Salary and Training Awards Programs

August 2010

Table of Contents

Executive Summary

Detailed Report

Appendix


Executive Summary

Introduction

The Internal Audit of the Salary and Training Awards Programs is part of the Risk-Based Annual Internal Audit Plan 2009-2010 approved by the Canadian Institutes of Health Research (CIHR) Governing Council.

The mandate of CIHR is to excel, accordingly to internationally accepted standards of scientific excellence, in the creation of new knowledge and its translation into improved health for Canadians, more effective health services and products, and a strengthened Canadian health care system. As part of its mandate, CIHR supports health researchers and health research trainees by providing open (untargeted) and strategic (targeted in areas identified by CIHR's thirteen Institutes) awards. Two types of awards programs exist: Salary Awards supports individuals conducting independent health research. Training Awards supports individuals engaged in health research training. These awards are intended to allow researchers to devote more time to research activities and help new investigators establish a body of research that will allow them to compete in CIHR's Operating Grants Program. Most awards are accompanied by funds earmarked for research costs and span several months to five years. For 2009-10, expenditures for Salary and Training Awards programs were as follows:

Salary and Training Awards 2009-10

Expenditures % of Total S&T
Total Salary Awards $111,175,403 57.69%
Total Training Awards $81,545,553 42.31%
Total Salary & Training Awards $192,720,956 100.00%

Per the Report on Plans and Priorities, 2009-2010, the total planned spending for Salary and Training Awards is $218 M in 2010-11 and $212.5 M in 2011-12.

Risk Addressed by the Audit

The audit addresses the risk that Salary and Training Awards are not managed in compliance with CIHR's internal policies and procedures. The risks are related to the Stewardship element of the Treasury Board Secretariat's Management Accountability Framework (MAF): The departmental control regime (assets, money, people, services, etc.) is integrated and effective, and its underlying principles are clear to all staff.

Objective

The objective of this audit is to assess the effectiveness of the administration of the Salary and Training Awards programs in complying with CIHR's internal policies and procedures. Controls are effective if they work as intended.

Scope

The audit covers the internal policies and procedures established by CIHR to administer the Salary and Training Awards programs. Reviews performed by external institutions in preparation for submission to CIHR are not included, nor are awards funded by flow-through money, specifically the Canada Research Chairs program, which is administered by the Social Sciences and Humanities Research Council and represents $87,219,607 or 45.26% of the total Salary and Training Awards expenditures for 2009-10. The audit complements the audit of the Operating Grants Program, June 2009, which covered Treasury Board (TB) policy requirements for departmental responsibility and accountability, approval of terms and conditions, Parliamentary approval and accountability, eligibility and accountability of recipients, stacking of assistance, official languages, monitoring, and operational goals and objectives. The audit concluded that the internal control framework for the non-financial administration of Operating Grants contained moderate issues: There were control weaknesses, but exposure was limited because either the likelihood or the impact of the risk was not high.

Overall Audit Opinion

The audit has concluded that the Salary and Training Awards programs are well controlled for compliance with CIHR's internal policies and procedures: No material weaknesses were noted or only minor improvements are needed.

Statement of Assurance

The audit of the effectiveness of the administration of the Salary and Training Awards programs in complying with CIHR's internal policies and procedures was conducted in accordance with the Federal Government Policy on Internal Audit and related professional standards. In my professional judgement as Chief Audit Executive, sufficient and appropriate audit procedures have been performed and evidence gathered to support the accuracy of the opinion provided in this report. The audit opinion is based on a comparison of conditions that existed at the time of the audit against established audit criteria that were agreed upon with management.

Summary of Internal Control Strengths

Overall, Salary and Training Awards comply with CIHR's policies and procedures governing:

  • Eligibility
  • Communication of competition results
  • Effective dates of funding periods
  • Payment of awards
  • Eligible expenses for research allowances
  • Continuing eligibility
  • Financial reporting
  • Non-award earnings
  • Taxation of awards
  • Leaves of absence
  • Transfers and activity changes
  • Termination procedures
  • Residual balances
  • Individual funding opportunities

Summary of Internal Control Weaknesses

The following minor aspects of the Salary and Training Awards programs require management's attention:

  • CIHR's process for reaffirming the award recipients' eligibility annually is generally effective, but could be improved through the collection of better information on the various types of eligibility;
  • While compliance with the essential criteria of the Grants and Awards Guide (GAG) and individual funding opportunities is generally well controlled, not all obligations listed in the GAG and funding opportunities are enforced and not all the activities undertaken by CIHR staff are requirements of either the GAG or the individual funding opportunities;
  • For partner-funded awards, it is not clear whether the requirements of the GAG apply, and if they do apply, whether CIHR or the partner is responsible for review and documentation of compliance;
  • There is no process to finalize the status of research allowances for recipients of direct payments after the expiration of the "Authority to Use Funds" period; and
  • CIHR's Records Management process needs improvement for tracking and recovering outstanding files in a timely manner.

Other, lower-risk findings have been issued in a letter for management's attention.

Internal Audit thanks management and staff for their excellent cooperation in this audit.

Dev Loyola-Nazareth, Chief Audit Executive
Steven Nimmo, Manager, Internal Audit
Michael Bazant, Internal Auditor
Tim Bowie, Summer Student
Canadian Institutes of Health Research

Detailed Report

Methodology and Criteria

The audit reviewed a stratified random sample of 150 funded awards from competitions launched in the 2005-2006, 2006-2007 and 2007-2008 fiscal years plus a risk-based sample of 31 awards addressing less commonly encountered requirements found in the Grants and Awards Guide (GAG).1 The random sample was selected from a population of 2,218, which represented the majority of the open competitions managed by the Research Capacity Development (RCD) Unit. No significant error was detected during the review and, therefore, the sample sizes did not need to be increased.

All awards were reviewed against criteria that were in force at the time of application. In addition, a brief review of the Salary and Training Awards programs against the previous Treasury Board (TB) Policy on Transfer Payments (effective June 1, 2000 and replaced on October 1, 2008) was conducted for a comparison with the findings of the 2008-2009 audits of the Operating Grants Program. The audit criteria were derived from those portions of the 2008-2009 CIHR Grants and Awards Guide2 (GAG) that dealt with Salary and Training Awards. As applicable, awards were also assessed against criteria derived from their specific Funding Opportunities details page.3 These two documents establish the requirements with which grants and awards applicants and their host institutions must comply. Detailed criteria and conclusions are contained in the Appendix to this report.

The audit was conducted between July 2009 and April 2010.

Observations, Recommendations, and Management Action Plan

The following are audit observations, recommendations, and management action plan to address minor weaknesses in the administration of Salary and Training Awards programs.

Observation Recommendation Management Action Plan

1. CIHR's process for reaffirming the awards recipients' eligibility annually is generally effective, but could be improved through the collection of better information on the various types of eligibility.

a) There are two primary and universal eligibility requirements: the recipient must be affiliated with an eligible institution and must occupy an appropriate role. There are three roles for Salary and Training Awards: student (masters, doctoral and health professional recipients working towards a degree under the supervision of an independent researcher), fellow (post-doctoral or post-health professional trainee recipients working under an independent researcher) and researcher (independent research recipients employed by the institution). Though institutions adequately report the presence or absence of the recipient, they are less clear on their status as a trainee, fellow or employee. When an individual changes roles (such as a trainee becoming an independent researcher at the institution) the annual assertion received by CIHR may correctly state that the individual is still present at the institution, but not indicate that the individual has changed roles.

Of 181 files reviewed in this regard, role-related eligibility was identified as a problem in only 1 file. However, CIHR does not explicitly request affirmation of role-related eligibility and consequently the extent of non-compliance is not known.

In addition, specific funding opportunities (generally for strategically-funded awards) can have extra requirements for ongoing eligibility. These requirements need to be reviewed on an annual basis as well.

It is recommended that the Director, Finance assess the feasibility and cost-effectiveness of conducting a comprehensive annual confirmation of all aspects of eligibility by institutions (presence at the institution, role of the recipient, and funding opportunity-specific requirements).

Responsibility: Director, Finance

Action: CIHR Finance will conduct a detailed review of the memorandum that is sent out to each host institution on an annual basis to reaffirm the eligibility of awards recipients.

CIHR Finance will consider amending the memorandum to facilitate a more comprehensive annual confirmation of all aspects of eligibility.

Timeline: October 31, 2010

b) Partner-funded awards that are managed by CIHR are accounted for as "encumbered" until specific actions are taken (generally in the form of the deposit of funds by the partner in a CIHR account), at which point their status becomes "outright". The annual eligibility assertion is based on an Electronic Information System (EIS, used for processing grants and awards) report for each institution that only reports on files that have "outright" funds available in the upcoming year. This can result in an incomplete list that does not include awards for which CIHR is responsible but for which funds are not yet considered "outright".

Of 181 files reviewed, there were only 2 instances of this.

It is recommended that the Director, Finance assess the feasibility and cost-effectiveness of ensuring that the annual reaffirmation of eligibility includes all awards for the upcoming year for which CIHR is responsible, both encumbered and outright.

Responsibility: Director, Finance

Action: CIHR Finance will meet with ITAMS to discuss including partner-funded awards which are encumbered as part of the reports generated for the annual eligibility assertion process.

If feasible and cost-effective, Finance will work closely with ITAMS to ensure that these new reports are available for use prior to the next annual reaffirmation of eligibility process, scheduled to take place in February 2011.

Timeline: January 31, 2011

2. While compliance with the essential criteria of the Grants and Awards Guide (GAG) and individual funding opportunities (eligibility criteria, reporting, leave requirements and documents for peer review members) is generally well controlled, not all obligations listed in the GAG and funding opportunities are enforced and not all the activities undertaken by CIHR staff are requirements of either the GAG or the individual funding opportunities.

The GAG lists several requirements that are not consistently enforced by CIHR. For example:

  • Foreign applicants and Canadians training in foreign countries are required to provide visas, but none of the files reviewed included appropriate documentation;
  • The date of birth or adoption for maternity leaves was not always provided;
  • Before releasing funds, CIHR does not document the receipt by the institution of partner funds, and ethics, biohazard and other certifications; and
  • CIHR does not follow-up on the lack of the applicant's supervisor's approval of non-award earnings.

In other cases, staff practice goes beyond the requirements of the GAG. For example:

  • For certain leave requests, CIHR requests confirmation of the return to the training environment or repayment of funds if a recipient terminates early after a leave; and
  • The Tri-council (CIHR, Social Sciences and Humanities Research Council, and Natural Sciences and Engineering Research Council) comparison of applications received is conducted yearly in rotation by each member to identify redundant applications, which are then withdrawn. This control process is not formally documented and its related roles and responsibilities are not formally defined.

For some funding opportunities, requirements included in the funding opportunity details page are not reviewed or documented in recipient or competition files. Examples include:

  • Specific funding opportunity requirements such as progress or final reports;
  • The relevance review for strategic awards, which was not found in several competition or recipient files; and
  • Acknowledgement of partners in notification letters.
It is recommended that the Director, Research Capacity Development review and clarify procedures for ensuring that CIHR requirements for awards recipients and host institutions are valid and enforced.

Responsibility: Director, Research Capacity Development

Action: For cases where it has been identified that requirements in the GAG are not always consistently enforced, a working group will be established to look into each case and determine steps for ensuring the requirements are enforced or the necessary modifications to the GAG are proposed.

For cases where common practice goes beyond the requirements of the GAG, a working group will determine if these practices are required. The results will be appropriately documented (updates to GAG, SOPs, etc.).

For cases where documentation specified in the funding opportunity is missing from the application or competition files, the SOPs will be reviewed to ensure the appropriate steps are detailed.

Timeline: A working group will be established in early July 2010. Work to address the above actions will take place over the summer months (July and August) with proposed solutions coming in September/October 2010.

3. For partner-funded awards, it is not clear whether the requirements of the GAG apply, and if they do apply, whether CIHR or the partner is responsible for review and documentation of compliance.

Of 181 files reviewed during the audit, 40 were partner-funded whole or in part. The partners included CIHR institutes and external organizations that used CIHR's peer review process to fund awards in specific strategic areas. The roles of CIHR and the partners varied widely, from matching funds to 100% partner-funded awards. The documents and application processes used also varied, with some utilizing CIHR's own application forms and infrastructure, and others providing their own forms and processes. This diversity seems to have contributed to non-compliance with CIHR-specific requirements related to public announcement of the awards, effective dates of funding, post-award administration, annual eligibility reviews, provision of a T4 or T4A to a directly-paid recipient, payment of fringe benefits to Salary Awards holders, and collection and distribution of activity reports.

Of 40 partnership awards assessed, there were 11 aspects of the GAG where compliance was in question.

It is recommended that the Director, Partnerships and Citizen Engagement review and clarify the roles and responsibilities of CIHR and the partner. Issues to be addressed include whether partner-funded awards will adhere to CIHR's requirements, who will be responsible for post-award administration and whether specific partner-funded awards will include extra requirements or exceptions.

Responsibility: Director, Partnerships and Citizen Engagement

Action: Work with Research Capacity Development (RCD) and Targeted Initiatives (TIB) branches to clarify roles and responsibilities of application and post-award administration of partnered awards and ensure that the collaborative agreements (and funding opportunities where appropriate) clearly reflect responsibilities of each party.

Timeline: December 31, 2010

4. There is no process to finalize the status of research allowances for recipients of direct payments after the expiration of the "Authority to Use Funds" period.

There is a process to finalize the status of the research allowances for recipients paid from common accounts at host institutions through either repayment or an assertion by the institutions that all the funds have been spent. However, for payments made directly to the recipients, there is no process to verify whether there is any unspent balance to be repaid. The Awards Financial Officer affirms in the EIS the full expenditure of the research allowance although he does not receive any information on the status of the allowance from the recipient. Though the value of the individual awards is generally low (ranging from $1,000 to $5,000 per recipient per year), it can be material in aggregate. For example, the total value of research allowances for the 2009-2010 fiscal year was over $800,000 for the Fellowship and Doctoral awards programs.

Of 181 files reviewed, 125 held research allowances, of which 63 had passed the "Authority to Use Funds" date. 18 of these 63 were direct payments to recipients in foreign countries, for whom the status of funds was finalized in the EIS without the benefit of related information.

It is recommended that the Director, Finance review the process for finalizing research allowances for recipients of direct payments to ensure that the risk of unspent funds not being repaid is appropriately controlled.

Responsibility: Director, Finance

Action: The verification of unspent balances for research allowances disbursed directly to recipients poses significant challenges.

Most CIHR grants and awards are administered by host institutions, and in such cases, it is much easier to obtain independent third party evidence to validate whether unspent balances remain. There is currently no cost-effective way to verify unspent balances for direct recipients who are not affiliated with a post-secondary institution in Canada. CIHR Finance considered the value of sending information requests to the individual research allowance recipients regarding unspent balances, but concluded that such self-reported information could not be considered reliable.

CIHR Finance will engage the Research Portfolio in discussions to determine the requirement for a separate research allowance and, if re-affirmed, potential strategies and measures to ensure that the risk of unspent funds not being repaid is appropriately controlled.

Timeline: November 30, 2010

5. CIHR's Records Management process needs improvement for tracking and recovering outstanding files in a timely manner.

Of 181 recipient files reviewed, 1 was missing and could not be found; an equivalent file was substituted to complete a full sample. Of 38 institution files reviewed, 2 financial files for two fiscal years could not be found, affecting 16 recipient files.

The inability to locate files impacts management's ability to conduct follow-up action or review. In addition, a missing file raises privacy and confidentiality issues. The difficulty in locating files has been noted in previous audits.

It is recommended that the Head, Client Services develop and implement a timely process for reviewing the status of outstanding files, reminding the borrowers of their responsibility for safeguarding and returning the files promptly, and tracking the files until they are recovered.

Responsibility: Head, Client Services

Action: ITAMS has identified a project to implement an electronic document and records management solution (EDRMS) which will resolve many of the issues raised in the audit. This project has been identified and is currently pending business case funding.

In the shorter term, the Records Management unit has undertaken the following:

File creation
Create corporate files for the common award account. At this present time, common account information is kept in accordion folders. This will allow better file and content accountability.

Timeline: July 2010

Awareness activities

  1. The Manager, Records Management has developed a 'tip of the month' in the HR newsletter. September's Newsletter is about information sharing (there is no newsletter for July and August). The Manager, Records Management will insert a comment about file circulation;
  2. The Manager, Records Management will post a notice at the Records Management Office counter, identifying borrowers' roles and responsibilities for safeguarding, transferring and returning files promptly;
  3. The Manager, Records Management will ensure that borrowers' roles and responsibilities for safeguarding, transferring and returning files promptly is highlighted at the Records Management Information Sessions;
  4. The Manager, Records Management will create a generic email to be sent to CIHR employees when files are ready to be picked up, informing them of file transfer protocols, and will also create a label to be applied on the file folders that indicates the process to be followed if the file is transferred to another user and serves as a reminder to staff.

Timeline: July 2010

Retrieval of outstanding files

  1. Create and review the list of currently outstanding files (files in circulation for more than 2 years);
  2. Notify file owners of their current responsibilities in relation to the files;
  3. Accounting for outstanding files will be performed according to the following schedule:
    • July 2010: account for files charged out since years 2001 and 2002
    • August 2010: account for files charged out since years 2003 and 2004
    • September 2010: account for files charged out since years 2005 and 2006
    • October 2010: account for files charged out since years 2007 and 2008
    • November 2010: inventory check
  4. This process and timelines will enable the Records Management Office to successfully account for outstanding files during peak period (July, August and September). Other factor to consider is the space optimization project scheduled for the 10th floor over the summer. Multiple files will be returned to the Records Management Office due to smaller cubicles.

Timeline: As point c above.

Appendix

Audit Criteria and Conclusions

The audit uses the following definitions to make its assessment of the internal control framework.

Conclusion on Audit Criteria Definition of Opinion
Well controlled Well managed, no material weaknesses noted or only minor improvements are needed.
Moderate issues Control weaknesses, but exposure is limited because either the likelihood or the impact of the risk is not high.
Significant improvement required Requires significant improvements in the area of material financial adjustments or control deficiencies represent serious exposure.

Overall Conclusion

The audit has concluded that the Salary and Training Awards programs are well controlled for compliance with CIHR's internal policies and procedures: No material weaknesses were noted or only minor improvements are needed.

Criteria Conclusions and Observation #
1. Salary and Training Awards comply with CIHR's policies governing eligibility. Well controlled with minor issues Observation 2
2. Salary and Training Awards comply with CIHR's policies governing communication of competition results. Well controlled with minor issues Observations 2 and 3
3. Salary and Training Awards comply with CIHR's policies governing effective dates of funding periods. Well controlled with minor issues Observation 3
4. Salary and Training Awards comply with CIHR's policies governing payment of awards. Well controlled with minor issues Observations 1, 2 and 3
5. Salary and Training Awards comply with CIHR's policies governing eligible expenses for research allowances. Well controlled with minor issues Observation 4
6. Salary and Training Awards comply with CIHR's policies governing continuing eligibility. Well controlled with minor issues Observations 1, 2, 3 and 5
7. Salary and Training Awards comply with CIHR's policies governing financial reporting. Well controlled with minor issues Observations 3 and 5
8. Salary and Training Awards comply with CIHR's policies governing non-award earnings. Well controlled with minor issues Observation 2
9. Salary and Training Awards comply with CIHR's policies governing taxation of awards. Well controlled
10. Salary and Training Awards comply with CIHR's policies governing leaves of absence. Well controlled with minor issues Observation 2
11. Salary and Training Awards comply with CIHR's policies governing transfers and activity changes. Well controlled with minor issues Observation 2
12.Salary and Training Awards comply with CIHR's policies governing termination procedures Well controlled with minor issues Observations 1 and 2
13. Salary and Training Awards comply with CIHR's policies governing residual balances Well controlled with minor issues Observation 4
14. Salary and Training Awards comply with CIHR's policies governing individual funding opportunities. Well controlled with minor issues Observations 2, 3 and 5

  1. These processes include direct payments, training awards given outside Canada, leaves of absence, changes to location and activities, early termination, affiliation commitments, training in federal departments, etc.
  2. 2009-2010 CIHR Grants and Awards Guide.
  3. Current opportunities, archived opportunities.