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Audit of the AgriInnovation Program – Enabling Commercialization and Adoption Stream

September 15, 2016

Report:
Office of Audit and Evaluation

Executive summary

Agriculture and Agri-Food Canada (AAFC) administers the AgriInnovation Program - Enabling Commercialization and Adoption stream which provides repayable contribution funding to industry to facilitate the commercial demonstration, commercialization and adoption of innovative agri-based products, technologies, processes or services.

This internal audit was included in the 2015-2018 Risk-Based Audit Plan. The objective of the audit was to provide assurance on the adequacy and effectiveness of the management control framework in place to support the delivery of the program.

The audit concluded that an adequate and effective management control framework is in place to support the delivery of the AgriInnovation Program – Enabling Commercialization and Adoption stream. In particular, the following strong practices were noted:

Recognizing that the program is well-managed, opportunities to improve its current risk management practices were identified, namely:

The audit also identified opportunities to improve the program's stewardship-related controls by:

1.0 Introduction

1.1 Background on the overall AgriInnovation Program

1.2 Enabling commercialization and adoption stream

1.3 Organization and governance

1.4 Audit objective

1.5 Audit scope

1.6 Audit approach

1.7 Conclusion

The audit concluded that an adequate and effective management control framework is in place to support the delivery of the AgriInnovation Program – Enabling Commercialization and Adoption stream. The following strong practices were noted:

1.8 Statement of conformance

2.0 Detailed observations, recommendations and management responses

The following sections present the key observations, based on the evidence and analysis associated with the audit, and provide recommendations for improvement. Management responses were provided and include:

The results of the audit are organized into two themes: Risk Management and Stewardship. (See Figure 2)

Figure 2 – Audit Result Themes
Description of this image follows.
Description of this image follows:

Risk Management and Stewardship are the two themes.

Risk Management covers Program-Level Assessments and Arrears and Default Risk Tolerance.

Stewardship covers Project Assessment Due Diligence, Financial Assessment, Claims Processing, and Repayment Policies and Procedures.

Risk management

2.1 Program-level risk assessment and response

Recommendation 1 – Program-level risk assessment and response

To further strengthen current risk management processes, the Assistant Deputy Minister of Programs Branch should ensure that:

  1. Quantitative program data is incorporated into program-level risk assessments to help inform identification of issues and decision-making; and
  2. As appropriate, action plans to mitigate identified risks are documented, implemented and monitored.

Management response and action plan:

  1. Agreed. Qualitative information currently included in the program's risk assessment can be supplemented by quantitative data to better reflect the potential impact of the issues raised.

    IPD's Program Design and Performance Division, in coordination with the Commercialization and Environmental Programming Division, will, using the departmental risk tool:

    • Include quantitative data on the program's performance against service standards, including application processing and approval delays, in future program risk assessments.
    • Review listed risk factors in future program risk assessments and ensure issues and impacts are quantified in all cases in which data is available.
  2. Agreed. Mitigating identified risks is an important part of internal risk assessment.

    IPD's Program Design and Performance Division will ensure that, when appropriate, information on approaches to control/mitigate risk are identified in the program risk assessment tool.

Lead(s) responsible: Manager – Innovation Programs Directorate (IPD) - Program Design and Performance Division

Target date for completion: November 2016

2.2 Arrears and default tolerance

Recommendation 2 – Arrears and default tolerance

To optimize the achievement of the program's innovation objectives and manage related financial risks, the Assistant Deputy Minister of Programs Branch should define the arrears and default tolerance levels accordingly.

Management response and action plan:
Agreed. It is recognized that defining arrears and default tolerance levels can help in achieving the program's innovation objectives.

IPD, in consultation with Corporate Management Branch – Accounts Receivable and Revenues Management, will define arrears and default tolerance levels for repayments under AgriInnovation Program - Enabling Commercialization and Adoption stream and future programs. To support this IPD will:

Lead(s) responsible: Manager – IPD - Claims/Repayment Division – Repayment/Financial Business Case Analysis

Target date for completion: January 2017

Stewardship

2.3 Information for management during project assessment

Recommendation 3 – Information for management during project assessment

The Assistant Deputy Minister of Programs Branch should review the processes in place to ensure that management has access to the breadth of the program's due diligence throughout the assessment phase.

Management response and action plan:
Agreed. Programs Branch will review the Program's due diligence process with program officers to ensure that the requirements for validating applicant information and performing related analysis for each criterion are clear and reflected in the documentation on file. Further Programs Branch will inform management through the project approval documentation e.g. Project Recommendation Form, Memo for Decision that additional assessment information is available from the program for their review upon request.

Lead(s) Responsible: Director - IPD - Enabling Commercialization and Adoption Stream

Target Date for Completion: September 2016

2.4 Financial assessment

Recommendation 4 – Financial assessment

In order to reduce the risk of errors and confirm the methodology used by the Repayment/Financial Business Case Analysis Unit, the Assistant Deputy Minister of Programs Branch should implement a periodic validation of the results of the financial assessments and methodology.

Management response and action plan:
Agreed. IPD will conduct a validation of the results of the financial assessments and methodology by:

Lead(s) responsible: Manager – IPD - Claims/Repayment Division – Repayment/Financial Business Case Analysis

Target date for completion: March 2017

2.5 Claims processing

2.6 Repayment policies and procedures

Recommendation 5 – Formal repayment policies and procedures

To support the sound management of repayment processes, the Assistant Deputy Minister of Programs Branch should ensure that formal policies and procedures are developed and applied for the management and monitoring of repayment processing.

Management response and action plan:
Agreed. To address this deficiency the Repayment/Financial Business Case Analysis Unit has been reviewing its current operational practices and consulting with other departments/Corporate Management Branch- Accounts Receivable and Revenues Management. Currently the unit is drafting documents which outline the roles and responsibilities of the repayment unit, provide guidelines for contacting the recipient, monitoring repayments, resolving repayment arrears, escalation to default and transferring to CMB- Accounts Receivable and Revenues Management. A process document for managing repayments in SAP and providing information to clients will also be created.

When finalized, these documents will formalize the main aspects for managing and monitoring the unit's repayments.

Lead(s) responsible: Manager – IPD - Claims/Repayment Division – Repayment/Financial Business Case Analysis

Target date for completion: January 2017

Annex A: Audit Criteria

  1. Program-level risk management
    • Program management develops and monitors the implementation of mitigation measures for risks identified in the annual update to the Program Risk Profile.
  2. Process for the assessment of project funding applications
    • An adequate control process has been documented and is consistently applied for the assessment of project funding applications.
  3. Administration of funding
    • Procedures and guidelines for project monitoring and claims processing are documented and followed.
  4. Repayments
    • Procedures and guidelines are in place for the management of repayment processing and monitoring.

Annex B: Acronyms

AAFC
Agriculture and Agri-Food Canada
DG
Director General
DRO
Departmental Regional Offices
IPD
Innovation Programs Directorate
PCRA
Project Complexity and Risk Assessment
PB
Programs Branch
RRMF
Recipient/Project Risk Management Framework
SPED
Service and Program Excellence Directorate
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