Executive Summary

Western Economic Diversification Canada’s three-year audit plan for 2008-2011 identified the Western Diversification Program as an area of focus for internal audit. The firm Samson & Associates was mandated by the Audit and Evaluation branch to conduct an internal audit of the Western Diversification Program (WDP) for the period from August 14, 2003 to March 31, 2008.

The objective of this audit was to conduct a thorough program audit on all aspects related to the Western Diversification Program life cycle. As such, the auditors examined key internal processes and controls as well as compliance to the Financial Administration Act, WDP Terms and Conditions (T&C), and Treasury Board Policies with respect to: program design; program operations; and review and evaluation.

Program Design: The Western Diversification Program is a mature program as it has been in existence for over 20 years. The types of eligible activities under WDP have increased significantly. The department should look at its two current delivery models to determine if standardization is warranted. The 2008 evaluation of the WDP concluded that it aligns with departmental priorities and supports departmental strategic outcomes. Financial reporting is done at the departmental level by strategic outcomes; supplementary information on expenditures is provided at the program level in the Departmental Performance Report (DPR).

Program Operations: In general, good controls are in place with regards to project approval and claims payments. Processes are well described and understood by staff, and project analysis documentation is generally uniform from region to region. Project Gateway is a tool that helps standardize the documentation used in the due diligence process, but more development work is required for Project Gateway to become a fully integrated management tool. The audit found that there are improvements required in the areas of project approval, documentation on rejected projects, recipient audits policy, and controls over payable at year end.

Review and Evaluation: Numerous internal audits have been performed on various management framework aspects of the department. However, this is the first full audit of the WDP.

In Conclusion: Other than the opportunities for improvement identified in this audit report, the Western Diversification Program has adequate overall delivery, operations and review processes that are working effectively. Sufficient audit evidence was gathered in accordance with the Government of Canada internal audit standards in order to come to this conclusion.

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Detailed Report

Introduction

The Department of Western Economic Diversification Canada (the department) was established in 1987 to lessen Western Canada’s strong economic dependence on its natural resources. Under the Western Economic Diversification Act, 1988, the department is mandated to “promote the development and diversification of the economy of Western Canada and to advance its national economic policy, program and project development and implementation.”

The Western Diversification Program (WDP) is a primary instrument for the department to address economic development challenges and meet departmental objectives and strategic outcomes of stimulating economic activity in the Western Provinces through Grants and Contributions (G&C). WDP, through initiatives like the Western Economic Partnership Agreements (WEPAs), allows the department to partner with various community and industry-based groups, and to implement project-based initiatives targeted at producing strategic outcomes.

The Terms and Conditions of the program are in effect from August 14, 2003 until July 14, 2009. The department was in the process of renewing the Terms and Conditions of the program. Although the program was last evaluated in October 2008, this is the first full audit of WDP that has been conducted. Subsequent to the completion of the audit fieldwork, the department renewed the WDP Terms and Conditions.

The department’s three-year audit plan for 2008-2011 approved by the Deputy Minister of the department includes an audit of WDP. The audit covers the period from August 14, 2003 to March 31, 2008. The audit plan defines key areas of focus in order to meet the expectations of internal and external stakeholders.

During this period, a total of 2,870 projects were approved under WDP for a total approved funding of $621 million. WDP funding is allocated to priorities identified by the department. The funding mechanism for delivering the program is a combination of direct funding and funding through third party delivery.

The WDP is delivered through four regional offices (Vancouver, British Colombia; Edmonton, Alberta; Saskatoon, Saskatchewan; and Winnipeg, Manitoba). The department’s corporate office is resident in Edmonton, Alberta, with a satellite office providing advocacy liaison services in Ottawa, Ontario. Each of the Regional Office and the Liaison Office is managed by an Assistant Deputy Minister (ADM). The ADMs form, along with headquarters’ senior management, the Executive Committee.