Quality Assurance Audit of

Akinnie

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Audit of Innovation (BDP, ISDI, PBS) ACOA Internal Audit Directorate Final Report July 2007 TABLE OF CONTENTS Assurance Statement ............................................................................................ 1 Executive Summary .............................. 2 Background ........................................................................................................... 3 Audit Risk .............. 4 Audit Objectives .................................................................................................... 5 Audit Scope And Methodology .............. 5 Audit Results ......................................................................................................... 7 Objective 1: ... 7 Objective 2: ................................................................................................. 13 Objective 3: . 14 Objective 4: ................................................................................................. 15 ASSURANCE STATEMENT President, Atlantic Canada Opportunities Agency We have completed the Quality Assurance Audit of Innovation, which included the Business Development Program (BDP), the Innovation Skills Development Initiative (ISDI) and the Productivity and Business Skills Initiative (PBS). The overall objective of this audit was to provide assurance ...

Sujets

• management
• managers

Informations

• Publié par: Neseng
• Nombre de lectures: 17
• Langue: English

Extrait

   

                       

                                       

July 2007    

 

Audit of Innovation (BDP, ISDI, PBS)     ACOA Internal Audit Directorate   Final Report

       

 

  TABLE OF CONTENTS      

    Assurance Statement............................................................................................1 Executive Summary ..............................................................................................2 Background. .......................................................................................................... 3  Audit Risk. ............................................................................................................. 4  Audit Objectives ....................................................................................................5 Audit Scope And Methodology..............................................................................5 Audit Results.........................................................................................................7 Objective 1: ...................................................................................................7 Objective 2: .................................................................................................13 Objective 3: .................................................................................................14 Objective 4: .................................................................................................15  

                   

 

     

 

  ASSURANCE STATEMENT   President, Atlantic Canada Opportunities Agency   We have completed the Quality Assurance Audit of Innovation, which included the Business Development Program (BDP), the Innovation Skills Development Initiative (ISDI) and the Productivity and Business Skills Initiative (PBS).   The overall objective of this audit was to provide assurance that the Agency has exercised due diligence in the delivery of Innovation-related program activity of the BDP, ISDI and PBS, and has complied with established policies and guidelines, as well as the Treasury Board Policy on Transfer Payments. The engagement was conducted in accordance with the Treasury Board Policy on Internal Audit and the Institute of Internal Auditors Standards for the Professional Practice of Internal Auditing.   The examination was conducted during the period of October 2006 through February 2007, and covered contributions approved during the three and one-half years, which commenced April 1, 2003 and ended September 30, 2006.   The audit consisted of an examination of project files in respect of approved contributions from each of the Agency’s four regional offices as well as Enterprise Cape Breton Corporation (ECBC). Selected projects were examined in detail in order to evaluate compliance with Agency guidelines through all phases of projects, including assessment, disbursement, monitoring and administration.   We concluded that, on an overall basis, ACOA exercises due diligence in assessing Innovation-related applications and in disbursing program funds to recipients. We further concluded that project approvals and amendments are in accordance with established delegated authorities, that contracts contain provisions required by program policies and guidelines, and that monitoring activities are adequate to meet established requirements.   In our judgment, sufficient and appropriate audit procedures have been conducted and evidence has been gathered to support the accuracy of the conclusions reached and contained in this report. The conclusions were based on a comparison of the situations, as they existed at the time, against the audit criteria and in consideration of the result of the compliance testing. The conclusions are applicable only in respect of the programs audited. The evidence gathered meets professional audit standards and is sufficient to provide senior management with the proof of the conclusions derived from the internal audit.      Chief Audit Executive

Internal Audit Directorate  

 

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EXECUTIVE SUMMARY   The Quality Assurance Audit (QAA) of Innovation focused on the innovation elements of three programs or initiatives, the Business Development Program (BDP), Innovation Skills and Development Initiative (ISDI) and the Productivity and Business Skills Initiative (PBS).    These programs and initiatives provide direct financial assistance to small and medium-sized enterprises (SMEs) and are delivered through the ACOA regional offices, with responsibility for development and maintenance of policy and procedures resting with program panagement at Head Office in Moncton.   The Audit of Innovation on the delivery of the BDP, ISDI and PBS innovation- related projects, for the period of April 2003 to October 2006, was completed with the objective to provide assurance that ACOA exercised due diligence in the delivery of the program and followed Treasury Board policy on Transfer Payments.   The audit concluded that almost all projects met eligibility requirements and that environmental assessments were conducted. The results also indicated that projects were properly assessed against evaluation criteria and that all information critical to project decisions was consistently and accurately documented. Recommendations were made to improve assessment of both clients and projects to ensure that eligibility criteria are consistently met.   The payments system was examined and solid management processes were found to be in place.   The audit examined project monitoring and benefits monitoring, and noted some areas which we believe could be improved. Recommendations were made to improve the monitoring process and to emphasize the importance of externally prepared financial statements, documentation of the Account M anager’s review of financial statements, risk assessment and monitoring updates, and regular client progress reports.   A number of recommendations contained in this Innovation report were also noted in an earlier audit of the BDP. Because both audits examined program activity for a similar period, management action in response to the BDP audit would not have been evident at the time the audit fieldwork was completed for this engagement. Accordingly, this audit could not take into account any corrective measures implemented in response to the BDP audit.   Based on the results of the audit, the Internal Audit Directorate has issued a Statement of Assurance that, on an overall basis, the Agency exercised due diligence in the delivery of the innovation element of the BDP, ISDI and PBS.

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 Internal Audit Directorate

 

  BACKGROUND   The Quality Assurance Audit of Innovation, approved by ACOA’s Review Committee (currently Audit Committee), is an assurance engagement that was included on the Agency’s audit plan for the 2006-2007 fiscal year.     As a component of the Agency’s Program Activity Architecture (PAA), the Innovation activity encompasses a number of contribution programs, including the Atlantic Innovation Fund (AIF), ISDI and PBS, and certain elements of the BDP. Because an audit of AIF was recently completed, that program was excluded from the scope of this engagement.   The audit focused on the Innovation elements of the three programs or initiatives; the BDP, ISDI and PBS. The program/initiative objectives of each are as follows.    The BDP Innovation element is intended to stimulate the development and use of new or improved technology or products in small and medium-sized enterprises (SMEs) in Atlantic Canada so that they may become more competitive, expand and create more economic benefits for the region. The Innovation element is particularly intended to increase the technology levels in strategic sectors that have been identified by the Agency as having particular growth potential in Atlantic Canada.    The key objectives of the ISDI, from a regional perspective, are to enhance the innovation and technology management capabilities of SMEs, increase the region’s pool of experienced technology managers and technical expertise, and retain more qualified science and technology graduates within the region’s SMEs.        The immediate objective of the PBS element is to encourage SMEs to improve their competitiveness by providing training to existing personnel, acquiring skills by hiring new employees, and developing and implementing plans for improved production efficiency, product quality, or environmental management effectiveness. The ultimate objective is to make Atlantic Canadian businesses more successful and more competitive so that they may expand and create additional social and economic benefits for the region.              

Internal Audit Directorate  

 

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During the audit period, the Agency approved contributions for Innovation-related projects under the BDP, ISDI and PBS as follows.   Region BDP ISDI PBS Totals Business  Su t Innovation Other ppor ECBC 262,500 1,421,903 18,750 877,460 72,375 2,652,988 NB 6,707,808 9,598,606 3,187,924 11,924,592 1,424,793 32,843,723 NL 16,118,883 12,194,322 3,820,731 8,952,655 866,005 41,952,596 NS 3,609,357 16,319,975 4,463,057 5,900,680 89,000 30,382,069 PE 15,363,104 2,075,178 494,235 3,398,347 504,623 21,835,487 HO 324,527 324,527 TOTALS 42,386,179 41,609,984 11,984,697 31,053,734 2,956,796 129,991,390     AUDIT RISK   The Quality Assurance Audit of Innovation is included in the Audit Plan for 2006-2007 as approved by Review Committee (currently Audit Committee). Engagement risk is determined through the use of the Audit Universe Risk Analysis (AURA). The AURA specifies the engagement risk by considering six risk criteria:  Level of Funding;  Other Audits Performed;  3 rd Party Control and Delivery;  Agency Internal Controls;  Program Sensitivity; and  Agency Strategic Direction. Through the process of the AURA for Innovation, the engagement risk was determined to be high as a result of a significant level of funding, program sensitivity, and the fact that Innovation is a component of the primary strategic outcomes of the Agency.                        

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Internal Audit Directorate

 

  AUDIT OBJECTIVES   The overall audit objective is to provide assurance that the Agency has exercised due diligence in the delivery of Innovation-related projects under BDP, ISDI and PBS, and has complied with policies and guidelines established for the Programs, as well as the Treasury Board Policy on Transfer Payments. In order to provide assurance, a number of sub-objectives have been established.    ACOA exercises due diligence in assessing applications for contributions.    Project approvals and amendments are in accordance with established delegated authorities, and related contracts contain provisions as required by program policies and guidelines.    The Agency exercises due diligence in disbursing program funds to recipients.    Monitoring activities are adequate to meet the requirements established for each project during the assessment and approval process.      AUDIT SCOPE AND METHODOLOGY   The engagement was included in the 2006-2007 ACOA Audit Plan, approved by ACOA’s Review Committee ( currently Audit Committee).   The audit was carried out during the period of October 2006 through February 2007. The audit examined contributions approved from April 1, 2003 through September 31, 2006.   The audit consisted of an examination of project files relating to approved contributions from each of the Agency’s four regional offices as well as Enterprise Cape Breton Corporation (ECBC). Selected projects were examined in detail in order to evaluate compliance with Agency guidelines through all phases of projects, including assessment, disbursement, monitoring and administration.                    

Internal Audit Directorate  

 

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The numbers of commercial and non-commercial projects selected for examination, as well as the total-related contributions, are as follows.   Region BDP ISDI PBS Total Assistance  Business $ Selected Support Innovation Other Projects NB 4 6 2 6 2 7,388,586 NS 2 7 4 6 1 6,452,810 ECBC 1 4 1 4 1 1,679,176 NL 3 7 4 6 1 21,825,638 PE 4 3 1 4 1 13,072,129 TOTALS 14 27 12 26 6 50,418,339     Each regional office was visited in order to:    conduct interviews with management to obtain an understanding of systems and processes in place; and  complete a detailed examination of project files in order to ensure compliance with Terms and Conditions of the initiatives, program guidelines as well as Treasury Board Policy on Transfer Payments.

   

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Internal Audit Directorate

  AUDIT RESULTS     OBJECTIVE 1   Provide assurance that ACOA exercises due diligence in assessing applications for contributions.   Criterion 1:   Projects are satisfactorily screened for eligibility and potential environmental impact prior to approval.   Eligibility   Under ACOA programming guidelines, program eligibility, as a component of Innovation activity, is an important distinction. Designation as an Innovation activity can render projects eligible for higher rates of contribution for assistance, more flexible terms of repayment, and access to funding for a broader range of initiatives. As a result, eligibility criteria for applicants and activities are, in many instances, more stringent than those of other program elements.   In most instances, we were able to satisfy ourselves that selected projects met the eligibility requirements established for the programs; however, we noted a number of cases for which eligibility rationale were not clear.    The objective of the Innovation element of the BDP is “to stimulate the development and use of new or improved technology or products in small and medium-sized Atlantic Canadian businesses, ” and both the ISDI and PBS are similarly targeted to benefit SMEs. We noted a number of instances, however, based on the financial history of clients and/or parent companies as well as existing employment levels, where applicants were not readily identifiable as SMEs and for which eligibility rationale was not clearly stated.    A number of ISDI projects relating to “ lean manufacturing ” (productivity improvements) were approved for which Innovation project eligibility rationale was not clearly described.    The Evaluation Guidelines for BDP Innovation projects state that “t he Agency must be satisfied that the bulk of the developmental work will be carried out in Atlantic Canada and that the benefits will accrue to Atlantic Canada. ” In this regard, we identified two instances in which the developmental work appeared to have been performed outside of Atlantic Canada, and we were unable to determine from the Project Summary Forms (PSFs)   the rationale for the determination of eligibility.

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