Audit Report - Audit of the Immigrant Settlement and Adaptation Program and the Host Contribution Program

Audit Report
Internal Audit and Accountability Branch
Citizenship and Immigration Canada
July 2006

Table of Contents

• 1. Introduction
• 2. Audit Objective
• 3. Audit Scope
• 4. Methodology
• 5. Observations and Recommendations
  • 5.1. Project Selection
  • 5.2. Approval of the Agreement
  • 5.3. Activity and Financial Monitoring
  • 5.4. Compliance of Payments
• 6. Conclusions
• 7. Management Action Plan

1.0 Introduction

The Internal Audit and Accountability Branch of Citizenship and Immigration Canada (CIC) completed a risk-based audit plan that identified the need for an audit of the adequacy of financial and management controls over contribution funding for all three departmental settlement programs: the Language Instruction for Newcomers to Canada (LINC) program, the Immigrant Settlement and Adaptation Program (ISAP) and the Host program. The LINC audit has been completed and was approved by the Audit Committee in September 2005. This report will address the ISAP and Host audits.

ISAP has two streams of funding. Stream A funds service providers who deliver direct services to immigrants such as reception, orientation, translation, interpretation, referral to community resources, solution-focused counselling, general information and employment-related services. Stream B funds indirect services that aim to improve the delivery of settlement services, including workshops, research projects and staff training programs. The total amount of funds committed for the 147 ISAP contribution agreements included in our scope amounted to approximately $32 million for the 2004–05 fiscal year.

The Host program is a volunteer matching program where the service provider matches newcomers with volunteers familiar with Canadian ways who can help newcomers learn about available services and how to use them, practise English or French, make contacts in their field of work and participate in the community. The total amount of funds committed for the 38 Host contribution agreements included in our scope amounted to approximately $3 million for the 2004–05 fiscal year.

The Department has developed a contribution accountability framework (CAF) that helps to ensure accountability for departmental expenditures, monitor service delivery, and evaluate the effectiveness of contribution programs in meeting the settlement needs of newcomers.

2.0 Audit Objective

The objective of the audit was to assess the adequacy of financial and management controls over ISAP and Host contribution agreements.

3.0 Audit Scope

CIC manages the delivery of settlement services, including ISAP and Host, in all provinces and territories, with the exception of Quebec (Canada Quebec Accord, 1991), British Columbia (immigration agreement, 2004) and Manitoba (immigration agreement, 2003). The agreements in place with these three provinces were not examined.

The audit scope covered the management of contribution agreements with service provider organizations (SPOs) in three regions where ISAP and Host are delivered by CIC: the Atlantic Region, the Ontario Region, and the Prairies and Northern Territories Region. The audit also covered ISAP agreements in place at CIC headquarters and managed by the Integration Branch. We examined the contribution agreements in place during fiscal year 2005–06.

ISAP Stream B includes the Enhanced Language Training initiative which was introduced as a pilot project in 2003, and is designed to provide higher levels of language training, including job-specific language training, to help immigrants and refugees find and keep work commensurate with their experience and skills. Because the initiative was still in its formative stages—the current funding level was announced in December 2004—it was not included in the scope.

4.0 Methodology

The audit of contribution agreements involved an examination of the management of contribution agreements to assess the adequacy of financial and management controls, which included an assessment of compliance with legislation and policy. A judgmental sample of 30 out of 147 ISAP contribution agreements and 10 out of 38 Host contribution agreements was drawn from agreements in place during the 2005–06 fiscal year.

The criteria for the examination of the contribution agreements were derived from the Financial Administration Act (FAA) and the Treasury Board Secretariat (TBS) Policy on Transfer Payments.

The TBS Policy on Transfer Payments requires that due diligence be exercised in the selection and approval of recipients of transfer payments and in the management and administration of the programs. The Department developed the settlement manual with this in mind. Many of the criteria used to assess the controls over contribution agreements were derived from this manual.

The audit was conducted in accordance with the Government of Canada’s Policy on Internal Audit, as well as auditing standards prescribed by the Institute of Internal Auditors. The field work was done in July 2005.

5.0 Observations and Recommendations

In broad terms, we examined four areas of management of the contribution agreements: project selection, approval of the agreement, activity and financial monitoring, and compliance of payments. We expected to find adequate financial and management controls over the contribution agreements examined in each of those areas, including compliance with financial authorities. The criteria for this assessment were drawn from the TBS Policy on Transfer Payments and the FAA.

5.1 Project Selection

In order to demonstrate due diligence in the selection and approval of the recipients of transfer payments, we expected to find an application on file, with evidence of both the settlement officer and the manager’s review. The settlement manual indicates that settlement officers are expected to assess the proposal for admissibility, feasibility, appropriateness and cost effectiveness. The tools to accompany these requirements have not yet been developed by national headquarters, although some regions have taken the initiative to develop them and have shared them informally with other regions.

The Integration Branch has informed us that as part of their ongoing activities to implement the CAF, a series of national tools are to be developed within the management control framework (MCF) which will define standard administrative practices in areas such as the proposal assessment and approval. We fully support this initiative as the implementation of the CAF is essential to ensure compliance with the TBS Policy on Transfer Payments.

All the files examined contained a proposal. However, eight ISAP and three Host files had no evidence of a proposal assessment on file, and six ISAP and five Host assessments were lacking evidence of a manager’s review.

Recommendation 1

The ADM of Operations and the Integration Branch should ensure that all proposals undergo an assessment that includes a component of management review.

Management Response

DG, Integration: Agree. The Department is encouraged to note that the majority of proposals assessed did demonstrate an assessment and management review. In terms of standardizing the assessment process, the settlement manual outlines a standard proposal assessment process. While the process is outlined, the Department has yet to develop national tools that will further assist with the standardization of proposal assessment. These will be developed in the next fiscal year as part of the MCF. Furthermore, to ensure effective implementation of these standard practices and national tools, CIC will develop settlement officer training modules for all regions.

ADM, Operations: The ADM of Operations agrees with this recommendation and will work with the regional DGs to support the outcome of the Integration Branch review and ensure that the tools developed are implemented, including the proposal assessment. In the interim, the procedures for the proposal assessments will be strengthened.

5.2 Approval of the Agreement

As part of the CAF, CIC developed standardized contribution agreement forms, which are in use across the country. We assessed the template and found that it complied with the TBS Policy on Transfer Payments.

In addition to the use of the templates, we expected to find evidence of the following on the files reviewed:

• the contribution funds identified in the agreement were within the financial limitations identified in the program terms and conditions;
• clear descriptions of the objectives;
• reasonable costs, broken down on a cash-flow forecast appended to the agreement;
• evidence that commitment certification (section 32 of the FAA) was on file prior to the contribution agreement being signed by CIC;
• observance of signing authority levels; and
• approval of the project prior to payments being made.

All the agreements examined had the appropriate contribution agreement on file, and evidence of the elements described above were on file.

5.3 Activity and Financial Monitoring

Settlement officers are able to monitor the implementation of contribution agreements in two ways: by reviewing the accounting statements and statements of progress supplied by the SPO, and by preparing and implementing a monitoring plan that includes on-site visits.

In order to comply with the TBS Policy on Transfer Payments, the SPO must provide the Department with an accounting statement and a statement of progress on the achievement of performance objectives at the time of claiming for a payment. This applies when a contribution is paid for achieving the performance objectives or when expenditures are reimbursed. If, on the other hand, the Department is issuing advances, the advance should be limited to prescribed amounts depending on the dollar value and duration of the agreement, and they should be accounted for in accordance with the policy prior to any further advance being issued.

In the sample of 30 contribution agreements we selected as part of ISAP, we observed that a number of files were missing accounting statements or statements of progress to demonstrate achievement of the stated objectives. The majority of our observations (16 of 20 agreements) resulted from the initiation of a pilot project in the Ontario Region. This pilot project, which began in April 2005, was terminated in July 2005.

In the sample of 10 contribution agreements we selected as part of the Host program, we observed that seven files were missing accounting statements or statements of progress to demonstrate achievement of the stated objectives. Four of the seven formed part of the pilot project mentioned above.

Our audit found that the pilot project did not conform to the requirements of the TBS Policy on Transfer Payments as it permitted the issuance of payments without the submission of supporting information in a manner consistent with this policy. The Ontario Region immediately terminated the pilot when the audit brought this observation to their attention.

In addition to the regular review of accounting statements and statements of progress supplied by the SPO, we expected that officers would be preparing and implementing a monitoring plan that included on-site visits. However, eight ISAP and two Host agreements were lacking a risk-based monitoring plan.

Recommendation 2

The ADM of Operations and the Integration Branch should ensure that accounting statements and statements of progress against the achievement of objectives are assessed at the time of claiming for a payment to ensure that financial and performance objectives are being achieved.

Management Response

DG, Integration: Agree. In its settlement manual, CIC does outline the requirement for service providers to provide narrative and financial reports (on a case by case or quarterly basis) to demonstrate that the performance objectives are being met. We will ensure that the requirement to provide such reports with the accounting statement is clearly outlined in the MCF.

ADM, Operations: The ADM of Operations agrees with the recommendation and will work with the regional DGs to ensure that the procedures regarding reporting requirements are strengthened.

Recommendation 3

The ADM of Operations and the Integration Branch should ensure adequate monitoring of the contribution agreements through the implementation of risk-based monitoring plans.

Management Response

DG, Integration: Agree. The Department will concentrate on developing national level risk-based monitoring guidelines and standardized tools as part of its MCF. This information will be included in its settlement manual and training modules.

ADM, Operations: The ADM of Operations agrees and will work with the regional DGs to ensure that monitoring practices are strengthened.

The settlement manual indicates that SPOs are to update their cash flow forecasts, usually on a quarterly basis, for monitoring and payment purposes. We examined the contribution agreements to ensure that this was being done. Six ISAP contribution agreements did not have updated cash flow statements on file. In addition, five files with variances from the cash flow did not have the required explanation on file. However, the cash flow statements in the Host agreements were up to date, and any variances were explained.

Recommendation 4

The ADM of Operations and the Integration Branch should ensure that officers are obtaining updated cash flow statements from service providers on a regular basis for monitoring and payment purposes.

Management Response

DG, Integration: Agree. The Department will develop settlement officer training modules as part of the MCF to ensure that settlement officers understand the necessity of obtaining updated cash flow forecasts for the files. The Department will also update the settlement manual, the MCF and the training modules to include the requirement to obtain explanations on cash flow variances from service providers and place these on file.

ADM, Operations: The ADM of Operations agrees and will work with the regional DGs to ensure that practices for monitoring of cash flow are strengthened.

5.4 Compliance of Payments

We examined the contribution agreements to ensure that they were compliant with the FAA. All the payments examined were compliant with financial authorities as defined in the FAA.

6.0 Conclusions

The objective of the audit was to assess the adequacy of financial and management controls over ISAP and Host. In order to do this, we examined four areas of management of the contribution agreements: project selection, approval of the agreement, activity and financial monitoring, and compliance of payments. We found that the contribution agreements examined complied with our expectations for the approval of the agreements and financial authorities. As noted in our report, the Department needs to strengthen the documentation of the selection decision, activity and financial monitoring, and the use of cash flow statements.

7.0 Management Action Plan