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The NADP is considered low risk based on the following:
These conditions significantly reduce the risks of misappropriation of funds and of unqualified recipients being funded through the program.
Since 1988, the CCA has delivered financial contributions to the Canadian archival community in the name of the federal government, to support archival projects leading to the development of a national network of archives. By implementing the NADP in 2006, LAC ensured the implementation of a contribution program that complied with all requirements of the 2000 Policy on Transfer Payments.
Due to limited capacities, the NADP did not provide LAC with any provisions for operational expenditures to administer and monitor the program. In the design of the program, LAC delegated the full responsibilities for program administration and monitoring to the CCA and its partners, the provincial and territorial archives councils. These responsibilities include:
LAC management exercises overall monitoring of the program to ensure that the CCA meets the terms and conditions set out in its contribution agreement.
Since 2006, the CCA's workload has increased significantly, as it also administers a second LAC contribution program. The CCA has experienced budget constraints due to initiatives to improve its capacity (e.g., a new telecommunication system, and development of a recipient database, etc.) and to meet LAC requirements in terms of monitoring and reporting for both programs.
In addition, the CCA capacity depends not only on its workforce of seven FTEs, but also largely on the efforts of volunteers within its organization, the provincial and territorial archives councils and the CCA national jury.
LAC acknowledges that using a risk-based approach will be a more efficient use of resources to monitor higher risk projects. In conjunction, it will also consider adjusting timelines for the CCA's reporting to LAC. Management believes that the new 2008 Transfer Payment Policy would facilitate its implementation.
We observed several good practices in relation to activities and internal controls in NADP management:
A- Capacity to Deliver the Program
The management control framework and the governance structure applied to manage the NADP were found to be adequate. Management of the program was in compliance with the 2000 Policy on Transfer Payments issued by the Treasury Board Secretariat, and the Financial Administration Act.
B- Eligibility, Selection and Approval
C- Agreements and Terms and Conditions
D- Project Monitoring and Payments
While the management control framework and the governance applied to manage the program were found to be adequate, we noted the following observations related to controls, compliance with policies, procedures and guidelines.
A. Banking Operations
Controls exercised by the CCA on banking operations (including issuing cheques) were lacking regarding segregation of duties, bank reconciliation review, and signing of cheques. However, the CCA management immediately took appropriate action to correct these control weaknesses by rearranging responsibilities among the staff.
We are satisfied that the CCA's banking operations are adequately performed, controlled and reviewed.
B. Applicant Eligibility, Recipient Selection and Approval
In a review of selected recipient project files maintained by the CCA, six out of twenty were lacking formal evidence of the applicant's legal status. The applicant guidelines stipulate that "all applicants must submit one of the following documents to give evidence of its [sic] legal status: letters patent, business number, charitable number, and act of incorporation, bylaw or other legal instrument". Appropriate documentation to provide evidence of legal status should be limited to letters patent, act of incorporation or law incorporating the society. This demonstrates that the applicant meets the program requirements and eligibility criteria.
Funding requests submitted by applicants were not supported by a formal commitment letter. Normally, a letter of this type is issued by the applicant's Board of Directors to endorse the project and the application to the NADP and to formally identify a representative to sign the documents issued to the CCA. This formal delegation by the Board of Directors is necessary to avoid projects being initiated and reported on by the same representative of the recipient's organization.
Management acknowledges this situation. Verification of legal documentation is performed by the CCA. The respective provincial or territorial archive council verifies that an applicant is in good standing. Nevertheless, LAC will collaborate with the CCA to define what constitutes "appropriate legal documentation" for NADP purposes, and these requirements will be clearly identified in the applicant guidelines.
C. Agreements and Terms and Conditions
The CCA's final reports are usually issued six months after year-end rather than three months, as specified in the contribution agreements. Consequently, program results are not communicated to LAC management in a timely manner. This situation is due to delays caused by project data capture, processing and analysis by the CCA. Final reports are only compiled and analyzed after all the recipients' reports are received.
The CCA's audited financial statements did not present the statement of operations by type of expenditures (e.g., wages, administration, travel, etc.), but only by activity (e.g., programs, committees, secretariat, etc.). However, the CCA periodically issues unaudited financial information on actual expenditures in its interim reports.
As requested by LAC's Finance Division, the CCA limits its reported expenditures up to the budget level determined by LAC, rather than reporting the actual level of expenditures incurred in relation to the program.
Management acknowledges this situation. To facilitate greater efficiency by the CCA in issuing its annual reports, LAC will review the new 2008 Transfer Payment Policy to see where flexibilities exist in reporting requirements for specific types of projects (i.e., low risk). LAC will also discuss with the CCA the potential receipt of project reports as the projects are completed during the year. Financial statements based on expenditures will be provided as an appendix to the current annual audited financial statements, which are based on activities.
D. Project Monitoring And Payments
The information in the project files examined was not always considered appropriate to justify the realization of the project funded. For example, projects concerning workshops or professional development did not provide lists of participants, tables of contents or feedback from participants. In addition, projects to reformat archival records did not always provide supplier invoices where applicable. The type of supporting documentation required to justify the final product is not defined in the terms and conditions of the contribution agreement signed by recipients. However, some recipients voluntarily provided additional justifications that were found to be adequate.
Recipients are required to submit the final archival description for upload to the national catalogue database, once the project has been completed. However, there has been no follow-up on this requirement and delays of up to a year before the transfer of the final product to the LAC database have been noted.
For certain projects, major increases were noticed between the initial budget and actual expenditures without having been approved by the CCA through a Project Modification Form. Moreover, the interim reports for these projects indicated that "the project was on budget.". Recipients who do not submit project changes for approval are not tracked, in order to inform the CCA national jury in case of future claims. In addition, any significant modification in the project scope could lead to a reassessment of the project objective that would not be captured by the CCA, thus leading to inaccurate program information.
Management agrees with these recommendations and will request that the CCA amend the contribution agreement with recipients to appropriately reflect the process in place to upload through the provincial or territorial catalogues and ultimately to the national catalogue. As of autumn 2009, the CCA was about to implement random and risk-based audits on project expenditures. LAC will investigate what kind of information is to be provided, what level of detail is required, and what form the narrative should take.
E. Risk Management and Program Monitoring
Performance measurements are being developed jointly by LAC and the CCA, and collection of data has begun. Each year the CCA issues a final activity report to LAC covering the program objectives and performance. LAC management has taken some corrective measures to meet the reporting requirements specified in the contribution agreement. However, the final report covering program activities did not demonstrate that the program had met its objectives and short-term outcomes, as identified in the RMAF, on an annual basis, and only provided quantitative data on results by objective, without considering the qualitative impact of project funding. No guidelines have been developed to follow up on risk management and measure program performance. This makes it difficult to ensure corporate memory or proof of due diligence in the areas of risk management and performance measurement.
LAC should require the CCA to provide a narrative in the final report on NADP activities to demonstrate that program objectives and resulting outcomes have been met successfully.
Management agrees with this recommendation. LAC will investigate what kind of information is to be provided, what level of detail is required, and what form the narrative should take.