Follow-up Audit of the Toronto Waterfront Revitalization Initiative. AUDIT REPORT September 2009

Transcription

1 Follow-up Audit of the Toronto Waterfront Revitalization Initiative AUDIT REPORT September

2 Table of Contents Table of Contents 2 Executive Summary 3 Background 4 Audit Objective and Scope 5 Approach, Assurance Statement and Auditing Standards Employed 6 Conclusions 7 Findings by Recommendation 8 Members of the Audit Team 17 2

3 Executive Summary The Toronto Waterfront Revitalization Initiative (TWRI) began in 2000, as part of a joint effort by the Government of Canada, the Province of Ontario and the City of Toronto to revitalize the Toronto waterfront through investments in infrastructure and recreational projects. Each level of government has committed $500 million to support this initiative. The Government of Canada s participation is manifest through a contribution program with the designated recipient being the Toronto Waterfront Revitalization Corporation (TWRC). The TWRI was initially led by Transport Canada (TC). Since its inception, however, the TWRI has been subsequently transferred between five other departments. While at Human Resources and Social Development Canada (HRSDC), an audit was initiated by their internal audit group in The objective of that audit was to provide assurance that the TWRC was in compliance with the terms and conditions of its Priority Project Contribution Agreement with the federal government. The HRSDC audit resulted in twelve recommendations and related management action plan. The objective of the follow-up audit is to provide the Department of Finance, which is currently responsible for the TWRI, with an update on the status of the management action plan that was to be implemented to address recommendations from the HRSDC audit in Our follow-up audit concluded that the federal TWRI Secretariat, which is responsible for policy development, program management, and monitoring of the TWRI on behalf of the federal government, has appropriately addressed all twelve of the recommendations from the 2005 HRSDC TWRI audit. 3

4 Background The Toronto Waterfront Revitalization Initiative (TWRI) began in 2000, as part of a joint effort by the Government of Canada, the Province of Ontario and the City of Toronto to revitalize the Toronto waterfront through investments in infrastructure and recreational projects. Each level of government has committed $500 million to support this initiative. The Government of Canada s participation is manifest through a contribution program with the designated recipient being the Toronto Waterfront Revitalization Corporation (TWRC). The federal TWRI Secretariat is responsible for policy development, program management, and monitoring of the TWRI on behalf of the federal government. The TWRI was initially led by Transport Canada (TC). Since its inception, however, the program has been subsequently transferred between five other departments Human Resources and Social Development Canada (HRSDC) 2005 Citizenship and Immigration Canada (CIC) 2006 Treasury Board of Canada Secretariat (TBS) 2007 Environment Canada (EC) 2008 The Department of Finance (FIN) While at HRSDC, an audit was initiated by their internal audit group in The objective of that audit was to provide assurance that the TWRC was in compliance with the terms and conditions of its Priority Project Contribution Agreement with the federal government. The HRSDC audit resulted in twelve recommendations and a related management action plan. This audit was not originally part of the Department of Finance s Risk-Based Audit Plan, as the TWRI only recently became part of the Department s mandate. An Order in Council was signed on October 30, 2008, transferring the federal TWRI Secretariat from the Department of the Environment to the Department of Finance. The Department of Finance s Internal Audit and Evaluation Branch received approval to conduct this audit from the Deputy Minister on December 5, 2008, and added it to its 2009/2010 audit plan, in order to better understand the risk related to the transfer of the TWRI. 4

5 Audit Objective and Scope Objective The objective of the follow-up audit is to assess the extent to which the twelve recommendations and management action plan for the 2005 HRSDC Audit of the TWRI have been properly implemented. Scope The audit scope includes determining whether the twelve recommendations and the management action plan relating to the 2005 HRSDC Audit of the TWRI have been implemented. This audit does not include the following: A program or operations audit of the TWRI. An audit of the federal TWRI Secretariat activities, except for those related to the twelve recommendations of the 2005 HRSDC Audit. 5

6 Approach, Assurance Statement and Auditing Standards Employed The audit was conducted in accordance with the International Standards for the Professional Practices of Internal Auditing. These standards require that the audit be planned and performed in such a way as to obtain reasonable assurance that the audit objective was achieved. During the audit, appropriate procedures were followed and sufficient evidence was obtained to support the accuracy of findings and conclusions presented in this report. Audit procedures included, but were not limited to, interviews, observations, review of supporting documentation and analytical reviews. The audit criteria used to develop the required audit tests were based on good management practices, applicable policies, regulations, and legislation. 6

7 Conclusions Audit Objective The objective of the audit is to assess the extent to which the recommendations and management action plan for the 2005 HRSDC Audit of the Toronto Waterfront Revitalization Initiative have been properly implemented. Our audit concluded that the federal TWRI Secretariat, which is responsible for policy development, program management and monitoring of the TWRI on behalf of the federal government, has appropriately addressed all twelve of the recommendations from the 2005 HRSDC TWRI audit. 7

8 The following section summarizes findings on the proposed action plan developed by management to address the recommendations contained in the 2005 HRSDC Audit Report and the current status of their implementation. The status of each recommendation s implementation was measured as either: 1) Fully Implemented 2) Substantially implemented 3) Partially implemented 4) Not implemented A brief summary of Internal Audit and Evaluation s assessment has been included with each followup finding. 8

9 Recommendation #1: TWRC should re-allocate the unallocated corporate costs. The TWRI Secretariat should review the allocation method used. Once satisfied that the allocation method is sound and reasonable, TWRI Secretariat should ensure that none of the five projects have exceeded the expenditure limitations as set out in the Contribution Agreement. If TWRC decline to reallocate these costs, the Crown should proceed to recover the portion of unallocated corporate costs that has been paid to TWRC. Management Action Plan #1: This issue is currently being addressed at the Inter-governmental Steering Committee (IGSC) table with the discussions/negotiation of a Corporate cost Contribution agreement. The corporate costs in question will be reallocated via an agreed upon allocation model. Since the HRSDC Audit in December 2005, unallocated corporate costs incurred by the TWRC fall under a separate Contribution Agreement. This Contribution Agreement provides details for both objectives and costs, allowing the TWRI Secretariat to monitor project costs for each Contribution Agreement separately and to oversee that none of the projects exceed expenditure limitations. Recommendation #2: A schedule for project milestones and anticipated dates of achievement should be inserted into the Contribution Agreement, which would help to ensure work is completed within budget and according to plan. Furthermore, a cash flow forecast should be incorporated into the Contribution Agreement, which would help the TWRI Secretariat detail when the funding is required and to which category of expense the funding will go toward. Management Action Plan #2: The current contribution agreement template utilized at CIC requires that the full approved proposal be appended to the contribution agreement that includes details of the activities and a work plan with detailed budget, timetable and expected results for each activity within the project. The TWRI Secretariat will ensure that this level of detail is included in the future amendment of Priority Projects Contribution Agreement. The revised Contribution Agreement template includes a Work and Deliverables Plan, Quarterly and Annual Progress Reports and Quarterly Cash Flow and Record of Expenditure Reports. 9

10 Recommendation #3: The TWRI Secretariat should redefine the definitions of indirect and overhead costs in Schedule B of the Contribution Agreement. TWRI Secretariat may consider referring to Public Works and Government Service Canada s Contract Cost Principles (Section DSS ) as a guideline in drawing new definitions. Management Action Plan #3: The secretariat will refer to internal and external documentation to develop definitions of indirect and overhead costs. The definitions will be included in section 1.1 of the new contribution agreement. The TWRI Secretariat has redefined indirect and overhead costs ; and clearly identifies the eligible and ineligible costs in Schedule C of the revised Contribution Agreement template. Recommendation #4: The TWRI Secretariat should ensure the Contribution Agreement allows for the incorporation of measurable objectives, which would allow the department to set ceiling amounts and milestones for each individual task within individual priority project levels. This would allow monitoring and facilitate progress evaluation and prevent over-spending on individual tasks performed within the four Priority Projects of the Contribution Agreement. Management Action Plan #4: The current contribution agreement template utilized at CIC requires that the full approved proposal be appended to the contribution agreement and includes details of the activities and a work plan with detailed budget, timetable and expected results for each activity within the project. This level of detail allows CIC to ensure that costs for particular activities do not exceed the authorised amounts. The TWRI Secretariat will ensure that this level of detail is included in the future amendment of Priority Projects Contribution Agreement. The revised Contribution Agreement template includes measurable objectives in the form of details of activities with budgets, timetables and expected results for each activity within the project. 10

11 Recommendation #5: Include a Financial and Progress Reporting Schedule similar to Schedule D of the Contribution Agreement Template (Developed in 2004) with TWRC to ensure all parties understand the due dates of the various reports. Management Action Plan #5: The current contribution agreement template utilized at CIC has a detailed Section 5 Payments and Reporting which was developed in conjunction with CIC Finance Branch to meet the expectation of the TB Policy on Transfer Payments. The TWRI Secretariat will ensure that this level of detail is included in the future amendment of Priority Projects Contribution Agreement. The revised Contribution Agreement template contains a greater level of detail than the original Contribution Agreement, as it includes Quarterly and Annual Financial and Progress Reporting schedules. 11

12 Recommendation #6: Claim Form and Progress Report templates should be included as a Schedule in the Contribution Agreement. TWRC would be required to complete these templates with their financial and progress reports which would provide greater details on how the funding was spent and provide better linkages between the financial information and project progress. Management Action Plan #6: The current contribution agreement template utilized at CIC includes a Schedule D Quarterly and Annual Progress Report guidelines for the proponent which was developed in conjunction with the Finance and Legal Branch at CIC to comply with the TB Policy on Transfer Payments. A review of the CIC TWRI Contribution Agreement will be performed to determine whether the enhanced Schedule D of the new contribution agreement template is sufficient or if cash flow, record of expenses and progress reporting forms be appended to the Contribution Agreement. The TWRI Secretariat will ensure that the required level of detail is documented and included in the future amendment of Priority Projects Contribution Agreement. A review of the Contribution Agreement resulted in a greater level of required financial and progress reporting detail. Financial and progress reporting schedules have been included in the revised Contribution Agreement template and evidence of use has been demonstrated. 12

13 Recommendation #7: The Contribution Agreement should also require that copies of TWRC General Ledger at the account summary level should be attached to the financial and progress reports. Management Action Plan #7: The current contribution agreement template utilized at CIC has a detailed Section 5 Payments and Reporting which was developed in conjunction with CIC Finance Branch. Specifically, this section requests that the proponent provide interim financial statements that includes a statement of financial position and a statement of operations that includes all revenues and costs incurred by the proponent for the Project. This level of detail is the same as attaching the general ledger to the claim form. The TWRI Secretariat will ensure that this level of detail is included in the future amendment of Priority Projects Contribution Agreement. The TWRI Secretariat has made significant changes to the revised Contribution Agreement template to define financial payment and reporting requirements. As a result, the TWRC has provided the Secretariat with appropriate financial information to support their Progress Reports. 13

14 Recommendation #8: Any adjustments made to previous Requests for Interim Payments should be documented and explained in a report submitted to the Secretariat for review. Management Action Plan #8: Additional discussions will take place with TWRC by March 31, 2006 on previous adjustments. The TWRI Secretariat will review the necessary documentation on previous interim payments and adjustments. In addition, the TWRI Secretariat has communicated to the TWRC that when an old fiscal year has been finalized and closed off it remains closed and can not be re-opened for adjustments. The TWRC has included the required documentation and explanations with the Interim Payment Requests submitted to the TWRI Secretariat. Recommendation #9: It is recommended that the department examines and investigates those contracts valued at over $75,000 that were awarded based on a non-competitive contracting method. Management Action Plan #9: Additional discussions will take place with TWRC with the intent to have a written rationale on file for the non-competitive contracts. Any follow-up investigations will be completed and be documented in the project file. The TWRI Secretariat has disallowed non-competitive contracts valued over $75,000; and has been assessing competitive contracts valued at over $75,000 to ensure compliance. One example includes a recent audit of one of the projects. The audit found that a competitive process was used for all contracts over $75,000. A similar audit of another project is scheduled for

15 Recommendation #10: Although it is understood that special circumstances may arise where the organization will be required to enter into agreements for over $75,000 with third parties, awarding these contracts on a non-competitive basis does not comply with Clause 5.1 of the Contribution Agreement. Therefore, it is recommended that the department amend Clause 5.1 of the Contribution Agreement to require TWRC obtain departmental authorization for any future non-competitive procurements (except in circumstances as defined by the Treasury Board Secretariat Contracting Rules). Management Action Plan #10: The contracting procedures clause is now Section 12 in the new contribution agreement template. The TWRI Secretariat will ensure that this clause is included in the Priority Projects Contribution Agreement and matches and is adhered to by TWRC. The TWRI Secretariat has included a detailed explanation of the contracting procedures in Section 12 of the revised Contribution Agreement template and has disallowed the use of non-competitive processes for contracts over $75,000. Recommendation #11: It is recommended that the secretariat examines and investigates the reasonability of trips made overseas. Management Action Plan #11: Additional discussions will take place with TWRC with the intent to have a written rationale on file for all overseas travel. Any follow-up investigations will be completed and be documented in the project file. The TWRI Secretariat has received documentation from the TWRC for the purpose of investigating the reasonableness of trips made overseas. The expenses have been deemed to be reasonable. 15

16 Recommendation #12: TWRI Secretariat should amend the Contribution Agreement to define allowable travel. The new policy and guidelines should be compliant with the existing Treasury Board Travel Policy and departmental guidelines. Management Action Plan #12: Documentation on Treasury Board travel policy was provided to the TWRC. The TWRC is in the process of formulating a travel policy. Future Contribution Agreements for the Priority Projects will contain a clause on allowable travel. The TWRI Secretariat has clearly defined allowable travel in the revised Contribution Agreement template. The TWRC has adopted the Treasury Board / National Joint Council Travel Directive for all TWRC employees on February 1,

17 Members of the Audit Team This audit was conducted by: Nathalie M. Lalonde, CGA, Audit Manager, Internal Audit and Evaluation Ziad Shadid, CGA, Audit Manager, Internal Audit and Evaluation Marie-Claude Lebel, CMA, Senior Financial Auditor, Internal Audit and Evaluation Rima Ben Saad, Senior Financial Auditor, Internal Audit and Evaluation The audit report was reviewed and approved by: Christian Kratchanov, MBA, CIA, Chief Audit Executive 17