Audit of the Governance and Institutions of Government Program

Background

Aboriginal Affairs and Northern Development Canada (AANDC) supports First Nation communities in the implementation of strong, effective and sustainable governments. AANDC supports the development of First Nation institutions and governance capacity, while respecting Canada's constitutional and statutory obligations towards First Nations. AANDC oversees the implementation and administration of governance processes under the Indian Act, while at the same time developing and implementing legislation and policies that support the modernization of First Nation governance frameworks and transparent and accountable governance, such as the First Nations Elections Act.

The Governance and Institutions of Government Program ("the program") of AANDC encompasses two sub-programs: the First Nation Governments sub-program delivered by the Regional Operations Sector and the Treaties and Aboriginal Government Sector; and, the Aboriginal Governance Institutions and Organizations sub-program delivered by the Regional Operations Sector and the Land and Economic Development Sector. The Program's actual spending for 2014-2015 was $422M, and planned spending for 2015-2016 is $389M.

The program provides support to First Nation governments, as well as Aboriginal governance institutions and organizations through core and targeted programming. The intent of this support is to facilitate capacity development in the Aboriginal public service, the elected leadership, and entities that administer aggregate services on behalf of, or to, First Nation governments and their communities because good governance practices are essential for active Aboriginal participation in Canadian society and the economy.

Program delivery is managed collaboratively by regional and headquarters (HQ) program staff. Program staff is responsible for the delivery of initiatives that fall under their respective mandates. Staff in HQ is responsible to support the horizontal coordination of sub-programs, including performance measurement, monitoring and reporting.

Audit Objective and Scope

The audit objective was to assess: (i) the adequacy and effectiveness of departmental controls for designing, approving, integrating and reporting on this program; and, (ii) the appropriateness of the design of region and sector controls for delivering the program in an integrated, efficient and effective manner, and in compliance with program authorities and Treasury Board and AANDC policy requirements.

The scope of the audit included all key components of the Governance and Institutions of Government Program for the period of April 1, 2014 to July 15, 2015.

Headquarters and regional offices located in British Columbia and Quebec were visited as part of this audit, and the Northern Governance Program was excluded from the audit scope as it is managed under different authorities.

Statement of Conformance

This audit conforms to the Internal Auditing Standards for the Government of Canada, as supported by the results of the quality assurance and improvement program.

Positive Observations

The audit team observed examples of best practices related to the controls implemented for the Governance and Institutions of Government Program, including:

• The Indian Government Support (IGS) bi-weekly national conference calls provide staff that supports the IGS components of the program and Professional and Institutional Development with the opportunity to share information on a regular basis.
• IGS system user manuals are comprehensive and provide step by step instructions to perform all typical activities in the system.
• In one region visited, a Regional Program Guide was developed to provide regional recipients with a single aggregated source of details about all transfer payment programs.

Conclusion

Generally, the audit found that the design of region and sector controls for delivering the program in an efficient and effective manner, and in compliance with program authorities and Treasury Board and AANDC policy requirements is appropriate. Opportunities for improvement were noted in relation to ensuring funding agreements and supporting documentation are on file, and in how the program can be managed in a more integrated manner. In relation to program integration, there is an opportunity for AANDC to review the program's current structure and components to ensure that it is designed to effectively and efficiently support Department objectives.

Recommendations

The audit identified areas where management control practices and processes should be improved, resulting in the following two recommendations:

1. The Senior Assistant Deputy Ministers of the Regional Operations Sector and of the Treaties and Aboriginal Government Sector, and the Assistant Deputy Minister the Lands and Economic Development Sector, should collaborate with senior management to review the program's current structure and related Program Alignment Architecture.  
2. The Senior Assistant Deputy Minister of the Regional Operations Sector should work with regions to ensure that all documentation supporting funding agreements, including documentation provided by recipients and internal documents facilitating the assessment of applications and reports, are accounted for and saved in a timely manner in the Grant and Contributions Information Management System (GCIMS).

Management Response

Management is in agreement with the findings, has accepted the recommendations included in the report, and has developed a management action plan to address them. The management action plan has been integrated into this report.

2.1 Audit Objective

The audit objective was to assess: (i) the adequacy and effectiveness of departmental controls for designing, approving, integrating and reporting on this program; and, (ii) the appropriateness of the design of region and sector controls for delivering the program in an integrated, efficient and effective manner, and in compliance with program authorities and Treasury Board (TB) and AANDC policy requirements.

2.2 Audit Scope

The scope of the audit included all key components of the Governance and Institutions of Government Program for the period of April 1, 2014 to July 15, 2015.

Grants and contributions agreements that were established and/or were active during the period identified above were included in the audit scope. For this period, AANDC established over 3,100 grants and contributions agreements for a total value of approximately $496M within the following components:

• First Nation Governments sub-program:
  • Band Support Funding (BSF);
  • Band Employee Benefits (BEB); and,
  • Professional and Institutional Development Program (P&ID), including Aboriginal Representative Organizations (ARO).
• Aboriginal Governance Institutions and Organizations sub-program:
  • Tribal Council Funding (TCF);
  • Family Homes on Reserves and Matrimonial Interests or Rights Act;
  • First Nations Fiscal Management Act (FNFMA); and,
  • Aboriginal Financial Officers Associations (AFOA) Canada.

The remaining program components do not provide grants and contributions, but they play a key role in supporting First Nations in developing effective governance mechanisms. As such, the elections, by-laws, and policy components were addressed under audit criteria focusing on the adequacy and effectiveness of departmental controls for reporting on the program in an integrated fashion. These remaining components are:

• First Nation Governments Sub-Program:
  • Elections under the Indian Act and First Nations Elections Act (Elections);
  • Support to First Nations Governments (By-laws); and,
  • Policy and Legislative Initiatives (Policy).

Audit work was performed at Headquarters and regional offices located in British Columbia and Quebec. The Northern Governance Program was excluded from the audit scope as it is managed under different authorities.

Positive Observations

The audit team observed examples of best practices related to the controls implemented for the Governance and Institutions of Government Program, including:

• The Indian Government Support (IGS) bi-weekly national conference calls provide staff that support the IGS components of the program (i.e. BSF, BEB, TCF, P&ID) with the opportunity to receive status updates on changes made to relevant policies, details with regards to AANDC's annual priorities, discuss arising issues, and share leading practices. These meetings ensure that all regional offices are provided with the same instructions and information required to deliver these program components consistently across the country.
• IGS system manuals for end users, regional coordinators, and HQ system administrators are comprehensive and provide step by step instructions to perform all typical activities in the system for BSF, BEB, and TCF. The manuals reduce the risk of recipient information being processed inconsistently across regional offices, therefore providing a fair treatment of all funding requests.
• In one region visited, a Regional Program Guide was developed to provide regional recipients with a single aggregated source of details about all programs that offer funding opportunities, along with application and reporting details. This includes the following components of the program: BSF, BEB, TCF, P&ID (incl. AFOA). Recipients therefore do not have to spend time looking in multiple locations to understand funding programs offered by AANDC.

Performance Measurement and Monitoring

The audit expected to find that management has identified planned results and performance measures linked to program objectives, and that management monitors and reports against planned results on a regular basis.

The audit found that two separate performance measurement strategies (PMS) were created for the program, one for Governance and Institutions of Government (GIG) and one for MRP. These two PMS provide clearly defined performance indicators and targets that are aligned with program objectives identified in the PAA, along with accountabilities and timelines for data collection. The GIG PMS covers the majority of the program's components (including BSF, BEB, P&ID, ARO, TCF, FNFMA, AFOA, Elections, By-laws, Policy), and the MRP PMS focuses specifically on the Family Homes on Reserves and Matrimonial Interests or Rights Act component. The two documents were finalized after the dissolution of the Governance Branch but they were not integrated, and they do not reflect the program's new organizational structure. Together, these two performance measurement strategies identify 41 different performance indicators. There are 29 performance indicators outlined in the GIG PMS and 15 indicators outlined in the MRP PMS (note that three of the indicators are shared between the strategies).

The audit found that management does not systematically monitor and report against the program's performance indicators in an integrated fashion on a regular basis, as planned in the PMS. The results of only 14 of the 41 performance indicators are reported formally on a consistent basis by the Department, through documents such as the annual Departmental Performance Report (DPR) (five indicators reported) and quarterly reports (QR) (12 indicators reported with three of these being the same as those reported in the DPR). There is no mechanism in place to systematically monitor and report against the other performance indicators for the program as a whole.

The DPR is prepared annually by the Policy and Strategic Direction Sector and provides an overview of AANDC's financial and non-financial performance against the Department's PAA. In the 2014-2015 DPR, the Governance and Institutions of Government is identified as program 1.1, with two sub-programs; 1.1.1: First Nation Governments, and 1.1.2: Aboriginal Governance Institutions and Organizations. As outlined above, it provides an assessment of five of the program's 41 performance indicators:

• Percentage of audited financial statements made available to community members;
• Percentage of First Nations free of default;
• Percentage of First Nations that submitted a proposal that received funding;
• Percentage of First Nations scoring low risk on the Governance Section of the General Assessment; and,
• Percentage of First Nations scoring low risk on the General Assessment.

At the operational level, each sector currently reports on components of the program that it oversees through quarterly reports, but there is no aggregation of these reports to provide an overview of the program as a whole. The RO Sector aggregates the results of quarterly and year end reports prepared by regional offices, but the resulting aggregated report is not subsequently aggregated with quarterly reports prepared by the LED Sector and the TAG Sector. A review of a sample of quarterly reports revealed that some regions provide a partial assessment of the 12 performance indicators that are tracked through the quarterly reports. 

Most performance indicators included in the MRP performance measurement strategy (12 out of 15 in total) are tracked as required by the LED Sector, but this information is not shared with other sectors responsible for other components of the overall program.

For the remaining performance indicators, program management indicated that performance is tracked in various forms (e.g.. GCIMS, third parties for FNFMA, spreadsheets, etc.), but this information is not consolidated for monitoring purposes on an annual basis, or as required by the PMS. The audit did not confirm the tracking performed through these informal processes.

In summary, the program's overall performance against identified performance indicators is only partially aggregated on an annual basis, and therefore not providing management with the required information to properly govern and oversee the program as a whole. Figure 2 below provides a summary of the tracking of performance indicators.

Without monitoring and reporting processes designed to systematically assess the program's overall performance in an integrated fashion, Senior Management is not provided with the opportunity to perform governance, oversight, and coordination activities in an effective and timely fashion to ensure that program objectives are achieved.

Sharing Lessons Learned and Leading Practices

The audit expected to find that lessons learned activities are performed to ensure that leading practices are shared across the various components of the program, and between sectors and regions responsible for components of the program.

The audit found that there is currently no program-level mechanism in place to ensure that leading practices and lessons learned, such as innovative tools (e.g.., Notice to Commit Funds Tool) and checklists, special initiatives, and consolidating efforts that target specific First Nations, are shared between regional offices and/or all components of the program. As such, information that could be beneficial to others is not shared between the various sectors and regions responsible for specific components of the program (i.e. RO, LED, and TAG).

Although IGS Bi-weekly National Meetings provide an opportunity to share operational information between the BEB, BSF, TCF and P&ID components, the group did not discuss checklists and tools developed regionally. Some of these checklists and tools, such as the P&ID Proposal Review Checklist and the P&ID Final Project Evaluation Grid, could be leveraged by other regions to streamline processes and increase the effectiveness and efficiency of regional activities for this program.

Finally, the audit found that program staff in regional offices were not aware that a definition of the People Year used in the calculation for Band Support Funding (BSF) is available on the AANDC website. Regional staff interviewed as part of the audit indicated that they use different methodologies to calculate the People Year, therefore not ensuring a constant calculation of BSF funding across the country.

Without implementing mechanisms to share leading practices and interpretations of program elements (e.g.. funding formulas) across program components and sectors or regions responsible for the program, there is an increased risk that the program will not be delivered in a consistent, coherent, efficient, and effective manner across the country.

5.2 Funding Agreements and Supporting Documentation

The audit expected to find that funding agreements are acceptable and according to relevant program terms and conditions, policies and guidelines. The audit also expected to find that all funding agreements are appropriately authorized under Sections 32 and 34 of the Financial Accountability Act (FAA).

The audit found that program staff is using the Grants and Contribution Information Management System (GCIMS) as a central repository for funding agreements and supporting documentation for all program components delivering transfer payments (i.e. BSF, BEB, P&ID, ARO, TCF, MRP, FNFMA, and AFOA). This approach is in line with the expectations outlined in the AANDC Management Control Framework for Grants and Contributions.

The audit found that funding agreements were generally acceptable and according to relevant program terms and conditions, policies and guidelines; however, supporting documentation was missing for 11 of the 63 grants and contributions files reviewed as part of the audit. The following documents supporting the funding agreement could not be found in GCIMS, therefore not providing all required information to confirm the completeness of funding agreement files and the effectiveness of management controls in place:

• Signed Project Approval Checklist (2 exceptions out of 63 samples tested): As per the P&ID Guidelines, a signed Project Approval Checklist must be retained on file to evidence the review of proposals received;
• Signed version of the funding agreement (5 exceptions out of 63 samples tested): As per AANDC's Management Control Framework for Grants and Contributions, the signed funding agreement details the recipients reporting obligations and should therefore be kept on file for future reference and for audit trail purposes; and,
• Deliverables to be provided by the recipient (e.g.. interim and final project reports, signed annual reports, audited financial statements, receipts for expenses incurred, etc.) (4 exceptions out of 63 samples tested): As per AANDC's Management Control Framework for Grants and Contributions, sufficient proof must be obtained to support the disbursements of payments. These supporting documents should be retained on file for audit trail purposes.

The audit found that all funding agreements were appropriately authorized under FAA Section 32, and payments were approved under FAA Section 34, by individuals with appropriate delegation of authority.

Without a copy of all required documentation to support funding agreements, there is an increased risk that management controls are not implemented to ensure that terms and conditions of funding agreements are respected by funding recipients.

Program