Audit Report - Audit of Language Instruction for Newcomers to Canada (LINC) Contribution Program

Audit Report
Internal Audit and Disclosures Branch
Citizenship and Immigration Canada
October 2005

Table of Contents

• 1. Introduction
• 2. Audit Objective
• 3. Audit Scope
• 4. Methodology
• 5. Observations and recommendations
  • 5.1. OAG Follow-Up
  • 5.2. LINC Contribution Agreements
• 6. Conclusions
• 7. Management Action Plan

1. Introduction

The Internal Audit and Disclosures Branch completed a risk-based audit plan for Citizenship and Immigration Canada (CIC) that identified the need for an audit of the adequacy of financial and management controls over contribution funding for the Language Instruction for Newcomers to Canada (LINC) program.

The LINC program provides basic language training to adult newcomers in one of Canada’s official languages to facilitate their social, cultural and economic integration into Canada.

The LINC program is delivered through contribution agreements with service providers. There are three components to LINC for which service providers can obtain funding:

• linguistic eligibility determination and related services;
• language training; and
• delivery assistance.

Contribution agreements with service provider organizations (SPOs) are generally managed by the local offices with the exception of the Ontario Region, where they are managed by a central regional settlement office. The Integration Branch at national headquarters also manages contribution agreements that are national in scope. The total amount of funds committed for the 207 different LINC SPO agreements in the Atlantic Region, Ontario Region, Prairies and Northern Territories Region, and the B.C. and Yukon Region included in our scope amounted to approximately $75.4 million for the 2004–05 fiscal year.

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

2. Audit Objective

The objectives of the audit were to assess the following:

• the follow-up on the implementation of the recommendations made by the Officer of the Auditor General (OAG) in Section 4 of the 2001 report Voted Grants and Contributions: Program Management;
• the adequacy of financial and management controls over the contribution agreements; and
• compliance with financial authorities.

3. Audit Scope

The audit scope covers both the progress made against the recommendations of the Auditor General and the management of individual contribution agreements with SPOs.

CIC manages the delivery of settlement services, including LINC, 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 service provider agreements managed by these three provinces were not included in the scope of our audit.

We examined contribution agreements for which payments were made during the 2004–05 fiscal year.

4. Methodology

There were two lines of enquiry: a follow-up on the OAG 2001 report, and the management of the contribution agreements.

The follow-up on the OAG recommendations involved interviews with headquarters and regional staff to determine the actions taken, as well as obtaining documentation to validate the information gathered during interviews. The file review undertaken to review the contribution agreements also provided information to confirm that follow-up actions had taken place. The three OAG recommendations constitute the criteria for this line of enquiry.

The audit of contribution agreements involved an examination of the management of contribution agreements to ensure compliance with legislation and policy. A file review was conducted in the four regions that deliver the LINC program. A random sample of 42 contribution agreements in three regions was drawn from the population of 207 contribution agreements for which payments were issued during the 2004–05 fiscal year in the four regions. The criterion for this line of enquiry was compliance with the Financial Administration Act (FAA) and Treasury Board’s Transfer Payments Policy.

Audit field work was conducted from January to March 2005.

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.

5. Observations and recommendations

5.1. OAG Follow-Up

We expected to find that the Department had implemented the Auditor General’s recommendations as they applied to the LINC program. There were three recommendations that applied to LINC:

1. the Department should move to multi-year funding agreements with its service providers;
2. all high-risk contribution agreements should be subject to at least one formal site visit to monitor financial controls and project activities; and
3. where service providers deliver services at several locations, monitoring plans should ensure that all locations are monitored over time.

5.1.1 Multi-Year Funding

In July 2004, the Department issued guidance to the regions regarding the implementation of the multi-year funding agreements with service providers. This policy is now incorporated into the Settlement Manual. The Department began to sign multi-year agreements with its LINC SPOs for the funding period of 2005–06.

5.1.2 Monitoring Service Providers

We examined 42 contribution agreements and found that risk-based monitoring plans existed in all but four cases. In the absence of monitoring plans, we were unable to determine whether high-risk contribution agreements were being monitored in the four cases. Of the remaining 38 with a risk-based monitoring plan, two were identified as high risk. The first high-risk file had evidence of a financial audit and activity monitors on a small number of sites, but there was no plan to conduct monitoring on any of the remaining sites that provide LINC services, of which there were several. In the other case, a financial monitoring exercise had been conducted but not an activity monitoring exercise. Monitoring requirements will be addressed further in section 5.2.

During our review, we were informed that some of the regions had developed a tool to aid them in monitoring SPO organizations who deliver LINC services at multiple sites. However, this tool was not systematically in place across the country. It was in place only for the high-risk contribution agreement with numerous sites discussed above.

The Settlement Manual provides guidance on these issues. However, as it was issued midway through the fiscal year, officers did not have the benefit of its guidance during the period under examination.

5.2 LINC Contribution Agreements

All the offices that managed LINC contribution agreements in the four regions were included in the sample population. However, only those offices whose contribution agreements were selected in our sample were visited. In broad terms, we examined four areas of administration of the contribution agreements. These were project selection, approval of the agreement, activity and financial monitoring, and compliance with payments.

We expected to find adequate financial and management controls over the contribution agreements examined in each of those areas. We also expected to find compliance with financial authorities. The criteria for this assessment were drawn from Treasury Board’s Transfer Payments Policy and the FAA.

5.2.1 Management Controls

Overall, we found that LINC contribution agreements were well managed. However, there were a small number of inconsistent practices with respect to management controls over the LINC contribution agreements. Weaknesses were identified in the documentation of the selection decision — four of forty-two files were missing documentation of the proposal assessment, and five files that had an assessment on file were missing evidence of review by the manager. There were also four agreements lacking a risk-based monitoring plan as described above.

Recommendation 1

The Integration Branch should compile and review the administrative tools used by various regions as part of the implementation of their contribution accountability framework. These tools should be made available to ensure consistency in decision making and improve operational practices.

Response

The Integration Branch agrees with this recommendation. As part of ongoing activities to implement the contribution accountability framework, a series of national tools are to be developed within the Management Control Framework. This framework will define and implement standard administrative practices in areas such as proposal assessment and approval, contribution agreement monitoring, financial management and risk monitoring for offices that deal with contribution programs.

5.2.2 Financial Controls and Financial Authorities

Overall, we found that the contribution agreements were generally compliant with financial authorities. However, we found weaknesses in the effective use of cash flow statements for the purpose of monitoring payments, and the issuance of a small number of advance payments. Again, the settlement policy manual provides guidance on these issues. However, the officers did not have the benefit of its guidance throughout the sample period.

Recommendation 2

The Integration Branch should ensure that officers are aware of their financial responsibilities as defined in the Settlement Manual.

Response

The Integration Branch agrees with this recommendation. The Settlement Manual was released in the winter of 2004. The Integration Branch, through various mechanisms that included the National Language Training Working Group, will continue to provide direction and guidance to the regions.

NHQ will remind the regions of the officers’ financial responsibilities as defined in the Settlement Manual.

6. Conclusions

As a result of our examination and follow-up on the Auditor General’s recommendations, we found that the LINC contribution agreements were well managed, with appropriate financial and management controls in place. The agreements examined were generally compliant with financial authorities. (Section removed)

7. Management Action Plan