Audit of the Management Control Framework for the Gas Tax Fund

Final Report–June 2009

Table of Contents

1. Executive Summary

The Gas Tax Fund (GTF) Transfer Payment Program was established in 2005 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 GTF program was announced in the 2004 Speech from the Throne and provided for an original allocation of $5 billion over the period of 2005-2010. An additional $8 billion was added to Budget 2007 for the period between 2010-2011 and 2013-2014. In its 2008 Budget the federal government announced that the GTF would become a permanent program beyond 2013-2014 with an annual allocation of $2 billion. For the audit period examined (2005-2008), Canada has provided the provinces and territories with a total of $1,950M (excluding First Nations) in GTF funding.

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.

The audit determined that INFC manages the GTF program effectively by overseeing three key areas:

  1. nurturing the relationship with the provinces and territories;
  2. reviewing the Annual Expenditure Reports and the Audit Reports (AER/Audit Report); and,
  3. defining and reporting on the results achieved through the use of Gas Tax Funds.

A summary of our observations and of the opportunities for improvements related to each of these topics follows:

  1. In order to nurture its relationship with the provinces and territories INFC has created a distinct and dedicated organizational unit that is staffed with a strong team of experienced employees who have evolved in line with the development and implementation of the GTF transfer payment program.

  2. INFC has made the review of the AER/Audit Report the focal point of its monitoring and reporting activities and has developed a number of tools and processes to perform and support its reviews. The implementation of these processes, however, should be strengthened to ensure that any GTF problems are identified, addressed, and resolved in a timely manner, and to provide feedback to recipients.

    Infrastructure Canada's Shared Information Management System for Infrastructure (SIMSI) is the key reporting system of relevant project and program tombstone information for the management of all its infrastructure programs. The recipients of the GTF program, however, were given the opportunity to use their own systems and only two provinces have adopted SIMSI. As a result, the information provided to INFC arrives in various formats and the program area must perform a manual process of national consolidation that is cumbersome, time-consuming, vulnerable and sensitive to error.

    Overall, the monitoring and reporting system adopted by INFC needs to be enhanced to ensure that program management and senior management are provided with timely, reliable, and complete information to support their decision making and to communicate the results of GTF Agreements.

  3. The recipients of the GTF program must provide an account of the results achieved by incorporating performance information in their annual AER/Audit Reports and by submitting an Outcomes Report by September 30, 2009, and periodically thereafter. INFC, in turn, relies on this information to prepare a number of national reports such as the Departmental Performance Report, the Report on Plans and Priorities, or other special reports.

    The audit found that the performance indicators provided to the recipients to report on the outcomes were not well defined and many jurisdictions were uncertain about how and what is supposed to be measured. INFC has undertaken a significant amount of work to resolve this problem but there are still a number of recipients that need to work with their respective jurisdictions to ensure appropriate implementation. Under these conditions there is a risk that the performance data required to produce the Outcomes Report may not be collected and analysed to the extent necessary to meet the September 30, 2009 deadline and INFC's requirements.

Our overall opinion on the adequacy and effectiveness of the management control framework and the appropriateness of the management practices that have been put in place for the Gas Tax Fund Transfer Payment Program is that they are satisfactory to ensure compliance, program effectiveness and financial integrity.

Original signed by

Chief Audit Executive
Office of Infrastructure Canada
Deputy Head

Date

2. Background

Established in 2005, the Gas Tax Fund (GTF) Transfer Payment Program is designed to contribute to the Government of 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 like roads and bridges, public transit, water and wastewater systems, solid waste, community energy systems, and capacity building.

In the 2004 Speech from the Throne, the federal government announced that $5 billion (including $62.55M for First Nations) would be available through the GTF program over the period of 2005-2010, and Budget 2005 confirmed this commitment. In Budget 2007, the GTF program was further extended with a provision of an additional $8 billion between 2010-2011 and 2013-2014. In Budget 2008, the federal government announced that the GTF program would be extended indefinitely as a permanent program beyond 2013-2014 ($2 billion per year) that will give municipalities and local governments a stable and predictable source of funds to build the infrastructure they need.

The GTF program is categorized as an 'Other Transfer Payment Program' as it does not fit either the typical contribution program model or the grant model. Unlike typical contribution programs, the funding under this program flows to the recipients before the expenditures for which it is intended are incurred. Unlike typical grant programs, the GTF is based on a formula linked to the gas tax, requires annual appropriations which have been determined through 2013-2014, and imposes a significant number of conditions on the recipients. Finally, the transfer payments will be made to a combination of provinces, territories, and municipal associations that varies by province/territory following the signing of a GTF Agreement with INFC.

The GTF Agreements signed by the parties 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.

For the audit period examined (2005-2008), the GTF provided $1,950M of funding to all provinces and territories (excluding First Nations) and the provinces and territories, through their respective municipalities have invested $1,793M as follows:
Amounts in $000's

Signatory Gas Tax Fund Jurisdictional Allocation
2005-2010
Cumulative $ Received from Canada (2005-2008)1 2007-2008 $Invested Cumulative$
Invested and/or
Committed
(2005-2008)
British Columbia 635,599 254,240 73,956 118,979
Alberta 476,907 190,763 62,695 134,438
Saskatchewan2 147,739 59,096 31,291 66,798
Manitoba 167,250 66,900 26,376 51,459
Ontario 1,865,500 746,200 281,126 539,274
Quebec3 1,150,986 460,394 406,293 781,605
New Brunswick 116,060 27,780 17,618 27,021
Nova Scotia 145,159 58,063 16,621 39,094
Prince Edward Island 37,500 15,000 5,307 14,658
Newfoundland & Labrador 82,250 32,900 10,930 10,930
Yukon 37,500 12,000 762 2,292
Northwest Territories 37,500 12,000 0 2,528
Nunavut 37,500 15,000 2,053 3,605
TOTAL4 4,937,450 1,950,336 935,029 1,792,680

3. Audit Objective

The objective of the audit was to provide assurance that an effective management control framework (policies, procedures, systems and controls) and appropriate management practices are in place to ensure compliance, program effectiveness and financial integrity.

4. Audit Scope

The scope of the audit included an assessment of the effectiveness of the management control framework and of the appropriateness of the management practices for the GTF Transfer Payment Program, as well as an assessment of a sample of key financial and non-financial documents associated with the GTF Transfer Payment Program.

5. Audit Approach

The audit was conducted in accordance with the Government of Canada internal auditing standards.

The auditors used the technique of directed sampling to determine the sample size and to select the items to be reviewed and persons to be interviewed. This approach was the most appropriate given that many of the audit tests and procedures fell outside a statistical context e.g. review of meeting agendas, records of discussions, and interviews with key stakeholders. A directed sample is a non-statistical sampling technique and the findings cannot be extrapolated to the whole population.

As part of the preliminary planning associated with management control framework audits, a risk assessment of the GTF Transfer Payment Program was conducted against the Management Accountability Framework, developed by the Treasury Board of Canada Secretariat (TBS).

Display full size graphic

Treasury Board Secretariat Management Accountability Framework

The results of the risk assessment identified the components of the management accountability framework that deserved further examination for the GTF Transfer Payment Program and were used to define the audit objective and scope.

Governance & Strategic Direction – The audit examined the governance processes in place to support the Gas Tax Fund (GTF) Transfer Payment Program. This included the program design and risk management processes that support corporate priorities (including the allocation of resources), the monitoring and reporting of program results, and the overall organizational and accountability structures.

People – The audit examined Infrastructure Canada's internal capacity to support the GTF Transfer Payment Program to determine if the research and analytical capacity is developed and sustained to support monitoring, reporting, program development and advice to senior management.

Stewardship – The audit examined Infrastructure Canada's federal partnership agreements with the provinces, territories, and municipal associations to ensure that the agreements were established in compliance with the terms and conditions specified in the Treasury Board Submissions related to the GTF Transfer Payment Program. The audit also determined if Infrastructure Canada's control regime (financial, human and informational resources) is integrated, effective, and communicated to all staff.

Accountability– The audit examined Infrastructure Canada's federal partnership agreements with the provinces, territories, and municipal associations to ensure that roles, responsibilities, and accountabilities for results for the GTF Transfer payment Program, are clearly assigned and consistent with resources, and delegations are appropriate to capabilities, communicated and understood.

Policy and Programs – The audit reviewed the policies and procedures in place for the GTF Transfer Payment Program to ensure that they are appropriate and adequate for ensuring compliance, program effectiveness and financial integrity. The audit also determined whether policies and procedures have been communicated and understood.

Results and Performance - The audit reviewed the process in place to support monitoring and reporting of relevant information on results of the Gas Tax Fund Transfer Payment Program, and to determine the extent to which it is used to support program decisions.

The examination phase of this audit commenced at the end of January 2009 and concluded at the end of April 2009. The examination employed various techniques including interviews, review of financial and non-financial documentation, sampling of files/records and analytical reviews. The audit criteria were based upon applicable policies, procedures, and legislation as well as Treasury Board Secretariat's Core Management Controls.

Following the examination phase the audit team prepared a number of Finding Sheets together with Recommendations and provided them to program and senior management of the Programs Operations branch for validation and comments.

Once the Finding Sheets were completed and validated, the auditors gathered all relevant documentation and prepared a draft report for the ADM, Program Operations. The ADM, in turn, provided feedback, comments, and formulated the management action plan in response to the audit recommendations.

This report, including the management action plan, was presented and approved by the Departmental Audit Committee on June 11, 2009.

6. Audit Findings

For purposes of this report, the residual risk rankings associated with the audit findings use a low, moderate, high three-point scale and are subjectively judged based on our knowledge of the GTF management control framework gathered during the audit. The subjective criteria are:

High – Threats/Opportunities have very significant impact on INFC's objectives, are imminently likely and no, or uncertain, mitigation measures are in place.

Moderate – Threats/Opportunities have significant impact on INFC's objectives, have a longer-term likelihood and reliable mitigation measures are planned or are being established.

Low – Threats/Opportunities do not have a significant residual risk to INFC's objectives.

6.1 Governance and Strategic Direction

Observation
Low Risk

The key governance processes currently in place to support the GTF program, include the program's design, the Oversight Committee, the National Workshops, the Issues Management Committee and the Program Management Committee. The audit found that these governance processes were appropriately conceived and generally work as intended.

The GTF program objectives and defined outcomes are aligned to the departmental mandate and priorities; the roles and responsibilities are clearly assigned to and understood by the three levels of government; the bilateral mechanism of the Oversight Committee, in conjunction with the ongoing dialogue between INFC and the jurisdictions, is an effective way of implementing and administering the Agreements; the National Workshops and the continuous support provided by the Partnership & Operations Desk Officers constitute a key and effective mechanism in building and sustaining Infrastructure Canada's partnerships with Provincial and Territorial counterparts at the program level. The Issues Management Committee, in conjunction with the Program Management Committee, at the program level also serve as a means of addressing, internally, key issues as they arise and ensuring that a consistent approach among provincial and territorial jurisdictions is adopted.

The effective implementation of the governance framework is a key control to ensure the continued success of the GTF program. Effective ongoing governance means that Infrastructure Canada can manage its program responsibly and provide effective direction to achieve its objectives. The increased transparency of the program promotes the confidence of the partners, Central Agencies, employees, and the general public.

Recommendations Management Action Plan

6.1.1 No action is required.

6.1.1 N/A

Manager Responsible:

Assistant Deputy Minister, Program Operations

6.2 Accountability

Observation
Low Risk

The GTF Transfer Payment Program Agreements signed by the parties entail a tripartite of roles and responsibilities where: INFC designs and monitors the program; the provinces and territories implement and administer the program based on their jurisdictional requirements by receiving and redistributing the funds and managing and reporting on the fulfillment of their obligations and commitments; and, the municipalities select the eligible projects to be funded based on their local priorities, they manage their implementation, and they report on results.

The audit found that for the Agreements reviewed, the Agreements were negotiated and written in a manner that respected the three levels of government (Federal-Provincial-Municipal), and recognized the need to balance the flexibility in delivering the program while establishing the conditions for accountability.

The accountability framework that has been established for the GTF transfer payment program is manageable and INFC has developed an appropriate and dedicated team of experienced, stable employees to ensure that the flowing of funds specified for GTF transfer payment program are in accordance with the signed Agreements and that effective financial and program controls are in place to manage the overall program. Under these current conditions there is a high level of probability that the GTF transfer payment program is consistently applied within the approved terms and conditions and that it meets its objectives.

Finally, the success of the GTF transfer payment program is attributed to the product of a balance between the level of collaboration of each partner and the strength of the GTF Agreements that have been negotiated with the provincial/territorial jurisdictions.

Recommendations Management Action Plan

6.2.1 No action is required.

6.2.1 N/A

Manager Responsible:

Assistant Deputy Minister, Program Operations

6.3 Stewardship

Observation
Low Risk

Financial Controls:

The audit found that the financial authorities, policies and procedures related to the accounting of expenditures are established and communicated, the payments made to initial recipients comply with the terms and conditions specified in the Treasury Board Submission and the initial recipients' Agreements, and the payment processing requirements were completed in a timely manner.

Moderate Risk

Monitoring and Reporting Controls:

In order to ensure that provinces and territories are responsible and accountable for the monies that they have been allocated and received under GTF transfer payment program, as well as the GTF investment decisions that have been made within their jurisdiction, Infrastructure Canada requires that an Annual Expenditure Report and Audit Report (AER/Audit Report) be submitted annually by each province and territory.

The audit established that the AER/Audit Report is the key monitoring and reporting instrument that INFC receives and reviews on an ongoing basis to ensure compliance to program requirements and the achievement of program results. INFC has made these reports the focal point of its monitoring and reporting activities and has developed a number of tools and processes to perform and support its analyses.

The audit reviewed fifteen initial recipient AER/Audit Reports and found a number of weaknesses and inconsistencies:the analysis of the financial statements is generally limited to verifying the accuracy of the numbers without a through analysis of items such as the investment rate of return used to calculate the interest earned on unspent funds, and administrative costs; the list of projects is accepted without further examination of key information such as their status of implementation or completion; the control matrix used to summarize the analysis of the AER/Audit Report by the program officer is not employed consistently and a number of omissions were observed,and in some cases there is no evidence on file to indicate that the AER/Audit Reports had been analyzed and accepted by the program.

The audit concluded that the implementation of the AER/Audit Report review process is adequate but needs to be strengthened to ensure that any GTF problems are identified, addressed, and resolved in a timely manner, and to provide feedback to recipients regarding opportunities for improvement.

Finally, the tracking mechanism adopted by INFC to monitor the status of the GTF investment decisions made by each provincial and territorial jurisdiction and to provide a national consolidation to senior management is a critical element in the overall monitoring and reporting process.

Our review of these documents indicates that the national consolidation prepared by the program does provide useful information for tracking key data elements, such as amounts received from Canada, interest earned on unspent funds, amounts spent by recipient on administrative costs, amounts transferred to ultimate recipients, etc. At the same time, however, the audit noted that certain key pieces of information were missing (i.e. interest earned on unspent funds and amounts spent by recipient on administrative costs) for some recipients.

Information Management

Infrastructure Canada's Shared Information Management System for Infrastructure (SIMSI) is the key reporting system of relevant project and program tombstone information for the management of all its infrastructure programs. The audit found, however, that the SIMSI system was not designed to easily support the reporting and information management requirements of a non-application based infrastructure transfer payment program like the Gas Tax Fund.

As part of the GTF program design, the audit found that the provinces and territories were given the opportunity to use their existing reporting mechanisms to capture the required financial and results information from their municipalities. As a result, only two provinces have adopted SIMSI while all the other provincial and territorial jurisdictions have decided to use their own application or other tools such as Excel spreadsheets or Word documents to prepare and submit their AER/Audit Report information.

By allowing the GTF recipients to utilize their existing reporting mechanisms, INFC has increased its difficulty in securing timely, complete and reliable information. The program area must collect the provincial and territorial AER/Audit Reports in various formats and consolidate all of the information into a national summary. The resulting data is stored in an Excel spreadsheet format and is manually entered and stored into the enterprise data warehouse of SIMSI that was originally created for GTF data. The audit finds this reporting system to be cumbersome, time-consuming, vulnerable and sensitive to error.

The audit concludes that the reporting system adopted by INFC needs to be enhanced to ensure that program management and senior management are provided with timely, reliable, and complete information that supports decision making and ensure that the results of GTF Agreements are communicated appropriately.

Recommendations Management Action Plan

6.3.1 Review of the Annual Expenditure Report/Audit Report (AER/Audit Reports): In conducting its review of the AER/Audit Reports, INFC needs to strengthen its control matrix to ensure that a thorough analysis of the audited financial statements and a risk-based analysis of the eligible project information is completed and documented in a consistent manner. The analysis of the audited financial statements would consider such items as the investment rate of return used to calculate the interest earned on unspent funds, administrative costs, and source of project funds. The risk-based analysis of the eligible project information would assess such items as project start and end dates, as well as confirmation of completion for those projects that are considered high risk. The intent of the strengthened control matrix is to support the review, provide evidence of the completion of this critical process, and facilitate the discussion between the desk officer and others, in order to resolve or escalate any potential issue.

6.3.1

  • Partnership and Operations Directorate will develop a GTF program Risk Management Plan that will be integrated into the GTF Management Control Framework. The Risk Management Plan will be based on the concepts identified in the GTF Results-Based Management and Accountability Framework and Risk-Based Audit Framework (RMAF/RBAF).
  • The GTF Management Control Framework will be updated to further strengthen the roles and responsibilities for conducting due diligence on AER/Audit Reports.
  • AER/Audit Reports Control Matrix will be reviewed and updated as appropriate, by the Partnership and Operations Directorate to ensure that all key financial and project information is properly analyzed by the program desk officers.
  • Partnership and Operations' documentation processes will be strengthened in an effort to demonstrate the analysis and evidence of due diligence by the program desk officers when reviewing AER/Audit Reports.
Manager Responsible:

Assistant Deputy Minister, Program Operations

Due Date:

March 31, 2010

6.3.2 Provincial/Territorial Audit Requirements: INFC should work with the provincial and territorial jurisdictions to undertake a review and analysis of the provincial/territorial management interpretations regarding compliance with agreement conditions. This would contribute to a better understanding of audit scope and criteria so that the audit process undertaken by the provincial and territorial jurisdictions provides program management with a moderate level assurance that the program and financial controls are adequate and effective.

6.3.2

  • Partnership and Operations Directorate has started a review of provincial and territorial audit requirements for GTF. This work will continue throughout the 2009-10 period in order to facilitate with P/T's jurisdictions the development of management interpretations in regard to compliance to terms and conditions.
  • Work will also be done by the Partnership and Operations Directorate to facilitate the implementation by P/T's of appropriate program management controls within their respective jurisdictions.
  • As part of the remaining GTF reporting cycles, an increased level of assurance will be confirmed and documented by Partnership and Operations Directorate.
Manager Responsible:

Assistant Deputy Minister, Program Operations

Due Date:

March 31, 2010

6.3.3 Reporting: INFC should undertake an analysis of its reporting system to clearly identify and document its requirements, including provincial and territorial data uploading processes, to ensure that its current and future business and security needs are being achieved in the most efficient and effective manner.

6.3.3

  • Partnership and Operations Directorate (P&O) will undertake to review its data requirements in consultation with P/T's over the next fiscal year.In addition, P&O will work with P/T's jurisdictions to determine, where possible, protocols for the transfer of data from P/Ts' current data management systems.
  • Programs Operations Branch will work, in consultation with the department's IM/IT group to ensure that appropriate resources are available to support GTF data management.
Manager Responsible:

Assistant Deputy Minister, Program Operations

Due Date:

March 31, 2010

6.4 Results and Performance

Observation
Moderate Risk

INFC is required to track the performance of the GTF recipients to demonstrate accountability for spending and to confirm that the anticipated program outcomes have been met.

In order to obtain the required performance information from the GTF recipients, the Agreements include a provision where each province and territory will compile and submit to INFC, as part of their annual AER/Audit Report, data associated with the performance and achievements regarding the use of GTF funds. The Agreements also include a provision that each province and territory will prepare, publish and disseminate to the public by September 30 2009, and periodically thereafter, an Outcomes Report. The Outcomes Report will give details on the cumulative investments made, including information on the degree to which these investments have actually contributed to the objectives of cleaner air, cleaner water and reduced greenhouse gas emissions.

The audit found that the outcome indicators for the GTF transfer payment program, which are linked to the program's objectives, were identified in the Agreements reviewed, however, the approach to select the performance indicators that was provided to the recipients at the inception of the program was not well defined and confused many jurisdictions. This finding was also noted in the March 18, 2008 report, Implementation Evaluation of the GTF, where INFC confirmed that many jurisdictions were still confused about how and what was supposed to be measured.

In an effort to resolve this issue, the audit recognized that INFC, in consultation with the provincial and territorial counterparts, has undertaken an enormous amount of work through its National Workshops and sub-committees to develop a Performance Measurement Framework for GTF and PTF that contains a set of performance indicators and a methodology to capture the performance data. In spite of this hard work however, there are still recipients that need to continue the performance measurement work within their respective jurisdictions to ensure full acceptance (i.e. oversight committee and municipalities) and appropriate implementation.

If the performance measurement framework defined by INFC in consultation with the provinces and territories is not accepted and implemented by all jurisdictions, there is a risk that the performance data required to produce the Outcomes Report may not be collected and analysed to the extent necessary to meet the September 30, 2009 deadline and INFC's requirements. Furthermore, there is a risk that INFC may not have all the information necessary to clearly demonstrate at a national level the achievement and performance of the GTF funds that have been expended when it comes time to prepare the department's Departmental Performance Report, and other reports.

Recommendations Management Action Plan

6.4.1 INFC needs to document that all provincial and territorial jurisdictions have adopted and implemented a Performance Measurement Framework that reflects the concepts identified in INFC's GTF and PTF Performance Measurement Framework.

6.4.1

  • Federal Oversight Co-Chair will confirm that provinces and territories have adopted and are implementing an appropriate GTF-PTF Performance Measurement Framework.
  • Following the publication of the GTF Outcomes Report in each province, territory, the performance measurement framework principles and methodology will be reviewed and analyzed by Partnerships and Operations in consultation with the provinces and territories, and revised as appropriate.
Manager Responsible:

Assistant Deputy Minister, Program Operations

Due Date:

March 31, 2010

6.4.2
INFC needs to develop a strategy for the review, analysis and validation of the Outcomes Reports that it will receive from provincial and territorial jurisdictions on or before the September 30, 2009 due date. The strategy will need to consider such items as consolidation and communication of the information received from the provinces and territories, 'lessons learned' regarding any enhancements that might be necessary to the reporting template, and defining 'next steps' for subsequent reports (e.g. timeline).

6.4.2

  • Partnership and Operations will develop a strategy to aggregate, review and analyze the results presented as part of outcomes reporting. Results data will serve to complete the reporting deliverables as planned by the Treasury Board approved GTF Reporting Strategy.
  • Program Operation Branch will work with the department's Communications group to develop a strategy to inform the public and parliamentarians on the aggregated outcomes of the GTF program.
Manager Responsible:

Assistant Deputy Minister, Program Operations

Due Date:

March 31, 2010

6.5 People

Observation
Low Risk

In building the 2007 Integrated Results-Based Management and Accountability Framework and Risk-Based Audit Framework (RMAF/RBAF) for the GTF transfer payment program, management undertook an assessment of the key inherent risks faced by INFC and determined that the internal capacity shortage to do collaboration and to administer the agreements was the highest risk area faced by the department. In the opinion of management, shortfalls in financial, human and information systems resources could affect the achievement of a key outcome and cause a loss of reputation and credibility. This assessment was later reconfirmed in INFC's 2008 Corporate Risk Profile where management determined that the insufficient Human Resources Capability and Capacity constituted a critical risk for the department.

In performing the review of the 'people' component of the management control framework for the GTF program, the auditors focused their attention on the Partnership and Operations Directorate (P&O). The performance of P&O is an essential ingredient to the success of the GTF program because P&O is responsible for undertaking the collaboration and administration activities of the GTF program.

Interviews with provincial and territorial counterparts and Oversight Committee Co-Chairs revealed that P&O has built a good team of capable people who are able to provide continuous support and advice on all aspects of the program's delivery. The continuous support provided by P&O represents a key and effective mechanism in building and sustaining Infrastructure Canada's partnerships with the provincial and territorial jurisdictions.

The audit determined that P&O has developed a sufficient, competent and stable workforce that enables its employees to have opportunities to exercise their skills and implement their training and development plans in order to assume responsibilities of increasing complexity.

In performing their review, the auditors noted that in some cases junior personnel were assigned to provincial or territorial jurisdictions that were experiencing challenges in completing their Annual Expenditure Report and Audit Report. The audit recognizes that these files provide an excellent learning experience but with that comes an expectation that proper monitoring or review of the work completed by junior personnel will occur on a regular basis. The file analysis, however, found inconsistencies in the monitoring or review, in terms of the sign-off of the Quarterly Reports and/or of the review of the control matrix by the manager.

By not ensuring consistent monitoring or review of the work completed by junior personnel there is a risk that the performance of P&O will diminish and impact the partnerships that P&O has built with the provincial and territorial jurisdictions.

Recommendations Management Action Plan

6.5.1 In order to ensure consistency of analysis and file documentation, there is a need to re-emphasize the importance of supervisory review in those cases where a junior analyst has been assigned a provincial or territorial jurisdiction that is considered to be a high risk.

6.5.1

  • Partnership and Operations Directorate will undertake to review and update its Human Resources Plan. The review will focus on key risk areas regarding organizational structure, staffing competencies and skills and retention.
  • If appropriate, an update to the Human Resources Plan will be undertaken to include risk mitigation strategies for each of the key risk areas. Particular attention will be given to supervisor and analyst roles and responsibilities.
Manager Responsible:

Assistant Deputy Minister, Program Operations

Due Date:

March 31, 2010

7. Audit Opinion

Based on the findings reported, our overall opinion on the adequacy and effectiveness of the management control framework and the appropriateness of the management practices that have been put in place for the Gas Tax Fund Transfer Payment Program is that they are satisfactory to ensure compliance, program effectiveness and financial integrity.

We found evidence that the governance and accountability framework that has been established for the GTF transfer payment program is manageable and that INFC has developed an appropriate and dedicated team of experienced, stable employees to ensure that: the flowing of funds specified for GTF transfer payment program are in accordance with the signed Agreements; adequate financial and program controls are in place to manage the overall program; and continuous support is provided as a means of building and sustaining Infrastructure Canada's partnerships with the provincial and territorial jurisdictions.

With that being said, we found that the program controls associated with monitoring and reporting, and results and performance need to be strengthened to ensure that program management and senior management are provided with timely, reliable, and complete information that supports decision making and ensure that the results and performance of the GTF funds that have been expended are communicated appropriately through the department's Departmental Performance Report, and other reports.

8. Statement of Assurance

In our professional judgment, sufficient and appropriate audit procedures have been conducted and evidence gathered to support the accuracy of findings reached and contained in this report. The findings were based on a comparison of the situations as they existed at the time against the audit criteria.

The findings are only applicable for the entity examined. The extent of the examination was planned to provide a reasonable level of assurance with respect to the audit criteria. The evidence gathered meets professional audit standards and is sufficient to provide senior management with proof of the findings derived from the internal audit.

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