Early Implementation Audit of the Global Commerce Strategy Program (GCSP) at the Department of Foreign Affairs and International Trade (DFAIT). This audit was carried out from February 2011 to August 2011.

The audit’s planning phase utilized a risk-based approach to identify areas of higher audit priority in order to focus the audit team’s efforts in the audit examination phase. Based on the planning phase risk analysis, the higher priority risk areas which were examined included the following:

  • Governance and Strategic Direction;
  • Stewardship;
  • Operational Capacity;
  • Results and Performance; and,
  • Risk Management.

The Global Commerce Support Program (GCSP) was established on December 11, 2008 in an effort to be consistent with Canada’s international commercial policy framework, the Global Commerce Strategy (GCS). The purpose of GCSP is to provide a consolidated mechanism to allow clients to access three funding sources from DFAIT in order to attract foreign direct investment, to increase Canada’s business share in foreign markets, and to increase Canadian international commercialization and innovation.

The GCSP is an approximately $6 million contribution program that amalgamates three components of funding to Canadian communities, national associations, and companies/ researchers under one umbrella mechanism.

The overall objective of the GCSP is to build a stronger and more competitive Canadian capacity to compete in the global economy. This is achieved by attracting foreign direct investment, by increasing Canadian innovation and commercialization opportunities, and by increasing Canadian business share in foreign markets. Through GCSP, DFAIT helps to achieve this objective by augmenting Canadian prosperity through greater Canadian participation in international commerce. The program focuses on three elements: Investment, Innovation and Industry Associations.

The GCSP provides a single management structure for accessing contribution funding from the Department for three funding components:

  • Invest Canada-Community Initiatives (ICCI), with an annual budget of approximately $3 million, is designed to promote foreign direct investment inward to Canada, thus increasing Canada’s productivity by supporting Canadian municipalities’ and communities’ efforts to attract, retain and expand foreign direct investment. The ICCI component supports locally developed projects that aim to build and maintain Canadian communities’ investment readiness enabling them to respond to investment inquiries in a timely manner;
  • Going Global-Innovation (GGI), with an annual budget of approximately $1 million, supports Canadian companies and researchers in pursuing international research and development (R&D) collaborative opportunities through the development of partnerships with key players in other countries/economies. The GGI supports projects that aim to build on targeted relationships between Canadian companies and/or researchers and key players in other countries with the expectation that these relationships will progress to formal discussions leading to future international R&D initiatives eventually leading to downstream commercialization results; and,
  • Global Opportunities for Associations (GOA), with an annual budget of approximately $2 million, provides contribution funding to support national associations undertaking new or expanded international business development activities, in strategic markets and sectors, for the benefit of an entire industry (member and non-member firms).

The program established a Common Administration Unit (CAU) in 2008 to assist in the administration of the program’s components. The purpose of the CAU is to centralize grant and contribution administration for the three components. Key functions of the CAU include financial management (budget control), accounts payable compliance review, application support, development of legal funding agreements, performance measurement and risk management.

The GCSP supports the strategic outcomes and program activities outlined in the Department’s Management, Resources and Results Structure and Program Activity Architecture (PAA). The GCSP is directly linked to the program activity “International Commerce” under strategic outcome 2 “International Services for Canadians”. In fact, Investment, Innovation and Sectors is a specific sub-activity in the PAA with the purpose to advise, fund and coordinate activities with domestic stakeholders on investment promotion, innovation, financing and contracting capabilities, and on Canadian sectoral capability to attract foreign direct investment and support Canadian business in international business development.

The amalgamated program has been granted flexibility to reallocate a portion of its annual allocation from one component to another to meet recipient demands. Authority for reallocation is delegated to the Assistant Deputy Minister of the International Business Development, Investment and Innovation Branch. This authority allows the Assistant Deputy Minister to use program resources more effectively to respond to the ever-changing market environment and priorities, and also to mitigate the risk of lapsing funds by effectively managing needs from recipients from all components.

The following summary table details the approved salary and operating expenditures (Vote 1) and contribution funding (Vote 10) for the period within the audit scope:

Table 1: Approved Funding
Approved Funding2009-20102010-2011
Salary$421,858$421,858
Operating & Maintenance$336,033$336,033
Total Operating$757,891$757,891
Grants & Contributions$6,037,363$6,037,363
Grand Total$6,795,254$6,795,254

The following diagram shows the Program’s contribution spending by Component for the fiscal year 2009-2010.

Table 2: GCSP Transfer Payments
GCSP Transfer Payments2009-2010 $2009-2010 %
Invest Canada Community Initiatives (ICC)$3,069,00056%
Global Opportunities for Associations (GOA)$1,570,00029%
Going Global Innovation (GGI)$791,00015%

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2.0 Observations and Recommendations

2.1 Reinvigorate the program’s governance structure to strengthen senior management oversight and tracking of key priorities, initiatives, and operating expenditures.

Key established governance mechanisms were not consistently in operation during the period of time covered by the audit.

Governance and management oversight of transfer payment programs is critical to ensuring senior management involvement in identifying key initiatives and risks, aligning operational plans with strategic priorities, resolving issues, and monitoring progress against objectives. The audit expected to find an appropriate governance structure in place and operating for GCSP.

At the time of amalgamation, a governance structure for the program was established. The primary governance mechanisms established within that structure included a Director General level Steering Committee and Director level meetings. The Director General Steering Committee is a key governance mechanism to raise operational and/or financial issues and concerns, discuss policies, procedures and processes, and to formulate recommendations for the program’s Assistant Deputy Minister. Based on the initially defined governance structure, Steering Committee meetings were intended to be held quarterly.

During the first half of the period under audit, the GCSP Steering Committee was meeting on a regular basis, until the end of the 2009-2010 fiscal year. During the 2010-2011 fiscal year a key organizer for these meetings left the Common Administrative Unit (CAU) and, as a result, the Steering Committee ceased meeting formally. Instead, the Steering Committee members communicated and made decisions through emails on an as needed basis as issues arose. The GCSP now has new CAU staff and has informed the audit team that regularly scheduled Steering Committee meetings will be re-introduced and implemented in the 2011-2012 fiscal year (the next Steering Committee meeting is planned for August 2011).

The audit also noted that a standard agenda of critical topics (or go-forward calendar of key agenda items to be covered throughout the year) to be discussed is not used for either the Director meetings or the Steering Committee meetings (e.g. financial update, review of key program risks, performance reporting, updates on key program initiatives, Human Resource updates, etc.). Instead, attendees are typically requested to provide suggested discussion topics for each meeting. The use of a forward agenda is a good practice to ensure that governance oversight bodies cover all key issues related to the program, and ensure that strategic priorities and areas of importance are being discussed regularly.

Recommendation:

1. Ensure formal Steering Committee meetings are re-implemented to identify, monitor, and report on key GCSP issues, risks and progress on key program initiatives in order to ensure strategic priorities are being achieved.

There is no reporting mechanism in place to allow for the identification, reporting and monitoring of salary and operating expenditures (Vote 1) for the GCSP overall.

In today’s fiscal environment, it is critical that financial resources are managed closely and opportunities for increased efficiency are identified. The amalgamation of the three components under one umbrella program was identified as the most efficient and effective way to maximize the use of resources. It was also noted that the amalgamation and centralization of administrative services would generate an average operational savings of over $400,000 annually. As such, the audit expected to find processes and practices in place to enable management to monitor GCSP’s overall salary and operating budgets and expenditures.

For GCSP, a formal mechanism is in place to monitor transfer payments which consists of financial reports prepared and administered by the Common Administration Unit and reviewed regularly by program component leads. Salary and operating expenditures, however, are managed at the Branch level instead of the program level specifically. As such, the audit found that the GCSP does not track salary and operating expenditures for GCSP overall (e.g. costs of personnel delivering GCSP, Common Administration Unit costs, regional personnel costs, etc.). Part of the challenge in tracking program salary costs relates to the fact that GCSP’s delivery model relies on staff who spend only a portion of their time working for the program (e.g. 30% of time). Therefore, to understand the costs of delivering GCSP, it is necessary to determine the proportion of salary costs that are related to the program as well as identify other Branch operating costs that are specific to the program. Without clear practices to regularly track salary and operating expenditures for GCSP overall, it will not be possible for GCSP management to monitor and report on actual program costs to deliver GCSP.

In addition, the audit found that no formal analysis has been completed since 2008 to assess whether the $400,000 of annual savings has been achieved through the amalgamation. It is important that GCSP give visibility to this in order to be able to demonstrate that planned operational savings have been achieved. Without reliable and complete program cost information, it will not be possible for management to demonstrate improved efficiencies over time.

Recommendation:

2. Develop a financial reporting mechanism to regularly report overall GCSP salary and operating expenditures to enable ongoing monitoring of the actual costs to deliver the program (including analysis of savings achieved as a result of the creation of GCSP).

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2.2 Improve the financial risk management strategy used to mitigate spending lapses.

Prior to amalgamation in 2008, individual GCSP components historically experienced average transfer payment funding lapses (Vote 10), which exceeded 20%. One of the key reasons for the amalgamation of GCSP components was to provide the required flexibility to reallocate funding between components in order to mitigate risks of lapsing funds by allowing GCSP to more effectively manage recipient needs across all GCSP components. As such, the audit expected to find that the GCSP had put in place an effective financial risk mitigation strategy to prevent any significant funding lapses.

The audit found that GCSP establishes, on an annual basis, an initial baseline funding allocation between the three components that is required to meet anticipated recipient needs and to meet overall program objectives. To mitigate the potential for lapsing funds, GCSP management notionally over-commits its baseline amounts by approximately 20% to allow for de-commitments that may take place throughout the year. Throughout the year, the CAU plays an instrumental role in the management and monitoring of the transfer payment budget, for both the GCSP components, as well as for GCSP as a whole. GCSP management also have an opportunity to review financial status reports on a regular basis, and to make adjustments if required.

The audit noted, however, that even with the strategy of using notional commitments of 20% over baseline allocations, GCSP continues to lapse funds. Since amalgamation, the trend in lapsing percentages has improved, with an approximate lapse of 12% in 2009-2010 and approximately 11% for the most recent fiscal year, 2010-2011. In the Global Opportunities for Associations component, the lapses are more pronounced. GCSP management noted that economic conditions and delays in the release of funding decisions partially contributed to the lapses experienced in recent years.

The auditors examined a sample of 40 projects to assess whether claims were reviewed for reasonableness and accuracy. Through this file testing, two issues were noted related to lapsing funds.

  1. The variance between planned expenditures and actual expenditures (for 12 single payment projects where funds spent were less than planned) ranged from 11% to 65% with an average variance of 33%. This indicates that applicants are often requesting more funds than are ultimately required. Without a sound challenge process at the time of application review to ensure that requested costs are reasonable, lapsing funds is likely to continue.
  2. It was noted that there is a fair degree of variability in the types of supporting documents which are provided by recipients to the different program components in order to support their payment claims. Varying levels include:
    • detailed supporting invoices;
    • narrative descriptions of activities completed along with a breakdown and description of expenses incurred;
    • relatively short descriptions of the outputs produced and the total dollar value being claimed;
    • other supporting documents produced (e.g. reports) are provided as well, where applicable and appropriate.

In the context of the lapsing challenge faced by the program, it might be beneficial for the Program to consider if mandatory financial information (e.g. planned expenditure, actual expenditure, brief explanations for significant variances) should be consistently requested by all program components in order to assist with identifying potential issues for lapsing funds at the project level. This information would assist the program in reviewing and assessing the reasonableness of future applicant budget requests.

While the purpose of this audit was not to examine all possible causes for the lapsing challenge, there are a variety of potential mechanisms which could be further explored and validated by GCSP management in order to enhance its current financial risk management strategy, including:

  • rigour of the challenge provided to applicants’ estimated project/activity costs in the program’s application and adjudication processes;
  • degree to which previous year lapsing trends and lessons learned are applied to subsequent year budgets;
  • use of a contingency list or provision of additional funding opportunities for the Global Opportunities for Associations component to help mitigate against the risk of lapsing funds;
  • request for additional mandatory financial information in expense claims which could be used by trade officers to identify potential lapsing issues at a project level; and,
  • the degree to which project forecasts are adequately updated throughout the year to reflect claim/expenditure patterns to-date on the project.

Recommendation:

3. To further mitigate risks of lapsing funds, implement a more rigorous financial risk management strategy considering the following:

  • increasing the degree of challenge provided to applicants’ estimated project/activity costs in the program’s application and adjudication processes;
  • factoring previous years’ lapsing trends and lessons learned into subsequent years’ GCSP budget allocation process;
  • developing a contingency list or providing additional funding opportunities for the Global Opportunities for Associations component to enable funding of additional projects should funds become available within that component during the fiscal year;
  • requesting additional mandatory financial information in expense claims which could be used by trade officers to identify potential lapsing issues at a project level; and,
  • reiterating the importance of proactively adjusting project forecasts to reflect individual project claim/expenditure patterns to-date and adjusting year-end project forecasts accordingly.

Once root causes for the lapsing issue are identified, the program should develop and implement strategies/mechanisms to ensure the full and effective utilization of program funds.

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2.3 Improve controls and long-term planning for critical IM/IT supporting systems used by the program.

The audit expected to find appropriate IM/IT supporting systems in place to enable the delivery of the program and reporting/monitoring of results.

The audit found that, for GCSP, there are a number of key systems used to record and report information, including:

  • GOA Online system and ICCI Online system - these systems are used (in Global Opportunities for Associations (GOA) and Invest Canada Community Initiatives (ICCI) for recording applications and eligibility decisions, project monitoring and reporting;
  • Microsoft Excel - key financial budgeting and reporting tool for the program; and
  • IMS – the departmental financial management system.

The GOA and ICCI Online systems are considered critical in the delivery of GCSP and, overall, are viewed as meeting the program’s needs, and as having helped to reduce the administrative burden for both the recipients and GCSP staff. Audit interviews and system walkthroughs found that the online systems can sometimes be slow and uploading supporting documents can be challenging at times. Interviewees also noted, in particular for the GOA Online system, that while various upgrades and improvements have been made to the system over time, due to the legacy nature of the system, there are limitations in coding and functions which impede the program’s ability to evolve the systems. Although a service level agreement is in place to support the current system requirements, at this point in time, the audit found that there is no long-term vision in place related to future system requirements for the program.

With respect to financial budgeting and reporting, the primary support tools used by GCSP are a series of Microsoft Excel spreadsheets. These budgeting spreadsheets are stored on a shared drive with access provided to CAU personnel and GCSP component leads. Using these spreadsheets, component leads have an opportunity to review and monitor their budget status against planned commitments. The CAU performs informal periodic reconciliations and an annual reconciliation of the information in the budgeting tools with IMS to ensure the information remains synchronized.

While access to key financial reporting tools on the shared drives is restricted, the audit found there is opportunity to further protect these tools and their data by using data integrity controls (e.g. passwords, read-only access rights). In addition, since the spreadsheets are not integrated with the GOA/ICCI Online systems or IMS, there are inherent risks that there is a lack of synchronization between the spreadsheets and actual systems of record, which could impact financial decision-making should there be a difference between the systems. As such, more frequent reconciliations would be beneficial to ensure the data remains accurate and consistent with the official departmental financial management system – IMS.

Recommendation:

4. Work in collaboration with the department’s Information Technology and Grant and Contribution Centre of Expertise groups to identify future supporting IM/IT system requirements for GCSP (operational as well as financial reporting), taking into account the long-term direction of the department with respect to grant and contribution supporting systems. In the interim, ensure appropriate controls/reconciliations are in place for supporting financial monitoring tools.

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2.4 Accelerate progress in implementing performance measurement practices to enable reporting of reliable performance information for use in strategic and operational decision making.

Practices to gather and report on program performance are still “in progress”.

Given the current fiscal environment along with increased attention being paid to results and performance, it is critical that GCSP be able to demonstrate its progress against established objectives and priorities for the program. The audit expected to find that approved performance indicators were in place, and that the program had established processes to gather and report on its performance on a periodic basis.

The audit found that the GCSP Accountability, Risk and Audit Framework (ARAF) includes performance measures which are clear and allow for results to be demonstrated as well as a high level description of the data sources for the performance measures. The baseline performance goals for GCSP components are included in the ARAF and the Common Administration Unit has a role in assisting the GCSP components in the preparation of performance reports.

The GCSP is still in the process of finalizing its practices and tools to collect performance information for the purpose of creating an annual performance report. In that context, the audit team did note that the Common Administration Unit has already developed a framework and outline for the annual performance report which appears reasonable. They are in the process of collecting available information including common elements across the amalgamated program (e.g. performance metrics related to networking) as well as specific recipient information such as financial data, program commitments, planned activities, reporting activities, and actual results. In addition, it was noted that some key indicators involve using the results of recipient surveys; however, these surveys are still in the process of being implemented by GCSP.

Recommendation:

5. Accelerate efforts to prepare a meaningful and reliable performance report for GCSP which addresses the program’s key objectives and supporting performance measures, in order to assist senior management in making timely strategic and operational decisions.

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3.0 Conclusion

Since creation in 2008, the Global Commerce Support Program (GCSP) has put in place a number of the key elements required to manage and deliver the program, including the Common Administration Unit and program delivery support mechanisms (such as training, tools, procedure guides, etc.). In addition, key elements have been defined such as a governance structure to manage the program and performance indicators to enable assessment of program results.

Having said that, GCSP needs to continue to build on progress made to date in order to strengthen and enhance the program, as follows:

  • Reinvigorate the program’s governance structure to strengthen senior management oversight and tracking of key priorities, initiatives, and operating expenditures;
  • Improve the financial risk management strategy used to mitigate spending lapses;
  • Improve controls and long-term planning for critical IM/IT supporting systems used by the program; and,
  • Accelerate progress in implementing performance measurement practices to enable reporting of reliable performance information for use in strategic and operational decision making.

It is important that the program address these areas to ensure it is effectively positioned to achieve its stated objectives and report on results.

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Appendix A: About the Audit

Objective

The objective of this audit was to provide assurance that:

i. An appropriate management control framework and processes are in place and operating adequately and effectively; and

ii. The Program’s structure, policies, and procedures (while potentially not fully implemented at this point in time) are established to meet Program objectives.

Criteria

The selected criteria for the examination phase have been derived from elements of the Office of the Comptroller General’s draft document "Core Management Controls". The criteria are mapped to the Management Accountability Framework (MAF) and were selected to enable the audit team to respond to the audit’s objectives.

Table 3: Audit Criteria
Audit CriteriaRelated Management Accountability Framework – Key Elements1
1 Management Accountability Framework Key Elements can be found at: ARCHIVED - MAF VII Methodology Overview 2009-10
1. Management is actively involved in exercising oversight and applying the governance structure.Governance and Strategic Direction: G-1, G-6
2. Planning adequately considers internal / external environment and aligns strategic objectives and operational plans.Governance and Strategic Direction: G-3, G-4
3. A formal process exists to challenge resource allocations and appropriately manage resources to match priorities.Stewardship: ST-2
4. Claims are reviewed for reasonableness and accuracy and examined for compliance to terms and conditions of contribution agreements and are appropriately approved.Stewardship: ST-7, ST-12
5. Organizational structure, available capacity, and competencies are reviewed and match those required to deliver the Program.People: PPL-1
6. Results expected from the Program are clear, measurable, directly related to Program objectives and reporting on results against achievement of objectives is timely and accurate.Results and Performance: RP-2

Stewardship: ST-20
7. Reporting and related application and information systems are reliable.Stewardship: ST-19
8. Agreements are appropriately administered using a risk based approach to monitor performance.Risk Management: RM-3, RM-7

Scope

The audit was conducted from February 2011 to August 2011.

The audit’s planning phase utilized a risk-based approach to identify areas of higher audit priority in order to focus the audit team’s efforts in the audit examination phase. Based on the planning phase risk analysis, the higher priority risk areas which were examined included the following:

  • Governance and Strategic Direction;
  • Stewardship;
  • Operational Capacity;
  • Results and Performance; and,
  • Risk Management.

Methodology

The audit was conducted in accordance with the International Standards for the Profession of Internal Auditing and the Treasury Board Standards for Internal Audit.

The methodology consisted of:

  • Interviews with GCSP management and staff at HQ and regions;
  • Document review (policies, procedures, program procedures, and relevant audit and evaluation reports);
  • Analysis of financial and non-financial information;
  • Testing of in-scope controls; and,
  • Walkthroughs of supporting systems.

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Appendix B: Management Action Plan

Table 4: Management Action Plan
Audit RecommendationManagement ActionArea ResponsibleExpected Completion Date
1. Ensure formal Steering Committee meetings are re-implemented to identify, monitor, and report on key GCSP issues, risks and progress on key program initiatives in order to ensure strategic priorities are being achieved.Formal Steering Committee meetings are an essential part of managing the Global Commerce Support Program. Formal Steering Committee meetings have been reinstated since May 2011 with the most recent meeting this August. A standardized agenda has been developed including a forward agenda of key strategic issues to ensure alignment with departmental exercises such as the Report on Plans and Priorities, the Departmental Performance Review, and the Strategic and Operating Review. Included in the agenda will be discussions on previous year financial performance, new year baseline allocations, program performance tracking and results achieved, and key strategic issues to align with departmental exercises. A Record of Decisions will be prepared for each meeting.International Business Development, Investment and Innovation Branch (BFM)Complete (On-going)
2. Develop a financial reporting mechanism to regularly report overall GCSP salary and operating expenditures to enable ongoing monitoring of the actual costs to deliver the program (including analysis of savings achieved as a result of the creation of GCSP).Maintaining reasonable overhead costs has been of particular focus and importance to the management team of the GCSP.

At this point in time, it would be difficult to attribute a portion of the Common Administration Unit (CAU) resources to each program/ component, especially since a higher proportion of the CAU's time and effort was spent during the phase-in period (09/10 and 10/11 respectively) for each of the additional two programs. The CAU will have a better understanding of the costs to be attributed to each program/component in the coming months as the components become fully functional.

A tool to determine overhead costs is being developed based upon the information that is currently available in each area’s operating and salary budgets.

With recent changes related to managing the Global Commerce Support Program through the restructuring of the Common Administration Unit, processes are being streamlined. These efforts should help further reduce overhead costs with the increased efficiencies in managing the program.
Common Administration Unit (CAU) in conjunction with working group of Directors responsible for each pillar and with input from financial/area management office within the BranchOctober/ November 2011 for development

April 1, 2012 for implementation
3. To further mitigate risks of lapsing funds, implement a more rigorous financial risk management strategy considering the following:
  • increasing the degree of challenge provided to applicants’ estimated project/activity costs in the program’s application and adjudication processes;
  • factoring previous years’ lapsing trends and lessons learned into subsequent years’ GCSP budget allocation process;
  • developing a contingency list or providing additional funding opportunities for the Global Opportunities for Associations (GOA) component to enable funding of additional projects should funds become available within that component during the fiscal year;
  • requesting additional mandatory financial information in expense claims which could be used by trade officers to identify potential lapsing issues at a project level; and,
  • reiterating the importance of proactively adjusting project forecasts to reflect individual project claim/expenditure patterns to-date and adjusting year-end project forecasts accordingly.
p>The importance of utilizing funds in a financially responsible matter is considered of utmost importance. In the case of GOA, for example, the capacity of applicants to fully utilize funds in the previous year was taken into account during the adjudication process. It should be noted that the 2008-09 period was unusual in that it coincided with the global economic crisis which increased the propensity for GOA industry associations to withdraw from cost-shared projects thereby creating a surge which was difficult for GCSP to fully absorb in time. This was a lesson learned.

Financial risk mitigation strategies to be considered/ implemented include:
  • Spanning agreements over fiscal years has already been put in place for two arms of the program (ICCI and GGI). The other arm (GOA) will explore the feasibility of expanding the concept more broadly as a way of mitigating lapses. Discussions with IT can be initiated shortly but it is uncertain when the necessary changes could be made for implementation.
  • CAU to review and provide upfront challenge function to applicants estimated project/activity costs at program application phase. This will be implemented when resources have been reallocated.
  • GCSP Steering Committee to review and revisit other approaches to ensure utilization of funding. Viable options will be determined.
Common Administration Unit (CAU) in conjunction with working group of Directors responsible for each pillar and with input from financial/area management office within the Branch









Immediate (Ongoing)





(Ongoing)





Immediate (Ongoing)
4. Work in collaboration with the department’s Information Technology and Grant and Contribution Centre of Expertise groups to identify future supporting IM/IT system requirements for GCSP (operational as well as financial reporting), taking into account the long-term direction of the department with respect to grant and contribution supporting systems. In the interim, ensure appropriate controls/reconciliations are in place for supporting financial monitoring tools.Significant effort was undertaken in previous years in the Department to consider a common system to administer grants and contributions programs. The GCSP will renew discussions with the department’s Information Technology and the Grants and Contribution Centre of Expertise groups to identify future supporting IM/IT system requirements and explore the feasibility of a common system. In addition, other government departments with grant and contribution programs will be approached to investigate sharing systems between federal departments. The emphasis of these efforts will be to reduce costs, share best practices, and in particular, to put in a place a tool that meets the needs of the Treasury Board Policy on Transfer Payments in the management of grant and contribution programs.

Access controls to information on program administration for the GCSP has been revisited and corrected limiting access to those with direct responsibility for administering the GCSP.
Common Administration Unit (CAU) in conjunction with working group of Directors/teams responsible for each pillar and the Office of the Chief Information Officer and associated Divisions and the Grants and Contributions Centre of ExpertiseNovember 2011 (consultation)

















Complete (August 2011)
5. Accelerate efforts to prepare a meaningful and reliable performance report for GCSP which addresses the program’s key objectives and supporting performance measures, in order to assist senior management in making timely strategic and operational decisions.Performance monitoring and measurement is of significant importance to the day-to-day management of the Global Commerce Support Program. The three areas have a strong logic model and report on performance through an annual performance report. Ongoing efforts will be undertaken to maintain the monitoring system and to report on results in the short, medium and longer term.

A draft GCSP annual performance report will be finalized in the coming weeks and will report on the following:
  • Overall Program costs (including overhead costs)
  • Overall audit and evaluation activities and findings
  • Overall survey activities and findings
  • The findings of “Risk” monitoring activities (as outlined in the ARAF)
  • Overall Performance Results
    • Activities and Outputs
    • Immediate Outcomes
    • Intermediate Outcomes
    • Ultimate Outcomes
  • Lessons learned (what the Program did well and what the Program could do better)
  • Recipient Success Stories
Common Administration Unit (CAU) in conjunction with working group of Directors/teams responsible for each pillarAugust 2011 for Draft Report

September 2011 for input and editing

November 15 2011 for Final Report and submission to Senior Management

1 The Independent Blue Ribbon Panel was a panel commissioned in June, 2006 by the President of the Treasury Board, to “provide advice on how to achieve strong accountability for the funds spent on grants and contributions…while allowing for their efficient management and effective access to them.”


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Date Modified:
2013-08-06