PACC Committee Report

Introduction
Observations and Recommendations
Conclusion

Pursuant to Standing order 108(3)(e), the Standing Committee on Public Accounts has the honour to present its

The Standing Committee on Public Accounts has considered Chapter 27 of the December 1998 Report of the Auditor General of Canada (Grants and Contributions: Selected Programs in Industry Canada and Department of Canadian Heritage) and the Committee has agreed to report the following:

Grants and contributions are part of government expenditures known as transfer payments, which are payments of money from the federal government to individuals and organisations of various types, such as businesses or other levels of government (27.7).

The federal government spent a total of $39.5 billion in grants and contributions in the 1998-1999 fiscal year (27.10). This represents approximately a quarter of the federal government’s expenditures for that period.

Grants are unconditional transfers, that is, they do not require the recipient to meet future performance requirements once the eligibility and entitlement requirements are met.

Contributions, on the other hand, are transfer payments subject to performance conditions that are specified in contribution agreements. In order to be reimbursed for specific costs over the life of the agreement, the recipient must continue to show that the performance conditions are met (27.8). Unlike grants, the federal government can usually audit contributions.

Over the past 21 years, the Office of the Auditor General (OAG) has carried out several audits on the management of grant and contribution programs throughout federal departments and agencies. These audits identified persistent and consistent shortcomings ranging from problems in compliance with program authorities, weaknesses in program design, instances of poor controls, and insufficient performance control and reporting.

The Office of the Auditor General (OAG) attributes these persistent problems to weak management practices, such as difficulty in setting clear and attainable goals, problems in exercising due diligence and measuring performance (27.23). The OAG noted in subsequent follow-up audits specific improvements in some areas but problems still persist each time the OAG audited grant and contribution programs (27.22).

It was in the context of this issue that the Standing Committee on Public Accounts decided to consider the findings and observations in Chapter 27 of the December 1998 Report of the Auditor General of Canada on grants and contributions: selected programs in Industry Canada and Department of Canadian Heritage. The Committee met on 11 February 1999 with Mr. Denis Desautels (Auditor General of Canada) and Mr. Peter Simioni (Principal, Audit Operations Branch). Representing the Department of Canadian Heritage were Mr. Norman Moyer (Assistant Deputy Minister, Canadian Identity) and Ms. Anne Scotton (Director General, Corporate Review). Ms. Diane Vincent (Assistant Deputy Minister, Operations Sector) and Mr. Michael Binder (Assistant Deputy Minister, Spectrum, Information Technologies and Telecommunications) represented Industry Canada.

In his opening statement, the Auditor General of Canada, Mr. Denis Desautels, made the following observation: that twenty-one years of auditing federal grant and contribution programs have uncovered persistent and consistent weaknesses. Significant opportunities remain to improve the management of the Multiculturalism Program of the Department of Canadian Heritage and the Ontario Base Closure Adjustment Program (OBCAP) delivered by Industry Canada. Industry Canada could also strengthen its accountability for performance under its contribution agreements with CANARIE (Canadian Network for the Advancement of Research, Industry and Education), and PRECARN Associates Inc., which stands for pre-competitive advance research network (1535).

The weaknesses found were in the areas of compliance with program authorities, program design, control, performance measurement and reporting. The persistence of these problems, according to the Auditor General, is partially attributable to decision makers not following the government’s own rules on grant and contribution programs and weak management practices (1535). To address the problem of weak management practices, the Office of the Auditor General is currently developing and will soon publish a performance management framework that will set out expectations of management and assist managers to think critically about their programs (1535).

The Auditor General indicated that the present audit focussed on a critical management issue of what constitutes due diligence in assessing applications for grants and contributions. According to the Auditor General, due diligence means ensuring that funding decisions take into account the funding criteria set by the Treasury Board and that they are based on reliable information (1537).

The present audit focussed on the direct delivery of grants and contributions under the Multiculturalism Program of the Department of Canadian Heritage and the Ontario Base Closure Adjustment Program (OBCAP) of Industry Canada. Also considered in the audit was Industry Canada’s management and administration of indirect delivery of contribution programs.

At the end of the audit, there remained three principal issues that still needed to be addressed. First of all, a clearer definition of expected results is required in order to assess whether grant and contribution programs achieve their intended goals. Second, application of due diligence to ensure that all funded projects represent value-for-money to both the applicant and the program. Thirdly, a review of the accountability arrangements and performance expectations for indirect delivery of grant and contribution programs (1543).

The witness representing the Department of Canadian Heritage, Mr. Norman Moyer, fully agreed with the Auditor General’s recommendations regarding the Multiculturalism program, particularly in the areas of clarifying program objectives, the application of due diligence in assessing, monitoring and evaluating projects, and the proper reporting of program performance (1550).

The witness for Industry Canada, Mrs. Diane Vincent, welcomed the Auditor General’s proposal to develop a performance management framework for grant and contribution programs and indicated to the Committee that Industry Canada would gladly collaborate with the Office of the Auditor General in further developing this framework (1555).

Several times during the meeting, Committee Members expressed concerns regarding the vagueness of performance expectations of certain grant and contribution programs, particularly under the Multiculturalism Program delivered by the Department of Canadian Heritage. Evaluation of program effectiveness and assessment of value-for-money is difficult, if not impossible, to undertake without clearly stated and focussed goals and expected results.

This prompts the Committee to support the following recommendations:

Committee Members also expressed concern about how departments managed and monitored their grant and contribution programs. The Auditor General’s Report found many examples where the Departments of Canadian Heritage and Industry Canada could have demonstrated more diligence in how they administered, documented, evaluated, and carried out the assessment of grant and contribution programs under their responsibility.

Particularly, for Industry Canada, the audit found many opportunities to improve the accountability for performance under its indirect delivery of contribution programs (i.e. CANARIE Inc. and PRECARN Associates Inc.). For example, business and operating plans provided by third parties could include annual performance expectations by which the department could monitor the performance of third party delivery of grant and contribution programs.

As a result of these concerns, the Committee recommends the following:

While acknowledging the efforts already undertaken by the various departments in addressing the issues raised by the Auditor General, the Committee remains concerned about the persistence of the problems regarding the management and administration of grant and contribution programs. Since 1977, audits of grant and contribution programs have

identified the same problems: weakness in program design, examples of poor controls, insufficient performance measurement and reporting. Although specific examples of improvements exist, the Office of the Auditor General continues to find the same consistent and persistent problems each time they audit grant and contribution programs (1535).

In view of the persistence of the problems associated with grant and contribution programs, the Committee does not believe that gradual reform is sufficient to address the issues identified in over two decades of audits. A more comprehensive approach is required. Thus the Committee strongly suggests that:

Grant and contribution programs require immediate attention given their size relative to other federal government expenditures and their potential impact on the welfare of Canadians. The Committee believes that the proposed recommendations provide the first critical steps to deal with the outstanding issues that have to date impeded the proper functioning of these programs and will go a long way to ensure better accountability to Parliament and to Canadians in general.

Pursuant to Standing Order 109, the Committee requests that the Government table a comprehensive response to this Report.

A copy of the relevant Minutes of Proceedings (Meeting Nos. 53 and 56) is tabled.

Respectfully submitted,

JOHN WILLIAMS

Chair