Internal Audit of Compliance with the Treasury Board Transfer Payment Policy Suite

Audit Report
September, 2016

Table of Contents

1 Executive Summary

1.1 Objective

The objective of the audit is to provide assurance that risk, controls and governance over CIHR transfer payment programs are effective, including financial and management controls which are compliant with the Policy, Directive and Guideline on Transfer Payments and the CIHR Research Projects and Personnel Support Grant Program Terms & Conditions.

1.2 Scope

Covering the activities during the 2014-15 fiscal year, the audit:

Tri-Agency administered programsFootnote 1,Footnote 2 and the Institute Support Grant program were not included in the scope of this engagement.

1.3 Overall Audit Opinion

The audit has concluded that delivery of programs under the Research Projects and Personnel Support Terms & Conditions is well-controlled. Areas for improvement have been identified, but overall these are not significant risks or impediments to the achievement of CIHR’s strategic objectives and mandate.

1.4 Summary of Strengths

Throughout the audit, the following strengths were noted related to compliance with the Transfer Payment policy suite:

1.5 Summary of Improvement Opportunities

The following aspects of the management and administration of transfer payments require management’s attention, and are presented along with the actions to be taken by management to address the risks (the observations, recommendations and management action plan are discussed in greater detail in the Detailed Report that follows the executive summary).

Observation 1: There is no documented program design framework to validate that new and modified activities comply with the Research Projects and Personnel Support Terms & Conditions and Treasury Board policy requirements, and to consult with primary stakeholders.

Response 1: The Vice-President Research, Knowledge Translation and Ethics & Chief Scientific Officer will include a step in the recently revised competition development process to verify compliance with the Treasury Board Policy on Transfer Payments and the program Terms & Conditions by January 2017.

Observation 2: There is no integrated approach to risk assessment and ongoing risk management of both initiatives and recipients as required by Treasury Board Policy and Directive on Transfer Payments.

Response 2: The Vice-President Research, Knowledge Translation and Ethics & Chief Scientific Officer will modify the Governance Strategy for Major Initiatives to ensure a consistent level of detail is captured for all major initiatives by December 2016. The Vice-President Resource Planning and Management & Chief Financial Officer will assess the impact and capacity for risk management from a recipient perspective as part of its implementation of Enterprise Risk Management by March 2018.

Observation 3: There are gaps in the management of financial risks related to recipients as required by Treasury Board Policy and Directive on Transfer Payments.

Response 3: The Vice-President Resource Planning and Management & Chief Financial Officer will define, document and implement  an approach to assess recipient risk and implement mitigation strategies as appropriate by March 2017.

Observation 4: Recipient financial reporting is not always received in a timely fashion, constraining CIHR’s ability to meet the cash management requirements as defined in the Directive on Transfer Payments.

Response 4: The Vice-President Resource Planning and Management & Chief Financial Officer will review current recipient financial reporting and identify improvements to the process based on a risk-based approach by March 2017. The Vice-President Resource Planning and Management & Chief Financial Officer will define, document and implement a revised process to improve cash management by March 2017.

Observation 5: Governing Council has not established policies respecting consulting and collaborating with persons and organizations that have an interest in health research as required by the CIHR Act.

Response 5: The Vice President, External Affairs and Business Development will recommend Governing Council formally delegate responsibility for developing a policy regarding consulting and collaborating to the Vice President, External Affairs and Business Development by Spring 2017.

Observation 6: Service standards for funding programs have not been established as per the requirement defined in the Policy on Transfer Payments.

Response 6: The Vice-President Research, Knowledge Translation and Ethics & Chief Scientific Officer will establish service standards and develop a performance management strategy for the implemented standards by April 2017.

Observation 7: The Research Projects and Personnel Support Terms & Conditions and supporting policies require updating to reflect CIHR’s current business model and ensure consistency in terminology between documents.

Response 7: The Vice-President Resource Planning and Management & Chief Financial Officer will coordinate a revision to the Terms & Conditions and act as liaison between internal stakeholders and Treasury Board by March 2018.

Observation 8: The Agreement on the Administration of Agency Grants and Awards and the CIHR Funding Agreement template are not fully compliant with the requirements defined by Appendix F: Funding Agreement Provisions for Grants of the Directive on Transfer Payments.

Response 8: The Senior Corporate Advisor, in consultation with the Deputy Chief Financial Officer, will revise the Funding Agreement template to ensure full compliance with the requirements of the Directive on Transfer Payments by March 2017.

1.6 Statement of Conformance

The Audit of Compliance with the Treasury Board Transfer Payment Policy Suite conforms with the Internal Auditing Standards for the Government of Canada as supported by the results of the quality assurance and improvement program.

Internal Audit thanks management and staff for their assistance and cooperation throughout the audit.

David Peckham
Chief Audit Executive & Director General, Performance and Accountability
Canadian Institutes of Health Research

Management agrees with the conclusion of the audit.

Jane Aubin
Vice-President Research, Knowledge Translation and Ethics & Chief Scientific Officer
Canadian Institutes of Health Research

Thérèse Roy
Vice-President Resource Planning and Management & Chief Financial Officer
Canadian Institutes of Health Research

Michel Perron
Vice-President External Affairs and Business Development
Canadian Institutes of Health Research

2 Detailed Report

2.1 Transfer Payment Programs

Transfer payments are monetary payments, or transfers of goods, services or assets by the Government of Canada to third parties, on the basis of a parliamentary appropriation. These payments represent a majority of CIHR’s spending and are limited to grants and awards, not contributions. Transfer payments are governed by the Treasury Board Policy and Directive on Transfer Payments.

The objective of this policy suite is to ensure that transfer payment programs:

Transfer payment programs are supported by a set of Terms & Conditions approved by Treasury Board. The Terms & Conditions define the objectives of the program, who may receive funding and for what purpose and in general terms, how the program will be delivered.

2.2 CIHR Resarch Projects and Personnel Support Transfer Payment Program

The Research Projects and Personnel Support program's key objectives directly reflect the Agency’s mandate: "to excel, according to international standards of scientific excellence, in the creation of new knowledge and its translation into improved health for Canadians, more effective health services, and a strengthened health care system".Footnote 4

The Research Projects and Personnel Support Terms & Conditions grant CIHR the authority to provide funding support for the direct costs of research grants, research personnel, collaboration, open competitions and strategic initiatives. The Terms & Conditions define, among other items, the eligibility of recipients and expenses, stacking limitsFootnote 5, and maximum payable grant value. The Research Projects and Personnel Support Terms & Conditions are the basis for the majority of CIHR programs.

2.3 Risk Addressed By the Audit

Risks specific to the Research Projects and Personnel Support Transfer Payment Program were identified and assessed.  Broadly, these can be summarized as:

Consideration was also given to organizational risks as documented in the corporate risk profile and the general risk categories as presented in the Treasury Board Guide to Risk Taxonomies.

2.4 Methodology and Criteria

The Internal Audit of Compliance with the Treasury Board Transfer Payment Policy Suite is part of the 2015-18 Risk-Based Audit Plan, as approved by CIHR’s Governing Council.

The audit was conducted in accordance with the Federal Government’s Policy on Internal Audit and related instruments. The principal audit techniques used included:

Controls were assessed as adequate if they were sufficient to minimize the risks that threaten the achievement of objectives. Detailed criteria and conclusions are contained in the Appendix of this report.

The audit was conducted between November 2015 and June 2016.

3 Observations, Recommendations, and Management Action Plan

Observation Recommendation Management Action Plan
1. There is no documented program design framework to validate that new and modified activities comply with the Research Projects and Personnel Support Terms & Conditions and Treasury Board policy requirements, and to consult with primary stakeholders. (Criteria 3, 5, 8, 9, 12, 24, 27, 34)

The CIHR programs and initiatives under the Research Projects and Personnel Support Terms & Conditions reflect a broad range of attributes. They range from low dollar-value, one-time targeted awards to high-value, multi-partner, long-term commitments that establish enabling structures for research. Using an umbrella set of Terms & Conditions to encompass this wide range of initiatives provides flexibility, but can add complexity to the design and development of those initiatives.

Treasury Board policy requires that program managers assess a set of core design elements and document evidence of their consideration when designing or redesigning a transfer payment program. This is usually addressed through the development and approval process for the program Terms & Conditions. However, the use of umbrella Terms & Conditions results in requirements that would normally be addressed in the Terms & Conditions being pushed down to initiative design. As a result, there are core design elements that should be considered or at a minimum validated during the design and development of new initiatives.

CIHR’s program suite can be grouped into three broad categories: Operating Support, Career Support (both under the Investigator Initiated area) and Priority Driven. The first two categories generally comprise initiatives that are (or will be) repeated on a regular basis, for example the Project and Foundation schemes and CIHR Fellowships. Priority Driven initiatives are heterogeneous, encompassing a variety of activities and include those under the purview of the Institutes.

In reviewing a sample of programs and funding opportunities the following gaps were identified:

  • Grants were awarded to organizational recipients not identified in the current Terms & Conditions.
  • Funding opportunities were published and included individual recipients inconsistent with the current Terms & Conditions.
  • Some grant funds were redistributed by the initial recipients as awards.
  • Some recipients were paid in advance of meeting eligibility requirements.
  • Grants were awarded that may have provided benefits to other federal departments.

Initiatives must comply with the Research Projects and Personnel Support Terms & Conditions, the Treasury Board policies on which the Terms & Conditions are based and applicable Tri-Agency and internal policies. Despite the differences in the initiatives, they follow a similar development cycle. Initial activities include strategy setting, requirements definition and initiative planning, followed by design, launch and management of the competition. Ongoing payments and other supporting activities comprise post-award administration, and depending on the program, a decision to continue, transition or end the initiative may be required.

The current approach to program design does not include a step for validation against the Terms & Conditions or other policy requirements early on in the requirements definition and planning stages. This is necessary to confirm that recipients and activities are eligible under the Terms & Conditions.

There are also activities that could be incorporated into the early planning that would assist with addressing policy requirements post-award. For example, budget profiling on large, longer-term grants such as those in the Priority Driven and Foundation programs could alleviate the need to review and consider holdbacks later on. Incorporating a risk-based approach (as described in observation #3) early on in the process would enable staff to shape the design, development and proposed oversight activities accordingly, focusing on the higher risk areas.

Involvement of the appropriate Offices of Primary Interest (such as Finance and Legal) based on the nature and risk of the initiative, would assist in identifying and addressing potential issues early on in the development cycle.

Some programs run for a designated length of time while others will require a decision to continue, transition or end. This decision should be based on a review or assessment of how the program has achieved its stated objectives.

As noted above, the use of umbrella Terms & Conditions provides flexibility, but adds complexity to the design and development of initiatives. In addition, CIHR collaborates with its partner funding agencies, SSHRCFootnote 6 and NSERCFootnote 7 and to a lesser degree, CFIFootnote 8, on the development of common policies and guidelines related to the conduct of research and the administration of funding. The use of two different agreement templates, the Common AccountFootnote 9 and the separate Funding Agreement, adds another dimension. In summary, the requirements and obligations of funding recipients are documented in a variety of places and the actual location varies slightly depending on the following factors:

  • if there is a published Funding Opportunity;
  • if the payment is through a Common Account or Direct PaymentFootnote 10;
  • if there is a separate funding agreement; and
  • which CIHR and Tri-Agency policies are linked to from the Funding Opportunity and agreements.

Tracking how the various obligations are addressed under different circumstances would assist program staff in the development of initiatives and impact assessment of policy changes.

Risk and Impact
Without a common design framework, there is a risk that new or modified programs and initiatives will not be in compliance with the approved Terms & Conditions and Treasury Board policies on transfer payments. Identification of and review by all Offices of Primary Interest at the right time in the development lifecycle will ensure that any issues are identified and addressed early on. Lack of clarity on if and where policy obligations are addressed could result in misunderstanding or obligations not being properly identified or understood.

1) Establish a program design and development framework that identifies key approval points and required supporting documentation, and includes representation from offices of primary interest.

1) Responsibility

Vice-President Research, Knowledge Translation and Ethics & Chief Scientific Officer

Action:

Agreed

RKTE has recently completed a LEAN process review of all of its Priority-Driven competitions and will now add a new step into the process to review the TB Policy on Transfer Payments and the Terms & Conditions prior to the development of funding opportunities. This step will ensure compliance with the recommendation.

Expected Completion

  • January 2017
2. There is no integrated approach to risk assessment and ongoing risk management of both initiatives and recipients as required by Treasury Board Policy and Directive on Transfer Payments. (Criteria 3, 34, 38, 39, 40, 41)

Treasury Board revised its Transfer Payment policy suite in 2008 based on a set of recommendations issued by an independent blue ribbon panel that reviewed Grants and Contributions programs across government. One of the cornerstones of the revised policy suite is the requirement for a risk-based approach to the design of programs and the determination of requirements for recipient monitoring and oversight.

Risks are assessed at different levels within CIHR. The Corporate Risk Profile identifies the top risks that could threaten the ability of CIHR to achieve its overall objectives. For some programs and initiatives, risks are identified through the Treasury Board submission process when applicable, and through the governance strategies for major initiatives. Once funding is awarded, a subset of recipient risk is mitigated through the Common Account model, which pre-qualifies institutions (“Eligible Institutions”) to manage funds on behalf of CIHR. These institutions undergo a review process prior to being granted status to administer CIHR funds and are subject to ongoing oversight of their financial administration controls through the Financial Monitoring process. 

Within Priority Driven research, there are gaps in existing risk management processes at the program and initiative level. Risks and mitigating strategies are identified and documented in Treasury Board submissions for those programs that require one, but there is no monitoring or reassessment of these risks to determine their continued applicability. While governance strategies for major initiatives do identify risks and mitigating strategies the strategies reviewed took different approaches, with some identifying risks at high-level, others in detail and some moving directly to mitigation strategies.

For Investigator Initiated research, project risks were identified and assessed and mitigation strategies put in place as part of the Reforms to the Open Programs, but the new business processes for the Project and Foundation scheme do not include assessment of program or recipient risks. The proposal to implement a case management approach for the Foundation grants represents a risk mitigation strategy, but is not based on a formal risk assessment.

Establishing consistent criteria for identifying and assessing risk across program areas and within specific initiatives would enable a more complete view of overall program risks and allow oversight bodies and resources to focus on risk mitigation and monitoring in the areas where it is most needed.

CIHR is considered a small organization in terms of number of full time employees (402Footnote 11), but manages a large funding budget (nearly $1BillionFootnote 12). Resource constraints combined with the fact that all programs relate to funding and directly support the CIHR mandate and strategic objectives suggest an integrated approach to program and risk assessment could be beneficial, providing Senior Management with a more complete view of the key risks facing the organization in achieving its objectives.

Ongoing monitoring of risk and the effectiveness of risk mitigation strategies is equally important as the initial identification and assessment of risk. As programs and initiatives progress, previously identified risks should be reassessed to determine if they are still valid or if new risks have emerged.

Risk and Impact

Managing enterprise and program risk in a non-integrated fashion may result in key risks not being identified, prioritized and managed. A consistent approach to risk assessment and ongoing monitoring of program and initiative risks would ensure resources are focused in the areas where they are most needed.

2) Establish an integrated and consistent approach to initial risk assessment and ongoing risk management for programs and initiatives under the Research Projects and Personnel Support Terms & Conditions.

2) Responsibility

Vice-President Research, Knowledge Translation and Ethics & Chief Scientific Officer

Action

Partially Agreed

Although major initiatives all involve a governance strategy with a risk assessment, the level of detail is not always consistent. As such, the Governance Strategy for Major Initiatives will be modified to ensure a consistent level of detail is captured for all major initiatives. In terms of other competitions and initiatives, the level of materiality and risk is not sufficient to warrant additional oversight.

Expected Completion

  • December 2016

Vice-President Resource Planning and Management & Chief Financial Officer

Action:

Agreed

Over the past year, CIHR has updated its risk management process to consider risks not just at the Corporate level but at the Operational level including initiative risks. As a result, initiatives that are found to be of higher risk will have ongoing senior management monitoring. Over the next year, CIHR will be implementing Enterprise Risk Management and as part of its planning and implementation, CIHR will assess the impact and capacity to do risk management from a recipient perspective.

Expected completion:

  • March 2018
3. There are gaps in the management of financial risks related to recipients as required by Treasury Board Policy and Directive on Transfer Payments. (Criteria 2, 16, 31, 34, 38, 39, 40, 41)

As described in Observation #2 above, many grants are paid via Common Accounts at Eligible Institutions, which are subject to ongoing oversight through the Financial Monitoring process. The Common Account structure, annual reporting by recipients on the use of grant funds, and financial monitoring provide ongoing risk management of a subset of recipient risks. There are gaps in other areas related to recipient risk, notably Direct Payments and cash management.

The Research Projects and Personnel Support Terms & Conditions specify that while the majority of research funds are paid to Eligible Institutions, funds may be paid directly to recipients when CIHR has determined that a direct payment represents an acceptable risk; however, there is no formal process for the risk assessment.

In addition, while the Treasury Board Directive on Transfer Payments allows for grants to be paid without a formal agreement, the grant must be both low risk and low materiality. CIHR has not defined thresholds for these conditions nor assigned responsibility for assessment. Direct payment recipients are not included in the Financial Monitoring process and there is no comparable process to assess the risks related to these recipients’ use of the funds. While direct payments represented only 4% ($27.9M) of the total payments made under the Research Projects and Personnel Support in fiscal year 2014-15, a small number of them are large valueFootnote 13. Establishing thresholds and criteria for risk rating of these direct payment grants and awards would allow the oversight to be appropriately tailored.

In some cases, separate funding agreements have been established with grant recipients paid through Common Accounts. This is generally driven by reporting requirements over and above the standard financial and research reporting; however, there is no consistent criteria established to guide staff as to when a separate agreement is required. Although related to recipient risk, this aspect should also be considered in the assessment of program risk discussed in Observation #2, as the nature and objectives of the program will also influence the need for an agreement.

The Treasury Board Directive on Transfer Payments establishes requirements for cash management, including aligning payments to recipient cash flow requirements and holdbacks on payments when there is a risk of overpayment or lack of performance. These risks should be considered as part of determining oversight requirements and to identify when it is appropriate to profile grant payments to better match funding needs. For example, the current default is to pay out all grants in equal installments over the lifetime of the funding; however for larger, long-term grants, installment payments could be more closely aligned with the recipients’ cash flow requirements.

Risk and Impact

The Treasury Board Policy and Directive on Transfer Payment requires managers of Transfer Payment programs to apply oversight and administrative requirements to recipients based on an assessment of risk. Without a consistent and structured process to assess the risk of recipients or classes of recipients, CIHR is not in compliance with this policy. Oversight and reporting that is not risk-based may result in the wrong level and type of information needed to manage cash flow and other financial risks.

3) Design and document an approach for financial risk assessment and ongoing monitoring of risk for recipients that addresses the following criteria:

  • acceptable risk thresholds for Direct Payment recipients;
  • when an agreement is required for these recipients;
  • when an agreement over and above the institutional agreement is required for Common Account recipients; and
  • where there is a risk of a payment not aligning with cash flow requirements of the recipient or other cash management risks.

3) Responsibility

Vice-President Resource Planning and Management & Chief Financial Officer

Action

Agreed

Vice-President Resource Planning and Management & Chief Financial Officer will be defining, documenting and implementing a risk based approach on:

  • Definitions on what is considered high versus low risk
  • Consistent use of agreements as a mitigation strategy
  • Establishing appropriate payment schedules and cash management as deemed necessary based on risk definition (see observation 4)

Expected Completion:

  • March 2017
4. Recipient financial reporting is not always received in a timely fashion, constraining CIHR’s ability to meet the cash management requirements as defined in the Directive on Transfer Payments. (Criteria 30, 34, 35, 40, 41)

Financial reporting by recipients provides input into several processes, including recovery of unspent balances, requests for extensions to grants, and assessment of cash flow requirements. These address requirements defined by Treasury Board, CIHR and Tri-Agency policies and guidelines, and the controls required for proper management and reporting of government resources.

The Directive on Transfer Payments states that payment of grant installments should be aligned with recipient cash flow requirements, that funding should reflect the minimum amount required to achieve the objectives and that holdbacks be considered when appropriate. The CIHR Grants and Awards GuideFootnote 14 and the Tri-Agency Financial Administration GuideFootnote 15 specify that unspent balances at the end of a grant are to be returned to the Crown.

Accurate and timely reporting on the use of grant funds is required to support these processes. For the majority of grants, reporting on the use of funds occurs via the Grants in Aid of Research Statement of Account, commonly referred to as the Form 300Footnote 16. These reports are submitted annually, either electronically via the Financial Data Submissions and Reconciliation (FDSR) system or on paper. The data is then uploaded to EIS, the CIHR system that tracks information related to grants and payments. Paper submissions are directly entered into EIS by CIHR staff.

The Form 300 process is labour-intensive and requires manual intervention to reconcile the amounts reported with EIS. Direct payment recipients are not actively reviewed as part of the current Form 300 reporting and reconciliation process. The Form 300s are primarily used to identify unspent balances to be recovered once the authorization for funding has expired. Due to the gaps in the information on outstanding balances, amounts that are due to the Crown are difficult to accurately estimate. Timing is also an issue; the Form 300s are due by the end of June for the previous fiscal year and require additional time for reconciliation. As such, the information is not available until well after year end and has limited use in informing decisions on payments for the current year.

There are challenges to improving the process. CIHR administers thousands of grants that vary in both value and length, which means that while the aggregate unspent balances at eligible institutions may be significant, assessing each individual grant may not be feasible. Unspent balances may result for several reasons, including delays in ethics approvals, approved leaves for researchers and the CIHR internal budgeting processes. As per the standard government process, CIHR is allocated budget for grants one year at a time and must spend the majority of the money within that year. Despite these challenges, there is sufficient information available with the current process to identify higher-risk grants and focus reporting and analysis efforts on these. Analysis on a sample of available information indicates that larger, longer-term grants tend to carry larger annual balances and are more likely to be extended beyond their original expiry date.

Risk and Impact

Without accurate and timely financial reporting, CIHR does not have the information required to fully comply with the cash management requirements of the Directive on Transfer Payments and to ensure government resources are prudently managed.

4a) Review the current Form 300 reporting process to determine if improvements can be made to enhance the timeliness and accuracy of reporting on use of grant funds and to leverage information for decision making.

4b) Apply a risk-based approach to identify and define the information required to ensure funding levels are appropriate, payments are aligned with recipient cash flow requirements, and to identify and record debts to the Crown.

4a) Responsibility

Vice-President Resource Planning and Management & Chief Financial Officer

Action

Agreed

Vice-President Resource Planning and Management & Chief Financial Officer will be reviewing the Form 300 process based on risk to:

  • Evaluate the scope, accuracy and timing of the review;
  • Ensure proper follow up process;
  • Improve reporting for decision making.

Expected Completion:

  • March 2017

4b) Responsibility

Vice-President Resource Planning and Management & Chief Financial Officer

Action

Agreed

Vice-President Resource Planning and Management & Chief Financial Officer will be defining, documenting and implementing a revised cash management process by:

  • Reviewing payment schedules;
  • Increasing follow-ups on recipients cash flow and amount owed to the Crown;
  • Recording debts to the Crown based on best estimate at reporting date.

Expected Completion:

  • March 2017
5. Governing Council has not established policies respecting consulting and collaborating with persons and organizations that have an interest in health research as required by the CIHR Act. (Criterion 1c)

The Governing Council (GC) of CIHR is responsible for establishing policies respecting “consulting and collaborating with persons and organization that have an interest in health research.” This responsibility is assigned to GC in the CIHR Act.

Although GC has communicated its support for partnerships and collaboration, it has not established a policy with respect to consultation and collaboration, nor has it formally delegated this responsibility. While CIHR has established the organization and other supporting structures that enable the agency to enter into agreements with various parties for the purpose of achieving its objectives, a policy on consulting and collaborating does not exist. Such a policy would enable GC to clearly outline their expectations for and the general principles to be applied to partnerships, collaborations and consultations.

Risk and Impact

The lack of an approved policy on consulting and collaborating is not in compliance with CIHR Act. A documented policy on consulting and collaborating that is periodically reviewed and updated would establish clear expectations, roles and responsibilities for partnering, consulting and collaboration, and ensure that practices are in line with the principles and strategic direction for the Agency established and approved by Governing Council.

5) Governing Council should establish a policy on partnerships that enumerates its expectations with regards to collaborating and consulting with external stakeholders.

5) Responsibility

Vice-President External Affairs and Business Development

Action

Agreed

  • The Vice President, External Affairs and Business Development (EABD), will recommend to the President that he request that Governing Council formally delegate responsibility for developing a policy regarding “consulting and collaborating” to the Vice President, External Affairs and Business Development
  • If this delegation of authority is approved by Governing Council, the Vice President, EABD, will commit to providing GC with an annual report on the progress made and results achieved related to the implementation of two corporate strategies:
    • CIHR Stakeholder Engagement Strategy;
    • CIHR Partnerships Strategy

Expected Completion:

  • Spring 2017
6. Service standards for funding programs have not been established as per the requirement defined in the Policy on Transfer Payments. (Criterion 25).

The Treasury Board Policy on Transfer Payments requires reasonable and practical department service standards be established for transfer payments. Further guidance on what these standards should include is not provided.

The 2012 Audit of Grant and Contribution Program Reforms by the Office of the Auditor General highlighted the following areas that two organizations had addressed:

  • acknowledgement of application;
  • timelines to provide funding decisions to applicants;
  • time it takes to issue payments.

A brief survey of published service standards information from other organizationsFootnote 17 considered comparable to CIHR with respect to the type of funding offered found a wide variety in the type and level of service standards. CIHR publishes formal service standards for Electronic Systems that address ResearchNetFootnote 18 and the impact of unplanned interruptions on extensions to funding opportunity deadlines. In addition, each funding opportunity contains a schedule that includes the application deadline, the anticipated notice of decision and the funding start date.

The Contact Centre is the central focus point for interactions with CIHR by applicants, recipients and other stakeholders and is tasked with developing service standards. The use of the newly implemented Customer Relationship Management system should facilitate tracking and reporting of response times for certain operations.

Risk and Impact

The absence of established service standards means CIHR is not in compliance with the Directive on Transfer Payments. Establishing and publishing reasonable and practical service standards would help manage client expectations, assist staff responsible for responding to prioritize their work and establish a baseline for performance measurement.

6a) Establish and publish a set of reasonable and practical service standards for transfer payments interactions with applicants and recipients.

6b) Implement a performance measurement strategy to identify, collect and report on metrics for service standards.

6a) Responsibility

Vice-President Research, Knowledge Translation and Ethics & Chief Scientific Officer

Action:

Agreed

CIHR’s Contact Centre was established in July of 2015 and is responsible for managing all inquiries from applicants and grant recipients in order to provide consistent, coordinated and integrated service delivery.  Service standards are being developed and implemented over the coming months.

Expected Completion:

  • April 2017

6b) Responsibility

Vice-President Research, Knowledge Translation and Ethics & Chief Scientific Officer

Action: 

Agreed

A performance measurement strategy will be developed to identify, collect and report on the metrics for the service standards implemented in (6a).

Expected Completion:

  • April 2017
7. The Research Projects and Personnel Support Terms & Conditions and supporting policies require updating to reflect CIHR’s current business model and ensure consistency in terminology between documents. (Criteria 3, 5, 11, 12, 13, 18, 22)

The Terms & Conditions are the vehicle by which Treasury Board grants authority to CIHR to distribute funding under the Research Projects and Personnel Support program. They document how CIHR addresses key aspects of the Treasury Board transfer payment policy requirements and outline the general structure for the program. Internal policies, directives and processes should support and align with the Terms & Conditions, providing staff with clear guidance on the design and delivery of initiatives under the Terms & Conditions.

The Research Projects and Personnel Support Terms & Conditions were last reviewed in 2011, when ministerial approval was obtained for minor updates. Prior to that, the last major update was in November 2006. Although the Terms & Conditions are generally in compliance with Treasury Board policy, a set of minor amendments are recommended to bring them up to date, add clarity and better align with the types of initiatives CIHR currently undertakes. Minor discrepancies between the Terms & Conditions and supporting documents were also identified; these should be reviewed and updates made to the appropriate document to ensure alignment.

The areas requiring review and update in the Terms & Conditions  are:

  • Remove the “Governance” section which is not required and is inaccurate;
  • Update the “Class of Recipients” section to reflect the changing nature of CIHR’s programs as endorsed by Governing Council;
  • Revise the “Collaboration (grants)” sub-section under the “Funding Types” section to reflect current funding for research enabling structures. Clearly define the projects, initiatives and activities and separate them from the eligible recipients;
  • The stacking provision section contains contradictory language and does not reflect the current actions taken by  CIHR nor the increasing significance of partner funding;
  • Update the basis and timing of payment and the Performance Measurement strategy to reflect the current practices. Consideration should be given to writing these sections as generically as possible, to avoid them becoming outdated if supporting elements change.

The following items require review for clarification or interpretation to ensure there is consistency between the Terms & Conditions, the Grants and Awards Guide and how they are used in Funding Opportunities. Which documents require updating will depend on the outcome of the review; however, a general principle is to keep the definitions broad in the Terms & Conditions, and include any restrictions in lower level documents, such as the Grants and Awards Guide or the Funding Opportunity.

  • Ensure clarity and consistency in the definitions of Knowledge Users. The Terms & Conditions read that Knowledge Users must be affiliated with a post-secondary or research institution, but the Grants and Awards Guide definition is broader, allowing Knowledge Users from private enterprises or media outlets.
  • The term “Eligible Institution” in the Grants and Awards Guide refers to one that has been approved to administer CIHR research funds. The Terms & Conditions do not use this term; however, there is language regarding the type of institution with which recipients must be affiliated which can be referred to as an eligible institution. Staff developing Funding Opportunities should be clear on their intent when using the term eligible institution.

Risk and Impact

The Terms & Conditions represent CIHR’s commitment to Treasury Board on how the Research Projects and Personnel Support program will operate, who will receive funding and for what activities. Updating the Terms & Conditions to better align with current business models at CIHR will ensure that approved authorities are clear and not overstepped.

7) Review and update the Research Projects and Personnel Support Terms & Conditions and supporting policies, guidelines and procedures to reflect current practice and ensure that terminology and definitions are clear and consistent between documents.

7) Responsibility

Vice-President Resource Planning and Management & Chief Financial Officer

Action

Agreed

Vice-President Resource Planning and Management & Chief Financial Officer will be the primary point of contact with TBS to ensure that the updates to the T&Cs are reflective of program needs and TBS guidelines. Vice-President Resource Planning and Management & Chief Financial Officer will coordinate the stakeholders’ input in the revision.

Expected Completion:

  • March 2018
8. The Agreement on the Administration of Agency Grants and Awards and the CIHR Funding Agreement template are not fully compliant with the requirements defined by Appendix F: Funding Agreement Provisions for Grants of the Directive on Transfer Payments (Criterion 7, 8)

The Treasury Board Directive on Transfer Payments lays out the clauses that must be included in the funding agreement for a grant. Funding agreements are based on two templates. The Tri-Agency Agreement on the Administration of Agency Grants and Awards signed with each Eligible Institution applies to grants paid through Common Accounts. The CIHR Funding Agreement template is the basis for agreements signed with Direct Payment recipients and others where additional terms are required.

The following items are missing from the Agreement on the Administration of Agency Grants and Awards

  • An indemnification clauseFootnote 19 to the benefit of the Crown as per requirement 8 of the Directive, Appendix F
  • A clause indicating funds are subject to appropriation as per requirement #6 of the Directive, Appendix F. This clause appears in the funding opportunity template and on the Authorization for Funding form, but consideration should be given to adding it to the standard agreement
  • A provision regarding the Conflict of Interest legislation and codes applicable to current and former public servants and members of the Senate and House of Commons as per  requirement #11 of the Directive, Appendix F
  • A declaration regarding compliance with the Lobbying Act as per requirement #12 of the Directive, Appendix F

The following items are missing from the Funding Agreement template.

  •  A clause regarding termination or reduction of funding if the recipient no longer meets eligibility requirements as per requirement #7 of the Directive, Appendix F
  • A provision regarding the Conflict of Interest legislation and codes applicable to current and former public servants and members of the Senate and House of Commons as per  requirement #11 of the Directive, Appendix F. The current template includes a clause covering the Values & Ethics code, but not all aspects of the requirement are addressed.
  • A declaration regarding compliance with the Lobbying Act as per requirement #12 of the Directive, Appendix F
  • A clause notifying the recipient regarding public dissemination of information regarding the recipient and the grant as per requirement #14 of the Directive, Appendix F
  • The Terms & Conditions include requirements for Official Languages as such, a clause should be included in the template for consideration when appropriate as per requirement #16 of the Directive, Appendix F
  • The information to be obtained for confirmation of ongoing eligibility, if required as per requirement #17 of the Directive, Appendix F
  • A clause regarding any obligations for an environmental assessment as per requirement #24 of the Directive, Appendix F. Although optional, it should be in the template for consideration as it is a requirement in regular FOs.
  • A clause regarding privacy and personal information as per requirement #25 of the Directive, Appendix F. Although optional, it should be in the template for consideration. The Tri-Agency Framework: Responsible Conduct of Research addresses this extensively and could be included through reference.

Risk and Impact

Without all of the required elements, the Research Projects and Personnel Support program is not fully compliant with the Treasury Board Directive on Transfer Payments. Required elements for funding agreements are defined to ensure funding agreements minimize risks to CIHR and enable programs to achieve their objectives. Missing elements may result in exposure to CIHR through increased scrutiny or damage to CIHR's reputation among stakeholders. Eligible institutions and recipients may not be aware of all their obligations.

 

8) Review and update the funding agreement templates to accurately reflect the requirements specified in Appendix F of the Directive on Transfer Payments.

8) Responsibility

Vice-President Resource Planning and Management & Chief Financial Officer

Action

Agreed

The Senior Corporate Advisor, in consultation with the Deputy Chief Financial Officer, will revise the Funding Agreement template to ensure full compliance with Appendix F.

Expected Completion:

  • March 2017

During the course of our audit, some minor opportunities for improvement were identified that could strengthen systems of internal control, streamline operations and/or enhance processes related to transfer payments. These observations have been communicated to management.

Appendix

3.1 Audit Criteria

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 improvements required Control weaknesses either individually or cumulatively represent the possibility of serious exposure.

3.2 Overall Conclusion

The audit has concluded that delivery of programs under the Research Projects and Personnel Support Terms & Conditions is well-controlled. Areas for improvement have been identified, but overall these are not significant risks or impediments to the achievement of CIHR’s strategic objectives and mandate.

Criteria Reference to Observations Conclusion
Line of Inquiry 1 – Governance, Accountability and Eligibility

1) Governing Council meets its responsibilities as defined by the CIHR Act including:

  1. Approving funding for research
No exceptions noted Well controlled
  1. establishing a peer review process for research proposals made to the CIHR
No exceptions noted Well controlled
  1. establishing policies respecting consulting and collaborating with persons and organizations that have an interest in health research.
Audit report observation #5 Moderate issues

2) A structure is in place for CIHR to enter into contracts, agreements, memoranda of understanding or other arrangements with a department or agency of the Government of Canada, with any other government or any of its agencies or with any person or organization in the name of Her Majesty in right of Canada or in its own name, for the purpose of achieving its objectives

Audit report observation #3 Moderate issues

3) Science Council and its standing committees have established a process for the design and development of program elements to support CIHR priorities that are in accordance with the Core Design elements in Appendix B of the Directive on Transfer Payments, legislation and existing Terms & Conditions where applicable

Audit report observations #1, #2, and #7

Moderate issues

4) Science Council and its standing committees have established the organizational structure, roles & responsibilities, policies and processes necessary for the delivery of program elements

No exceptions noted

Well controlled

5) Program changes are assessed to:

  • Determine the impact on program Terms & Conditions
  • Validate legislative & policy requirements
  • Obtain the required approvals
  • Notify all parties as required

Audit report observations #1 and #7

Moderate issues

6) The Research Projects and Personnel Support Terms & Conditions address the elements identified in Appendix D: Terms & Conditions for Grants of the Directive on Transfer Payments

No exceptions noted

Well controlled

7) The Agreement on the Administration of Agency Grants and Awards by Research Institution complies with the Research Projects and Personnel Support Terms & Conditions

Audit report observation #8

Moderate issues

8) The Agreement on the Administration of Agency Grants and Awards by Research Institution complies with requirements defined by Appendix F: Funding Agreement Provisions for Grants of the Directive on Transfer Payments

Audit report observations #1 and #8

Moderate issues

9) Agreements with other Orders of Government comply with the requirements defined by Appendix I: Transfer Payments to Other Orders of Government

Audit report observation #1

Moderate issues
Line of Inquiry 2 - Compliance with CIHR Research Projects and Personnel Support Terms & Conditions

10) All Funding Opportunities (FO) are listed in a FO Database and are made publicly available on CIHR's website. For each FO, the website provides:

  1. a description of the FO,
  2. eligibility criteria,
  3. application guidelines and links to forms, and
  4. policies and procedures governing the use of funds
No exceptions noted Well controlled
11) CIHR publishes the Grants and Awards Guide which outlines the policies and guidelines in the conduct of research and it is updated regularly Audit report observation #7 Moderate issues
12) CIHR only grants/awards funds to eligible classes of recipients as defined in the program Terms & Conditions Audit report observations #1 and #7 Moderate issues
13) CIHR only provides programs that offer types of funding included in the Terms & Conditions. Audit report observation #7 Moderate issues
14) Application requirements are specific to each competition (and the applications themselves) and are detailed in the FO and other literature that can be accessed on CIHR's website. No exceptions noted Well controlled
15) Research funds are only paid to institutions with a health research or knowledge translation mandate that administer research accounts on CIHR’s behalf and have signed an Agreement on the Administration of Agency Grants and Awards by Research Institutions No exceptions noted Well controlled
16) Funds are paid directly to recipients only when the recipient is not affiliated with an institution that has signed the MOU with CIHR and where CIHR has determined that a direct payment represents an acceptable risk. Audit report observation #3 Moderate issues
17) CIHR has established and communicated the types of expenses that are eligible for funding. CIHR has established a process to identify, document and communicate to recipients when exceptions apply to a specific funding opportunity No exceptions noted Well controlled
18) Total Canadian government funding does not exceed 100% of total eligible expenditures and there is no duplication of funding for the same research. Audit report observation #7 Moderate issues
19) Research Funding and Collaboration (grants) do not exceed the maximum amount payable of $50,000,000 per recipient per fiscal year. No exceptions noted Well controlled
20) Research Personnel (awards) do not exceed the maximum amount payable of $200,000 per recipient per fiscal year. No exceptions noted Well controlled
21) Ongoing eligibility of recipients is confirmed in accordance with an established process. No exceptions noted Well controlled
Line of Inquiry 3 - Compliance with Treasury Board Transfer Payment Policy Suite

22) The Terms & Conditions are relevant and effective in meeting CIHR and government objectives, and are aligned with and support:

  • CIHR's Management, Resources and Results Structure; and
  • results from periodic spending reviews, such as strategic reviews.
Audit report observation #7 Moderate issues

23) A performance measurement strategy for the transfer payment programs:

  • exists;
  • is periodically updated;
  • supports the evaluation of the program; and
  • supports the review of its relevance and effectiveness.
No exceptions noted Well controlled
24) Results of an evaluation or review of the relevance and effectiveness of each transfer payment program are taken into consideration and that appropriate and timely action is taken and where appropriate, recommends the continuation, amendment or termination of the Terms & Conditions for these programs. Establishing a three-year plan for review or evaluation that is integrated with the department’s Report on Plans and Priorities Audit report observation #1 Moderate issues
25) Ensuring there are reasonable and practical departmental service standards for transfer payments Audit report observation #6 Moderate issues
26) Transfer payment programs and processes are harmonized and standardized within the department and between departments as appropriate. No exceptions noted Well controlled
27) Transfer payments are not made to a department as defined in section 2 of the Financial Administration Act, nor made to finance the ongoing operating or capital requirements of a federal Crown corporation. Audit report observation #1 Moderate issues
28) The design and delivery of programs respects Part IV and Part VII of the Official Languages Act. No exceptions noted Well controlled
29) Information on transfer payments, including a description, application and eligibility requirements, and criteria for assessment, is publicly available and easily accessible to potential recipients No exceptions noted Well controlled
30) The amount of funding provided to recipients is the minimum required to achieve the program goals. Audit report observation #4 Moderate issues
31) An agreement exists with the recipient/organization before the first payment is released Audit report observation #3 Moderate issues
32) Transfer payments are paid to recipients in a timely, prudent and efficient manner that supports the achievement of objectives and recognizes the risks involved. No exceptions noted Well controlled
33) That a grant in excess of $250,000 is paid in instalments, unless the full amount is required in a single payment to meet the objectives of the grant. No exceptions noted Well controlled
34) Retaining a holdback of a portion of any payment under a funding agreement when this is deemed appropriate based on the risk of non-performance or overpayment Audit report observations #1, #2, #3, and #4 Moderate issues
35) Amounts repayable by or recoverable from recipients are recognized as debts due to the Crown and appropriate action taken for recovery Audit report observation #4 Moderate issues
Line of Inquiry 4 - Oversight, Risk Management and Control Activities

36) Financial signing authorities are exercised and verified as per CIHR’s Delegation of Financial Authority Instrument when:

  1. Grant Agreement is signed
  2. Section 32 – Commitment Authority
  3. Certification of performance (Section 34 of the Financial Administration Act)
  4. Payment is issued (Section 33 of the Financial Administration Act)
No exceptions noted Well controlled

37) Records and information regarding transfer payments are maintained in accordance with laws and regulations.

  • Accounting records and information are maintained in accordance with government laws and regulations.
  • Responsibilities for monitoring the requirements for information management are clearly assigned.
No exceptions noted Well controlled
38) A documented risk assessment has occurred to ensure that the level of monitoring of recipients and the reporting required from recipients, including the degree of certification or audit assurance required from the recipient on any reports, reflects an assessment of the risks specific to the program, the value of the funding in relation to administrative costs, and the risk profile of the recipients. Audit report observations #2 and #3 Moderate issues
39) On-going risk management activities are undertaken to ensure residual and exposure risks are minimized. Audit report observations #2 and #3 Moderate issues
40) Financial and non-financial reporting is reviewed for completeness, accuracy, relevance, timeliness, appropriateness, and reasonableness and is used for decision making Audit report observations #2, #3 and #4 Moderate issues

41) Reviews of financial reports are conducted to analyze, compare and explain financial variances between actual and plan and spending patterns.

  • The requirement to compare and explain variances is documented.
  • Responsibility to compare and explain variance is known and understood and applied accordingly.
  • Management reviews variance reporting prepared.
  • Management review is on-going and is timely
  • Information is used for decision making
Audit report observations #2, #3 and #4 Moderate issues
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