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December 2011
Table of Contents
1.0 Executive Summary
1.1 Introduction
In fiscal year 2010-2011, the Canadian Food Inspection Agency's (CFIA or the Agency) Internal Audit Directorate conducted an Audit of the Federal Assistance Program (FAP). The objective of the audit was to provide assurance that compliance exists with the terms and conditions, laws, regulations and other authorities affecting the expenditures and management of the Federal Assistance Program. The audit included one recommendation, which management prepared a Management Response and Action Plan to address. The recommendation is as follows: the President should designate a senior CFIA executive accountable and responsible for the Federal Assistance Program to establish a program entity and to ensure that the program meets all applicable governance, risk management and control expectations for a federally-funded contribution program. This follow-up audit is to provide assurance that the findings and recommendation from the initial audit have been addressed.
The Federal Assistance Program operates within the context of the broader mandate of the CFIA. The objective of the FAP is to support projects and initiatives that advance the Agency's strategic outcome, specifically promoting science-based regulations and maintaining an effective regulatory framework. The FAP provides a vehicle for Agency program managers to broaden their reach by supporting collaborative and partner initiatives that will strengthen the underlying science, improve the national and international regulatory framework, and improve the effectiveness of the inspection system.
The approved terms and conditions of this contribution program are effective June 2, 2006 and were set to expire on May 31, 2011. The Agency received ministerial approval on January 31, 2011, to extend the approved terms and conditions by one year.
1.2 Main Findings
The CFIA's FAP meets the Treasury Board (TB) requirements for a transfer payment program. The audit found that the CFIA has developed a risk based control framework for the operational management of the FAP that is adequate for the risks associated with the transfer payment program.
1.3 Recommendations
The audit report has no recommendations.
1.4 Statement of Assurance
In my professional judgment as Chief Audit Executive, sufficient and appropriate audit procedures have been conducted and evidence gathered to support the accuracy of the opinion provided and contained in this report. The opinion is based on a comparison of the conditions, as they existed at the time, against pre-established audit criteria. The opinion is applicable only to the entities examined and within the scope described herein.
1.5 Audit OpinionFootnote 1
In my opinion, the Federal Assistance Program has no risk exposures related to governance, risk management and control processes that require management attention.
Brian Smith
A/ Chief Audit Executive, CFIA
2.0 About the Audit
2.1 Background
In fiscal year 2010-2011, the Canadian Food Inspection Agency's (CFIA, or the Agency) Internal Audit Directorate conducted an Audit of the Federal Assistance Program (FAP). The objective of the audit was to provide assurance that compliance exists with the terms and conditions, laws, regulations and other authorities affecting the expenditures and management of the Federal Assistance Program. The audit included the following recommendation: the President should designate a senior CFIA executive accountable and responsible for the Federal Assistance Program to establish a program entity and to ensure that the program meets all applicable governance, risk management and control expectations for a federally-funded contribution program. A Management Response and Action Plan was developed to address this recommendation.
The objective of the FAP is to support projects and initiatives that advance the Agency's strategic outcome, specifically promoting science-based regulation and maintaining an effective regulatory framework. The approved terms and conditions of this contribution program are effective June 2, 2006 and were set to expire on May 31, 2011. The Agency received ministerial approval on January 31, 2011, to extend the approved terms and conditions by one year. The approved terms and conditions state that the maximum amount payable to any one recipient is $2,000,000 per year and the total value of all contributions under the FAP in any one-year will not exceed $4,500,000.
The FAP operates within the context of the broader mandate of the Agency; to safeguard Canada's food supply, and the plant and animal resources upon which safe and high quality food depend. The mandate is drawn from the 13 federal acts, as well as their respective regulations, that the Agency administers and enforces.
The Agency's capacity to achieve its mandate and strategic outcome is influenced by its ongoing ability to recognize, manage and mitigate known and emerging risks. Four key factors are critical to success: sound science; an effective regulatory base; effective inspection delivery; and strong partnerships.
The FAP provides a vehicle for the Agency's program managers to broaden their reach by supporting collaborative and partner initiatives that will strengthen the underlying science, improve the national and international regulatory framework, and improve the effectiveness of the inspection system.
2.2 Objective
The objective of this follow-up audit is to provide assurance that the findings and recommendation from the initial audit (2010-11) have been addressed and that compliance exists with the terms and conditions, laws, regulations and other authorities affecting the expenditures and management of the FAP.
2.3 Scope
The scope of this follow-up audit included all audit findings and the recommendation from the previous audit (2010-11). The follow-up audit covered the period April 1, 2011 to the end of the conduct phase.
The audit focused on a review of the framework. Since April 1, 2011, no new agreements were approved under the program. As such, the audit did not include testing to determine whether the guidance documents and performance frameworks have been implemented and are effective.
2.4 Methodology
Criteria
Follow-up audit criteria and detailed sub-criteria were developed to serve as standards against which our assessment could be made, clarify the audit objectives and form a basis for the work plan and the conduct of the follow-up audit. The follow-up audit detailed sub-criteria were developed based on the detailed findings and recommendation from the approved 2010-2011 audit of the FAP. The detailed sub-criteria are in Appendix A. For each of the criteria, the relationship to governance, risk management and control was identified. For this follow-up audit, the criteria were as follows.
Governance
Roles, responsibilities and accountabilities for the management of the Federal Assistance Program are clearly defined and communicated.
Risk management
The Federal Assistance Program is delivered and managed in a manner that takes account of risk.
Risk-based approaches are adopted for issuing funding agreements and recipient auditing.
Control
The Federal Assistance Program is supported by oversight and control systems at the Agency level.
The Federal Assistance Program is accessible and useable by applicants and recipients.
Approach
The follow-up audit was conducted in a manner consistent with the TB Policy on Internal Audit. The follow-up audit included the following audit methodologies to provide reasonable assurance that the audit objectives were achieved: interviews, observations, process walkthroughs, review of supporting documentation, and analytical reviews.
Detailed testing was not undertaken for the audit as no new agreements were entered into since April 1, 2011. One application for funding was in progress during the audit, which was reviewed, but has yet to result in an agreement being approved.
3.0 Findings
3.1 Introduction
This section presents details from the findings on the Follow-up Audit of the Federal Assistance Program at the CFIA. The findings are based on the evidence and analysis, gathered during the planning and conduct phases of the audit.
3.2 Governance
We expected to find that roles, responsibilities and accountabilities for the management of the FAP were clearly defined and communicated.
The Associate Vice President of the Strategic Projects and Integration Sector has been assigned overall accountability for the FAP. A strong governance structure has been established for the FAP, with appropriate segregation of duties identified. All agreements, entered into after November, 2011 are required to use this process to be approved for funding.
Documents and practical tools have been developed for the operational management of the FAP. The guidelines and flowchart, process narrative, performance measurement strategy, and the risk management framework clearly outline the roles and responsibilities of the parties involved in the management and administration of agreements.
3.3 Internal Control
We expected to find that the FAP is supported by oversight and control systems at the Agency level.
The TB Policy on Transfer Payments requires that transfer payments be managed in a manner that is sensitive to risks, that strikes an appropriate balance between control and flexibility, and that establishes the right combination of good management practices, streamlined administration and clear requirements for performance.
The control framework established for the FAP meets the TB requirements for a transfer payment program. Performance reporting requirements for both individual agreements, and the program overall have been developed. The frequency of reporting on individual agreements is to be based on the risk associated with the recipient. Reporting on success of the FAP is to be done annually and will include the results of recipient audits.
The FAP database has been updated to include information regarding agreements from the time the application form is sent to the program manager, up to and including all payments to the recipient. Responsibility for maintaining the database and permanent files has been clearly defined, and information is updated throughout the life cycle of an agreement.
The application process identified for the FAP has been clearly documented and satisfies the transparency requirements of the TB Policy on Transfer Payments and TB Directive on Transfer Payments. The FAP process flowchart has been revised to provide more clarity around the application process. Critical control points are highlighted, with all decision steps clearly identified.
3.4 Risk Management
We expected to find that the FAP is designed, delivered and managed in a manner that takes account of risk and that a risk-based approach has been adopted for issuing funding agreements and identifying recipients for audit.
A recipient risk assessment and management framework (RRMAF) has been developed for the FAP and is consistent with the TB Policy on Transfer Payments. A risk assessment template has been developed and will be used for all new recipients. The results of the risk assessment will then determine the level and frequency of monitoring for agreements. The RRMAF addresses the related findings from the 2010-2011 audit of the FAP.
Although a risk-based audit plan is currently not in place, an approach for identifying recipient audits has been established. Management has identified one agreement, based on the materiality of the funding, that is currently undergoing a recipient audit. Moving forward, recipients will be reviewed for potential audits in December each year using a risk-based approach.
Appendix A: Detailed Audit Criteria
Governance
- Roles, responsibilities and accountabilities for the management of the Federal Assistance Program are clearly defined and communicated.
- Clear procedures have been developed outlining the responsibilities of the various parties involved in the management of agreements.
- Reporting relationships and responsibility for managing the FAP files have been identified for the program
- Monitoring and reporting of FAP files requirements have been identified for the program
- Practical tools have been developed to assist managers to ensure program delivery is applied consistently
- A senior Agency executive has been made accountable and responsible for the FAP
Risk Management
- The Federal Assistance Program is delivered and managed in a manner that takes account of risk.
- A measured response to risk throughout the management cycle of FAP has been put into place
- Risk-based approaches are adopted for issuing funding agreements and recipient auditing
- A risk-based plan for recipient audits has been put into place.
Control
- The Federal Assistance Program is supported by oversight and control systems at the Agency level
- Applications are going from the application stage to the approval stage in a timely manner
- Agreements are signed prior to the project start date
- Performance management reports are being prepared and communicated to management
- The database has been updated to capture up-to-date information and to track the number of active agreements
- The Federal Assistance Program is accessible and useable by applicants and recipients
- Information on the FAP program is communicated and publicly accessible to potential recipients
- The application process is transparent