Audit Assurance

Based on internal audit standards and criteria selected, sufficient audit work has been completed and analyzed to support the conclusion that the expertise and resources for which WD management is responsible has been effectively exercised. WD has accomplished program objectives by implementing effective management frameworks and through collaborative and solid provincial relations.

In accordance with the Government of Canada internal auditing standards, the Chief Audit Executive is providing audit assurance that relevant and reliable management controls were effective in design and were operating satisfactorily for the successful delivery of the ICP, MRIF and CSIF programs in fiscal years 2006 to 2008 in the four western Canadian provinces.

Introduction

The Government of Canada over the years has entered into various bi-lateral agreements with the Provincial Governments to undertake federal infrastructure programs and projects in western Canada. This audit covers three of those active infrastructure programs: Canada Infrastructure Program (ICP), Municipal Rural Infrastructure Fund (MRIF), and Canada Strategic Infrastructure Fund (CSIF). Under these agreements in each province, the parties established a federal-provincial management committee to administer and manage the agreement or specific projects. The committees consist of at least four members of whom two members are appointed by Canada and two members appointed by the Province. The committees operate until all terms and conditions of the agreement have been fulfilled and all of its activities have been completed.

Infrastructure Canada (INFC) is the primary accountable federal department for Canada. Western Economic Diversification (WD) is the Federal Delivery Partner (FDP) for western Canada. WD and INFC have entered into various Memoranda of Understanding (MOU) for the delivery of the programs in western Canada. The MOUs set out the roles and responsibilities of the federal departments and the collaboration required with the Provincial Governments for the successful implementation of the agreements in western Canada. Under this model, INFC is able to utilize the expertise and resources of WD, the federal regional development agency in the four western provinces: British Columbia, Alberta, Saskatchewan, and Manitoba.

The MOUs set out WD’s roles and responsibilities. INFC appoints WD officials to serve as co-chairs and members of the management committees. As federal members of the management committees, WD representatives have a number of responsibilities, including the following:

• To administer, monitor and manage the federal-provincial Agreement;
• To liaise with the Province, municipalities and communities;
• To develop guidelines and procedures for submitting project applications;
• To review and rank applications against the screening and ranking criteria and make a recommendation as to each application’s suitability for funding;
• To report back to applicants;
• To ensure that appropriate contribution agreements are entered into with recipients or, in the case of a non-delegated territory, that proper commitments by the Province are recorded in writing;
• To review requests for project amendments;
• To review and approve claims;
• To oversee all related communications;
• To administer, monitor and manage the capacity building portfolio; and
• To monitor program compliance audits in accordance with the Canada – Province Reporting – Audit – Evaluation Guideline.

In addition, WD has shared responsibilities along with INFC, the Province, Joint Secretariat and municipalities in the following areas: reporting, due diligence, environmental issues, information management, resources and financial management, and communications.

Each of the four western management committees have established a Joint Secretariat to support the administration of the agreement utilizing regional expertise. The parties operate the Joint Secretariat with resources on a cost-shared basis in order to administer project implementation at the local government level.

Programs Background

Between 2000 and 2008, the Government of Canada’s contribution to the three programs is summarized below.

Program	Number of Projects	Federal Contribution in BC$’000	Federal Contribution in Alberta$’000	Federal Contribution in SK$’000	Federal Contribution in Manitoba$’000	Total Federal Contribution$’000
ICP	1,618	268,548	171,028	56,711	60,918	557,205
MRIF	578	73,326	88,000	38,000	41,000	240,326
CSIF	9	222,500	-	27,700	374,500	624,700
Total	2,205	564,374	259,028	122,411	476,418	1,422,231

Infrastructure Canada Program (ICP)

Through matching federal and provincial agreements, the parties provide funds by way of contribution agreements with recipient municipalities or organizations at the local government level, to assist municipalities in their infrastructure projects that qualify for funding. The purpose of ICP is to improve urban and rural local government infrastructure in Canada and the Provinces.

Municipal Rural Infrastructure Fund (MRIF)

MRIF builds on the results and successes of ICP. Its purpose is to continue to improve urban and rural local government infrastructure in the Provinces by Canada leveraging investments with the provincial, municipal and non-governmental financial contributions. Furthermore, to address the individual needs of smaller communities, a minimum of eighty per cent of MRIF investments are to be directed to projects that benefit municipalities with populations of less than 250,000.

Canada Strategic Infrastructure Fund (CSIF)

The purpose of the CSIF is for Canada and the Province to support large-scale infrastructure projects of national and regional significance. These projects are high-dollar projects with broader provincial and national benefits that are usually beyond the limited financial resources of local municipal governments or organizations.

Audit Context

In each federal-provincial agreement, the management committee is responsible for ensuring that project expenditures are audited. In addition, any party, at its own expense may audit all accounts, records, and claims for reimbursement relating to the agreement and may undertake reviews of the agreement’s administrative, financial and claim certification processes and procedures to ensure compliance with the agreement. WD is conducting this internal audit in that context.

This audit does not duplicate existing monitoring of projects and any work performed by other assurance providers. This audit examined the effectiveness of processes management has established for governance, risk management and control in order to achieve its program objectives. WD conducted a similar internal audit in 2006.

The intent of this audit is to provide audit assurance to WD’s Deputy Minister on how effectively WD has fulfilled its roles and responsibilities under the MOUs with Infrastructure Canada (INFC) in the delivery and implementation of infrastructure programs in western Canada.

As the scope of the audit focussed on WD’s roles and responsibilities, the auditors restricted their interviews to personnel from WD, the four provincial governments, and the Joint Secretariats. The auditors did not interview any personnel from INFC.

Audit Objectives

The objectives of this audit are to provide audit assurance that:

• WD has applied its expertise and resources by way of sound management control frameworks towards the successful delivery of INFC programs in western Canada in order to realize the intended program results; and
• WD roles and responsibilities as outlined in the MOUs and agreements for ICP, MRIF, CSIF, have been fulfilled, and are in accordance with the Treasury Board Policy on Transfer Payments and the Financial Administration Act.

Audit Criteria

The audit criteria have been drawn from federal-provincial agreements, INFC-WD MOUs, contribution agreements, preliminary engagement discussions and respective program documentation established by the management committees. The auditors also incorporated federal government requirements included in the Policy on Transfer Payments, the Financial Administration Act, and the Policy on Internal Audit.

Key Risks

Key risks that might impact program objectives include:

• Management or oversight committee being uninformed about unusual matters, and variances such as cost over-runs, environmental issues, projects in jeopardy, and community concerns;
• Ineligible costs being paid;
• Untimely or inadequate communication of information that may hinder INFC ability to reallocate funds;
• Non-compliance with Treasury Board requirements and the terms and conditions of agreements and the MOU;
• Performance information outlining the intended benefit is not being clarified up-front prior to commencement of project or being collected; and
• Program criteria not being understood by the intended beneficiaries.

Scope

The audit covers three infrastructure programs (ICP, MRIF and CSIF) administered under INFC-WD MOUs during the period April 01 2006 to March 31 2008 in western Canada. The audit does not include new initiatives such as the Building Canada Fund.

Acknowledgements

The auditors would like to thank WD management and staff, their provincial counterparts, and the Joint Secretariats for the cooperation and timely assistance provided to the audit team throughout this engagement.