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Appendix D - Specific Observations and Recommendations for the Regions
A) British Columbia
1. Support for Eligible Costs
Observation
WD relies on the summary information on expenses that they receive and on the project audit work done by the provincial internal auditors and by WD project auditors. They do not obtain or monitor invoices to support claims.
Support for the 13 projects we examined consisted of an expense summary sheet and a listing of invoices or general ledger report details. For three of these files there have been no claims made. Of the remaining ten files one had some invoice support. This is in line with the procedures for claim processing in British Columbia.
Significance
The key concern is over the amount of control exercised over the project costs when considered in conjunction with the extent of audit work completed. There have been 38 financial audits completed. Of these 17 related to the 66 high risk projects selected. These audits provide very high assurance related to eligible costs. However, by obtaining invoice information to support the costs on high risk projects the risk of ineligible costs occurring is minimized.
Recommendation
We recommend that WD review the degree of evidence to be obtained for all projects. Obtaining supporting invoices related to project costs would reduce the extent of audit work required while at the same time minimizing the risk.
WD Regional Response
The recommendation has been discussed with the key members of the program's Joint Secretariat. There are three points raised in response to the recommendation pertaining to the legislative environment in British Columbia, the procedures in place and audit findings to date.
First, the Community Charter came into effect January 2004 in British Columbia (Bill14-2003). The Community Charter provides greater autonomy to municipalities, more accountability and better services for local taxpayers. It is viewed as the most empowering local government statute in Canada. It goes further than any provincial legislation in recognizing municipalities as an order of government. It recognizes that enhanced municipal powers are balanced with increased public accountability. The charter provides new accountability tools, such as mandatory annual reports and public meetings. Given that Canada's agreement is with British Columbia who in term administers the contract with the proponent, it would naturally follow our relation with both parties would follow the same principles.
Secondly, the claim forms submitted to British Columbia by the recipients are signed by two municipal officials, who are generally professional engineers and accountants. On each claim the recipient authorizes that the costs are (1) incurred and paid (2) attributable to the project (3) are eligible and (4) are net of tax rebates and are in accordance with the provincial Canada-British Columbia Infrastructure Program.
In addition, British Columbia authorizes each of the claims prior to submitting them for reimbursement of the federal share.
Finally, the audit findings to date have not uncovered any material issues pertaining to ineligible costs so it is concluded as being a low risk. As such, the merit of consuming scarce resources to submit, collect, analyze and store this information is questionable. Given the current construction market conditions in British Columbia, projects are generally coming in over budget so an ineligible cost can easily be replaced with a claim for eligible cost item.
The audit work for the program goes beyond reviewing eligible costs, as such, by requesting recipients to submit invoices with claims may not have a significant impact on the number or types of audits that are undertaken.
B) Alberta
1. Monitoring Environmental Risk
Observation
The monitoring of the environmental mitigation measures are not being completed early enough in the project life in order to avoid the risk of non compliance with legislation for an unnecessary lengthy period of time.
There is good information on the environmental screening prior to project commencement and mitigation measures were clearly identified. Reporting against these on completed projects was also clear at the end of a project.
Significance
As the completion of projects is often delayed, the sign off related to mitigation factors is also delayed. An improved process would be to identify projects with high environmental risks and require support for the completion of the mitigation factors at an earlier stage of the process.
Recommendation
We recommend that the Secretariat identify the projects with high environmental risks and monitor that required mitigation is completed an earlier stage of the project completion.
WD Regional Response
Agreed that monitoring of mitigation efforts should occur throughout construction.
C) Saskatchewan
1. Monitoring Environmental Risk
Observation
The monitoring of the environmental mitigation measures are not being completed early enough in the project life in order to avoid the risk of non compliance with legislation for an unnecessary lengthy period of time.
WD in Saskatchewan obtains an independent environmental assessment at the outset of all projects that identifies mitigation measures required. At the close of the project the authority responsible for the project signs a statutory declaration indicating that the mitigation matters have been addressed. A copy of the mitigation matters is attached to the statutory declaration and supporting information, such as copies of permits, is found on the files. This is a strong control and is working well.
Significance
There could be several years between the commencement of the project and the statutory declaration. As a result, significant time could elapse between identifying mitigation measures needed and confirming compliance.
Recommendation
We recommend that the Secretariat identify the projects with high environmental risks and monitor that required mitigation is completed an earlier stage of the project completion.
WD Regional Response
The Management Committee has decided to put in place the following risk management approach to address the issue raised above:
Projects with significant environmental risk will be those projects where joint federal provincial environmental assessments (EA) are required. Projects requiring a joint EA are projects like the Saskatoon or Prince Albert landfills which do present potential significant risk to the environment.
For those projects with significant environmental risk, upon receipt of the initial request for payment and before the first payment is made, all agencies identified in the mitigation section of the EA will be contacted to ensure all necessary permits, documentation and procedures have been followed. This will eliminate the time concerns raised above by ensuring the identifying mitigation measures have been addressed early on and will confirm the project is being constructed in a manner that is in compliance with the mitigation issues raised in the EA.
2. Projects Closed Before Actual Project Completion
Observation
Projects 7381 and 1531 were closed, and the federal share paid out, before the projects were fully completed. As a result, there is a risk the entire project has not been completed as set out in the approved application.
Also in the case of Project 1531, the project was closed without the assurance that the environmental mitigants had been addressed.
Significance
The project managers had no assurance that the project as anticipated was complete.
Recommendation
We recommend that management ensure the projects have been completed and environmental mitigants addressed prior to project close-out.
WD Regional Response
A policy decision was made by the Management Committee that for large city projects where CSIP funding is a small portion of the overall eligible project costs that all CSIP funds could be released before the projects were completed. The EA certification, however, will be followed up and obtained at a later date.
The example stated above for project #7381 pertains to the Regina water meter replacement program. In this case all the CSIP funds were released before all the meters were installed because there were enough eligible costs to pay out the full amount. It should be noted there was follow up with the city and the final number of meters installed was determined and recorded in SIMSI.
The second example Project #1531, pertains to the Prince Albert Cultural Centre and the closing of the file before there was assurances that the environmental mitigations had been addressed. We accept the fact the Attachment A is not on the file, however, this was addressed by an e-mail on the file, which states the following:
“ The entire project is only 55% complete as of July 31, 2002 so Attachment A was not included with this claim. In discussion with Deanne it was determined that since an EA audit was just completed and there were no deficiencies noted it would be o.k. to release the final payment.”
The EA audit for 2001-2002 which includes project #1531 is on file.
The Management Committee has decided to continue the above policy of paying out CSIP funds on City projects before completion of the project when there are enough eligible costs to pay the total CSIP funds out. However, a monitoring system will be put in place that will ensure all benefits, final project costs and EA mitigation measures are captured upon final project completion.
D) Manitoba
1. Monitoring Tendering
Observation
The degree of control required to be considered by WD staff on tendering could be clearer and documentation supporting the rationale for not tendering could be improved. WD has only limited assurance that projects have been tendered.
One of the six files examined contained no support for tendering. In another file there was a short note explaining that tendering had not been done for a major contract because there were no other vendors with the required experience.
All municipalities in Manitoba are required to tender significant contracts under the agreement on internal trade. In addition WD personnel maintain a key interest in the projects they manage. The project files frequently have references to tendering that have been placed on files as a result of reviews of newspaper articles or other sources. For non-municipal operated projects that we examined tendering was required under the agreements between the Province and the project authority. This provides a good basis for control over tendering.
Significance
In the past, the Federal Auditor General has commented on the need for tendering and compliance with the Transfer Payment Policy. More recently a number of public sector projects have not been tendered properly. The public expectation is that government projects will be tendered. There is an expectation that the Departments involved will monitor this process.
An improved monitoring process would be to determine the projects considered to be higher risk in this area and for WD to request and retain specific support to demonstrate that tendering has been used if appropriate on those projects. The higher risk projects are generally non-municipally operated.
For the project noted above, where there were no experienced vendors, we would have expected more adequate justification and support to reach that conclusion given the size of the contract. There appeared at least to be other alternative steps such as doing a request for qualifications prior to determining there was no other suitable vendor.
Recommendation
We recommend that WD review their process for the monitoring of project tendering to ensure compliance with Transfer Payment Policy.
WD Regional Response
It is important to note that the matter of tendering is not covered in the Canada Manitoba Infrastructure Program (CMIP) Agreement, nor in any other federal guidelines or policies pertaining to the ICP. Moreover, section 5.1 of the CMIP states that "All contracts shall be awarded and administered in accordance with the administrative, management and contract procedures within Manitoba." where Manitoba is defined as " The Government of The Province of Manitoba". Therefore all the project contribution agreements are between Manitoba and the Project Proponent. WD is not a party to these agreements and is not in a position to be stipulating any tendering requirements to Manitoba or Project Proponents.
However, that doesn't mean that tendering is not important and Manitoba has policies and procedures in place in that regard. As discussed with you, the Secretariat provides a detailed letter to all successful proponents prior to entering the Contribution Agreement, detailing tendering requirements and expectations and all the associated protocols necessary to be fulfilled for their project. This letter is followed up with contact by project managers to further discuss tendering expectations. All proponents, especially municipalities, are familiar with the Internal Agreement on Trade outlining tendering expectations in Manitoba. Our response on "tendering" is that the Secretariat will consider including evidence of project tendering within project files as a file management requirement. This will supplement the present use of Internal Agreement on Trade for municipalities and further enhance the detailed tendering requirement letter forwarded to all proponents outlining their tendering requirements.
2. Monitoring Environmental Risk
Observation
The monitoring of the environmental mitigation measures are not being completed early enough in the project life in order to avoid the risk of non compliance with legislation for an unnecessary lengthy period of time.
There is good information on the environmental screening prior to project commencement and mitigation measures were clearly identified. Reporting against these on completed projects was also clear at the end of a project.
Significance
As the completion of projects is often delayed, the sign off related to mitigation factors is also delayed. An improved process would be to identify projects with high environmental risks and require support for the completion of the mitigation factors at an earlier stage of the process.
Recommendation
We recommend that management identify the projects with high environmental risks and monitor that required mitigation is completed an earlier stage of the project completion.
WD Regional Response
The Secretariat will consider implementing a file management policy of requiring the proponent, via their CAO and/or Engineer/Consultant, to submit an affidavit with each claim or prior to final claim. The affidavit will state that all environmental mitigation measures identified within their Contribution Agreement have been or are being fulfilled.
