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AUDIT OF THE NEW SAR INITIATIVES FUND
Table of ContentsExecutive SummaryThe audit of the New SAR Initiatives Fund (NIF) has been conducted pursuant to the Memorandum of Understanding with Consulting and Audit Canada. The objective of this assignment was to audit the NIF to provide assurance that it is managed according to applicable governmental and departmental policies and procedures. The scope of the audit included project files selected from the fiscal years 2003-04 and 2004-05. The audit did not include recipient visits or a review of recipient records. Documentation review and interviews focused on the management control framework including authorities, roles and responsibilities, processes and procedures and overall monitoring. Interviews were conducted with key staff within the National Search and Rescue Secretariat (NSS) as well as selected Federal Sponsors and Project Officers. The NIF was established in 1988 to provide operating and capital funding to Federal departments with SAR responsibilities for initiatives to enhance search and rescue in Canada. In 1996, this was expanded to include initiatives for the provincial and territorial Emergency Measures Organizations. With an annual budget of $8.1 million, Federal departments with SAR responsibilities, as well as provincial and territorial Emergency Measures Organizations, compete for funds by submitting project applications for consideration by the Merit Board. A review of the authorities revealed that the approved Treasury Board Submission in 1988 did not clearly state the objective or the eligibility criteria for the Fund. Further, the Treasury Board approval did not include the authority for third-party contributions by Federal Sponsors. In November 1996, the Lead Minister for Search and Rescue approved the Terms and Conditions for the Contribution Agreement with Provincial/Territorial Governments for federal funding of New SAR Initiatives Fund projects in support of the National SAR Program. The approved Terms and Conditions do not include most of the stated requirements contained within the applicable Treasury Board Secretariat (TBS) Policy on Transfer Payments. In January 2005, as a temporary measure pending renewal of Treasury Board approval for the contributions portion of the fund, NSS received Ministerial approval to reimburse third party contribution project under the auspices of Federal Sponsors and expand the list of eligible recipients to include volunteer, non-profit, academic and private sector. Further, NSS is in the process of drafting and reviewing with TBS Terms and Conditions for the contribution portion of this Fund and finalizing a Treasury Board submission for renewal approval. Roles, responsibilities and authorities are formalized and updated through Memoranda of Understanding (MOUs) between NSS and the NIF Sponsors. For the contribution portions of the Fund, the MOU and the project proposal do not include most of the stated requirements contained within the TBS Policy on Transfer Payments. NSS is in the process of putting in place contribution agreements directly with third party recipients carrying out on-going projects sponsored by federal, provincial and territorial authorities. NSS has developed a New Search and Rescue Initiatives Fund Program Guide that outlines the requirements of recipients and the general roles and responsibilities of the various delivery partners. The Guide provides information on the application process, and monitoring and reporting requirements. Both the New Search and Rescue Initiatives Fund Program Guide and the NIF Call Letter are distributed to sponsors and are available on the NSS’s website to ensure that all potential applicants are aware of the Fund. In total, ten project files were selected for review. In all files reviewed, required approvals were obtained for the Merit Board and the Lead Minister and the Director, Coordination and the Sponsor signed the project proposal and any subsequent amendments. The New Search and Rescue Initiatives Fund Program Guide contains fourteen principles and guidelines that relate to the screening and scoring of proposals. In all files reviewed, these principles and guidelines were respected; however, it was difficult to determine if the project repeated a previously approved NIF project. In all files reviewed, the funding value did not exceed what was approved and payments were being released based on quarterly reports. In nine out of the ten files reviewed, the quarterly reports matched the management plan contained in the project proposal. Observations were also raised about the organization of information in files and on improvements in monitoring and reporting procedures. RecommendationsThe main recommendations in this report are summarized as follows: The Executive Director should ensure that:
1.0 - IntroductionThe National Search and Rescue Secretariat (NSS) has requested an internal audit of the New SAR Initiatives Fund (NIF). This report presents the results of the internal audit. NSS officials have been debriefed on the results. 1.1 - Objective and ScopeThe objective of this assignment is to audit the NIF to provide assurance that it is managed according to applicable governmental and departmental policies and procedures. The audit reviewed and assessed the authorities and management control framework for NIF at the NSS. This included interviews and documentation review with respect to the application submission process, the application review and approval process, the payment process, and project monitoring and reporting. The scope of the audit included project files selected from the fiscal years 2003-04 and 2004-05. The audit did not include recipient visits or review of recipient records. The audit was conducted in two phases. A preliminary survey was conducted during November to December 2004 followed by a detailed audit of key issues during January to April 2005. 1.2 - Approach and MethodologyThe audit was conducted through interviews and a review of pertinent documentation. Interviews focused on the management control framework including authorities, roles and responsibilities, processes and procedures and overall monitoring. Interviews were conducted with key staff within the National Search and Rescue Secretariat as well as selected Federal Sponsors and Project Managers. The following background information was part of the documentation review:
1.3 - BackgroundIn 1986, the Federal Cabinet, acting on one of the recommendations of the Ocean Ranger Commission Report, directed that a National Search and Rescue Program be established and managed as a distinct program of government. Overall responsibility for Search and Rescue rests with the Minister of National Defence as the Lead Minister for Search and Rescue. The NSS provides direct, independent support to the Lead Minister for Search and Rescue and is responsible for effective management of the program. In particular, NSS coordinates the efforts and activities of six federal departments, provincial and territorial governments, and corporate and voluntary sector organizations involved in search and rescue. The NIF was established in 1988 to provide operating and capital funding to Federal departments with SAR responsibilities for initiatives to enhance search and rescue in Canada. In 1996, this was expanded to include initiatives for the provincial and territorial Emergency Measures Organizations. With an annual budget of $8.1 million, Federal departments with SAR responsibilities, as well as provincial and territorial Emergency Measures Organizations, compete for funds by submitting project applications for consideration by a selection committee. In 2003-04, there were 98 projects approved, of which 55 were continuing projects. Figure 1 provides a breakdown of expenditure for 2003-04 by the two main Sponsor groups (Federal departments and Provincial/Territorial Governments), as well as the Public Accounts breakdown of expenditures by vote. The Contribution portion (Vote 10) includes only the expenditures related to provincial and territorial governments. At this time, NSS is unable to segregate Operating (Vote 1) or Third-Party (Vote 10) projects and corresponding expenditures related to Federal Departments without detailed project-by-project manual manipulation. Interviews revealed that a new information system is to be implemented in 2005-06 which will allow this to be done more readily. Figure 1: Breakdown of NIF for 2003-04
Federal Departments (Capital Vote 5), Provincial and Territorial Governments (Contribution Vote 10) Source: NSS Excel Speadsheets and DND Financial Management Accountability System (FMAS) 2.0 - Detailed Findings2.1 - Authorities and External Reporting2.1.1 - Treasury Board ApprovalTreasury Board approval should provide clearly stated objective(s) and eligibility criteria for a Program. This ensures that only eligible recipients and projects are funded in accordance with the approved program objective(s). In 1987, Treasury Board Decision 805407 approved the establishment of an annual special allotment within the Operating Reserve commencing in 1988-89 to support new SAR initiatives. In 1988, Treasury Board Decision 808067 approved the $9M1 allocation to the National Search and Rescue for funding of new SAR initiatives. In the rationale section of this submission, it states that the Cabinet approved development of a funding mechanism for new SAR initiatives originating from involved departments and from NSS. However, neither approved submission clearly states the objective or the eligibility criteria for the Fund. According to the Treasury Board Decision 808067, the new SAR initiatives reserve would be placed under the control of the NSS through the DND appropriations process by way of special Treasury Board controlled allotments in DND Vote 1 and Vote 5 as appropriate. The Treasury Board approval did not include the authority for third party contributions by Federal Sponsors. Over the last two years, Departmental sponsors such as RCMP and Transport Canada have raised concerns with regards to the authority to spend the money received under NIF, particularly, for projects with third-parties. Interviews and file review revealed that such contributions are being made by Federal Sponsors and until recently there has been no specific authority for these payments. Given that NSS is unable to segregate the contribution projects and corresponding expenditures, it was not possible to determine the timeframe and the amount of such contribution projects. These contributions are currently included as Capital (Vote 5) for external reporting purposes. In January 2005, as a temporary measure pending renewal of Treasury Board approval for the contributions portion of the fund, NSS received Ministerial approval to reimburse third party contribution project under the auspices of Federal Sponsors and expand the list of eligible recipients to include volunteer, non-profit, academic and private sector. This temporary measure was to remain in effect until March 31, 2005. Further, NSS is in the process of drafting and reviewing with TBS Terms and Conditions for the contribution portion of this Fund and finalizing a Treasury Board submission for renewal approval. 1 In 1991-92 with the introduction of GST, NIF was reduced by 10% to $8.1M for the Manufacturing Sales Tax portion of the Fund. 2.1.2 - Expansion of the Program to Provincial/Territorial GovernmentsIn accordance with applicable Policy on Transfer Payments, Treasury Board approval of the proposed terms and conditions is required for all contributions, either to a specific recipient or a class of recipients, unless authority to establish the terms and conditions has been specifically delegated by the Treasury Board to the responsible Minister. In June 1996, the Minister of National Defence received the delegated authority to approve the terms and conditions for contributions under the understanding that the Minister’s authority would be exercised within the requirements of the TBS Policy on Transfer Payments. In November 1996, the Lead Minister for Search and Rescue approved the Terms and Conditions for the Contribution Agreements with Provincial/Territorial Governments for federal funding of New SAR Initiatives projects in support of the National SAR program. This authority did not include third party contributions by Federal Sponsors. The approved Terms and Conditions do not include most of the stated requirements contained within the applicable Policy on Transfer Payments. Appendix A provides a comparison of the approved Terms and Conditions to the requirements for Terms and Conditions as contained in the applicable TBS Policy on Transfer Payments. In particular, the approved Terms and Conditions do not:
The approved Terms and Conditions did not specify but implied that the recipients would be volunteer groups across Canada. The documentation and file review indicated that contributions have been made to provincial and municipal government organizations, universities and for-profit businesses. As a temporary solution, in January 2005, NSS obtained Ministerial approval to expand the current list of eligible recipient to non-profit, academic and private sector organizations. Further, the interviews and file review indicated that there have been contributions over $100,000 to for-profit businesses without any approval on file regarding exemption from repayment of the contribution provisions. Given that NSS is unable to segregate the contribution projects and corresponding expenditures, it was not possible to determine the timeframe and the amount of contributions over $100,000 to for-profit businesses. Between 1996 and 2001, the approved Terms and Conditions required that each provincial/territorial proposal have a commitment of at least 25% of its total cost from a source other than the NIF prior to submission to the NSS. In 2001, with Ministerial approval, the existing 25% funding contribution requirement from Provincial and Territorial sponsored projects was replaced with a requirement for cost sharing and partnering for all project proposals, which was implemented in the 2003-04 funding cycle. An analysis of the approved funded projects for 2003-04 and 2004-05 confirmed that the mandated requirement for cost sharing for all projects was implemented in 2003-04. However, the total cost of audit, evaluation and monitoring activities is being charged to the Fund, which is not in accordance with the TBS Policy on Transfer Payments. Further, this analysis indicated that NIF funding ranged for $4,000 to $1,000,000 and on average represented 60%2 of the total project funding. Of the remaining 40%, in-kind contributions constitute approximately 80%. As stated earlier, NSS is now in the process of drafting and reviewing with Treasury Board Secretariat (TBS) Terms and Conditions for the contribution portion of the Fund. 2.1.3 - External Reporting and DisclosureIn accordance with the Treasury Board Decision 808067, NSS receives, as part of the DND Main Estimates, an annual funding of Vote 5 capital funds. Once projects are approved, the money is distributed throughout the year, based on quarterly progress reports, to Federal departments and Provincial and Territorial governments. At the year-end, the expenditures related to provincial and territorial projects are internally transferred to Contributions (Vote 10) with the remaining portion reported as Capital (Vote 5) in the Public Accounts of DND. NSS is unable to segregate the Federal Sponsored projects that relates to Operating (Vote 1) and Contributions (Vote 10), therefore, these amounts are currently included as part of Capital (Vote 5) in the Public Accounts of DND. TBS has expressed to NSS that the resource spent by Federal Sponsors should in future be transferred and reported by the Department. The current method creates an anomaly for external reporting and disclosure purposes. Currently, NSS is discussing with Treasury Board the appropriate funding mechanism and delegated signing authority for Operating (Vote 1), Capital (Vote 5) and Contributions (Vote 10) aspects of the Fund for Federal and Provincial/Territorial Sponsors. RecommendationsThe Executive Director should ensure that:
Management ResponseRecommendation (s. 2.1) – 1: Objectives and eligibility criteria (should be) developed for both the contribution and non-contribution portion of the fund. Concur - The existing NIF program includes objectives and eligibility criteria for new proposals, and similar provisions will be included in the renewed program for application to contribution and non-contribution proposals. TB approval is being sought for the objectives and eligibility criteria applicable to the renewed contribution portion of the fund. Recommendation (s. 2.1) – 2: Terms and Conditions (should be) developed and approved by Treasury Board, for both contributions by Federal Sponsors and contributions to Provincial/Territorial Sponsors, which meet the requirements of the TBS Policy on Transfer Payments in order that there is appropriate authority for the NIF contribution payments by Federal Sponsors. Concur - Implementation in progress. Recommendation (s. 2.1) – 3: These Terms and Conditions (should) clearly state the objective and eligibility criteria for the Fund as well as define the class of eligible recipient, the maximum amount payable, use of holdbacks, guidelines for advance payments and define conditions for repayable contributions. Concur - Implementation in progress. Recommendation (s. 2.1) – 4: The Results-Based Management Accountability Framework, Risk-Based Audit Framework and the New Search and Rescue Initiatives Fund Program Guide (should be) revised to clearly reflect the changes in the authorities and funding mechanism for both the contribution and non-contribution portion of the fund. Concur - Implementation in progress. 2.2 - Review of Management Control Framework2.2.1 - Roles and ResponsibilitiesThe NIF program is delivered through a shared accountability structure which involves the NSS, the Interdepartmental Committee on Search and Rescue (ICSAR) and a series of delivery partners referred to as NIF Sponsors. NSS manages the NIF and provides central co-ordination and leadership to the various program delivery partners. The Secretariat manages the Fund in partnership with the ICSAR. NIF Sponsors include federal, provincial and territorial organizations that are involved with the SAR and are responsible for the day-to-day management of NIF projects. Roles, responsibilities and authorities are formalized and updated as required through Memoranda of Understanding (MOUs) between NSS and the NIF Sponsors. Through interviews and documentation review, it was determined that NSS has a signed MOU with all Sponsors. In June 2004, NSS sent out revised MOUs to Federal, Provincial and Territorial Sponsors for signature. At the time of the audit five out of the thirteen MOUs had not been signed by the Federal, Provincial or Territory Sponsor. Interviews indicated that the MOUs will be further revised as a result of the negotiations with TBS on the Terms and Conditions and external reporting. According to the approved Treasury Board Submission, the purpose of the MOU is to record an agreement between the NSS and the Federal, Provincial and Territorial Sponsors regarding their respective roles and responsibilities for the implementation of the NIF projects. Each approved new project proposal is an Annex to the MOU. For the contribution portion of the Fund, the MOUs and the project proposals do not include most of the stated requirements contained within the TBS Policy on Transfer Payments. Appendix B provides a comparison of the MOUs and project proposals to the basic requirements of a contribution agreement as contained in the TBS Policy on Transfer Payment. In particular, the MOUs and project proposals do not:
The New SAR Initiatives Fund Program Guide states that NIF Sponsors must put in place an agreement, for example a contract and/or a Memorandum of Understanding between themselves and the NIF Project Manager that mirrors the MOU between NSS and the NIF Sponsor. A Third Party MOU template is available on-line in the NIF toolkit. As stated above, this template does not meet the basic requirements for a contribution agreement. Interviews with Federal Sponsors indicate that, in most cases, third party MOUs were not put in place between the Federal Sponsor and the recipient. The file review confirmed that, in most cases, the recipient and the type of project (operating, capital, and contributions) were not clearly identified in the project proposals and that other sources of funding where not related to specific limits of Total Government Assistance. In January 2005, as a temporary measure pending renewal of Treasury Board approval for the contributions portion of the fund, NSS received Ministerial approval to reimburse third party contribution project under the auspices of Federal Sponsors and expand the list of eligible recipients to include volunteer, non-profit, academic and private sector. This temporary measure was to remain in effect until March 31, 2005. NSS is in the process of putting in place contribution agreements between themselves and these recipients. 2.2.2 - Policies and ProceduresThe NSS has developed a New Search and Rescue Initiatives Fund Program Guide that outlines the requirements of recipients and the general roles and responsibilities of the various delivery partners. The Guide provides information on the application process, and monitoring and reporting requirements. The Guide is updated to incorporate improvements to the selection process. Further, NSS has developed procedures for processing quarterly reports and invoices. An annual NIF Request for Proposal communicates the priorities of the NIF program, which reflects the needs and requirements of the NIF sponsors. Interviews indicated that for 2006-07, the NIF Request for Proposal will be more closely linked to the SAR strategic direction and annual plan that are approved by ICSAR. Both the New Search and Rescue Initiatives Fund Program Guide and the NIF Call Letter are distributed to sponsors and are available on NSS’s website to ensure that all potential applicants are aware of the Fund and its requirements. Further, there is an annual workshop and site visits, which also promote the NIF and provide guidance for potential recipients. 2.2.3 - Project Approval ProcessNIF Sponsors receive, screen and submit funding proposals to NSS for preliminary review. If necessary, the Sponsor provides assistance to applicants in proposal development. NSS and the Merit Board use a standard proposal template for the selection process. The Merit Board is a sub-committee of Inter-departmental Committee on Search and Rescue (ICSAR) and is comprised of one representative from each of the Federal Sponsors, and one representative from the Provincial and Territorial governments. The NSS screening process may identify deficiencies and the proposal would be re-submitted. Proposals are then reviewed by the NIF Merit Board and scored based on Program Guide criteria. NSS averages the Board Members’ scores, develops a ranked list and highlights specific deficiencies, which are addressed before the list is finalized and recommended for approval, or a conditional approval is recommended. The Merit Board approves a Merit list, which goes to the ICSAR and the Lead Minister for final approval and sign-off. A sample of files were reviewed to determine that appropriate approvals were received prior to the commencement of funding, that any deficiencies identified in the reviews by NSS staff and the Merit Board had been resolved and that confirmation letters had been attached to the project proposal to support amounts identified as cost sharing. In all files reviewed, approvals were obtained for the Merit Board and the Lead Minister, and the Director, Coordination and the Sponsor signed the Project Proposal and any subsequent amendments. The file review indicated that the reviews are taking place by NSS staff but at times it was difficult to determine what changes were required and if the required changes had been made. Further, the review by the Merit Board is maintained in general files which were not well organized. NSS was unable to locate the copy of the signed merit list for 2003-04 on the NSS files. The New Search and Rescue Initiatives Fund Program Guide contains fourteen principles and guidelines that relate to the screening and scoring of proposals. In all files reviewed, these principles and guidelines were respected, however, it was difficult to determine if the project repeated a previously approved NIF project. Interviews indicated that the new information system will facilitate a search of approved projects. Further, the file review indicated that the Guide project proposal templates were being used and the management plans were being completed with objectives, project activities, outputs, performance measures and timing. In nine files reviewed, other funding sources were identified. In eight out of nine cases, letters of support or confirmation letters were attached. However, in only four out of the nine, the nature and the total monetary value of the cost sharing support were indicated. As part of the project proposal template, all files reviewed included a detailed funding section where costs were broken-down between goods, services, communication, translation, travel, evaluation, personnel and contingency (10%) costs. The file review indicated that the 10% contingency was requested and approved for each project proposal. 2.2.4 - Payment Process for the FundThe NIF Sponsors are responsible and accountable for individual NIF project results within their area of responsibility. NIF recipients are required to provide quarterly and final reports to the NIF Sponsor. The NIF Sponsor forwards the reports and invoices to NSS. NSS processes invoices based on the quarterly reports. The final payment of a project is linked to the fourth quarter report as there is no holdback provision. There is a requirement for an evaluation six months after the end of the project. A sample of payments was examined to determine that funding value did not exceed that which was approved in the project proposal or subsequent amendments. In addition, the file review verified that the quarterly reports related to the management plan and for completed projects that final and post-evaluation reports were submitted. Also, the signing authority for payment was verified. In all cases the funding value did not exceed what was approved and payments were being released based on quarterly reports received. In nine out of the ten files reviewed, the quarterly reports did match the management plan. However, neither the quarterly reports nor invoices related to the cost categories approved in the project proposal. Further, there was no additional supporting documentation on the project files at NSS. The New SAR Initiatives Fund Program Guide does not provide any clear direction on roles and responsibilities with regards to project management and maintaining supporting documentation related to invoices. Interviews with Federal Sponsors and a limited review of invoice documentation indicated that supporting documentation is being maintained by the Federal Sponsor and/or project officer. However, there appears to be a lack of understanding on their roles and responsibilities with regards to the verification of NIF funds and other sources of funding. The file review indicated that nine out of the ten project files reviewed were not well organized, with documents out of chronological sequence and papers added randomly to the file. The date of receipt of quarterly reports was not indicated making it very difficult, without the NSS spreadsheets, to relate payments to quarterly reports. Further, in five out of ten files, some of the relevant documentation was not on file. A review of final reports and post-project evaluation for 2003-04 indicate that most of the final reports are being received but very few post-project evaluations are being received. As stated earlier, the Terms and Conditions do not have a hold back to ensure that final reports are received on a timely basis and linked to the final payment. In accordance with the approved Terms and Conditions, NSS may negotiate for advance of funds for up to the maximum of 50% of the NIF contribution to the total project cost for the year in question. The New Search and Rescue Initiatives Fund Program Guide states that the advance payments will only be made on the basis of a written justification. Neither are in line with the TBS Policy on Transfer Payments. The file review indicated three projects where advances were made in excess of 50% of the NIF contribution to the total project cost. However, one of the advances related to a Federal Sponsored project which was not a third party contribution. A condition in the Treasury Board Decision is that prior to the end of the fiscal year, any unspent funds are returned to NSS new initiatives allotment in DND. In one file reviewed, where this applied, the unspent funds were returned. RecommendationsThe Executive Director should ensure that:
Management ResponseRecommendation (s. 2.2) – 1: Contribution Agreements (should be) developed that are consistent with the requirements of the TBS Policy on Transfer Payments. Concur - Implementation in progress. Recommendation (s. 2.2) – 2: Contribution Agreements (should) clearly identify the recipient, the extent of total government assistance (stacking provision), and expectations between the initial recipient and third parties. Concur - Implementation in progress. Recommendation (s. 2.2) – 3: The Results-Based Management Accountability Framework, Risk-Based Audit Framework and the New Search and Rescue Initiatives Fund Program Guide (should be) revised to clearly reflect the changes in the management framework for both the contribution and non-contribution portion of the Fund including roles and responsibilities for project management, maintaining appropriate supporting documentation, and linking quarterly reports and invoices to allowable cost categories. Concur - Implementation in progress. Recommendation (s. 2.2) – 4: Training and information sessions with Federal, Provincial and Territorial Sponsors on the revised requirements of the program (should be) considered. Concur - Implementation in progress; included in NIF renewal implementation plan. Recommendation (s. 2.2) – 5: A file documentation procedure (should be) developed to ensure that all relevant information is properly maintained on the project files. As part of this procedure, file checklist should be developed for the general files related to proposal assessment and approval and for the individual project files maintained by NSS and the NIF Sponsors. Concur - A review of the NSS-wide filing system will be carried out in FY 2005-06, as documented in the Secretariat’s Business Plan, with the NIF program files being treated as the highest priority. Recommendation (s. 2.2) – 6: Holdbacks (should be) considered to ensure that final payment is related to final report and that guidelines on advances are amended to be in line with the TBS Policy on Transfer Payments. Concur - The option of using holdbacks to ensure compliance with NIF reporting requirements will be retained in the new Terms and Conditions, and advances will be administered in compliance with the TBS policy. 2.3 - Monitoring and Reporting2.3.1 - Information Systems and ReportingCurrently, NSS maintains Excel spreadsheets and Word documents on applications and approved projects. NSS, with the support of National Defence On-Line (NDOL) funding, is introducing a new NIF information system (NIFIS) to replace the Excel spreadsheets and Word documents. NIFIS is intended to improve financial management and reporting, with a Web-based, user friendly system with management reporting functions. Interviews indicated that this new system should be operational by April 1, 2005 and the NSS plans to run parallel systems for 2005-06. There are quarterly management reports to the ICSAR Coordination Subcommittee and NSS management committee. These quarterly reports provide overview of funding, however, they do not include a status report by project. As stated earlier, NSS is unable to segregate Operating (Vote 1), Capital (Vote 5) and Third-Party (Vote 10) projects and corresponding expenditures which are an essential element for internal management reporting. File review and interviews revealed that pending lapses are only identified late in the fiscal year. Early identification would permit timely re-allocation to other approved projects. Figure 2 provides the internal carry forwards and lapses of the Fund since its inception. NSS has made progress is trying to reduce the amount of year-end lapse. Figure 2: History of Carry Forwards and Lapses
Source: NSS Excel Spreadsheets 2.3.2 - Audit and EvaluationCurrently, approximately five to six recipient audits are conducted per year by external consultants. NIF project audit criteria includes: compliance with MOUs; proposal application, selection and funding; project management; progress reporting; project claims and payments; post-project evaluation; and communication of project results. As stated earlier, there is a requirement in the New SAR Initiatives Fund Program Guide for NIF Sponsors to have an agreement between themselves and the recipient; this is not part of the current audit criteria. The Results-Based Management Accountability Framework and the Risk-Based Audit Framework are in the process of being developed. RecommendationsThe Executive Director should ensure that:
Management ResponseRecommendation (s. 2.3) – 1: NIF information system (NIFIS) is implemented to provide improved financial management and reporting so that projects can be appropriately monitored and reported. Concur - System requirements will be reviewed during 2005/2006 to ensure they reflect the management and reporting requirements of the renewed program, and resources will be sought for implementation. Recommendation (s. 2.3) – 2: Pending lapses are identified as early as possible in the year in order to re-allocate funds to other projects. Concur - The incidence of lapses is likely to be reduced with the renewed program design, and in addition the new program guide will strengthen this requirement. Recommendation (s. 2.3) – 3: The criteria for recipient audits (should be) revised to review the adequacy and compliance with agreements between the NIF Sponsor and the recipient. Do Not Concur - The requirement for NSS scrutiny of NIF sponsor-recipient agreements has been removed with the redesign of the program:
Appendix AComparison of the NIF Terms and Conditions to the Applicable TBS Requirements
Source: Chapter 2-12 Policy on Transfer Payments * Does not include a requirement to disclose the involvement of former public servants. ** Includes advance payments which are not in accordance with the TBS Policy on Transfer Payments. Appendix BComparison of the NIF Memorandum of Understanding and the Project Proposal to the TBS Requirements
Source: TBS Policy on Transfer Payments * included in the NIF Program Guide |
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