AUDIT OF GEO-MAPPING FOR ENERGY AND MINERALS AU1205

Reports 2012

EXECUTIVE SUMMARY

Introduction

The Government of Canada is investing $100 million from 2008-2013 in the Geo-Mapping for Energy and Minerals (GEM) Program.

The main priorities of the Program are:

  1. Mapping the Arctic using modern geological methods and standards to identify the potential for energy and mineral resources;
  2. Emphasizing the training of the next generation of Canadian geoscientists required to address the future capacity gap; and
  3. Encouraging economic stimulation in order to increase prosperity and well-being in Canada’s North.

The audit of GEM was approved by the Deputy Minister as part of the 2011-2013 Risk-Based Audit Plan.

The overall objective and purpose of this audit was to provide reasonable assurance that the Program has:

  • Implemented an effective and efficient governance and accountability framework;
  • Managed its projects, partnerships and collaborations to effectively and efficiently achieve the Program’s objectives in accordance with the terms and conditions of the Program; and
  • Implemented risk-based controls, monitoring and oversight for projects and payments.

The scope of the audit covered controls for program delivery and included projects, grants and payments from May 6, 2008 to April 14, 2011.

Strengths

The audit found that there was an advisory committee who reviewed the alignment of projects selected with the model developed for the Program. Projects were selected through a consultative process with Provincial and Territorial partners. The GEM Program has implemented risk management processes, a performance measurement strategy and has ongoing communication with appropriate stakeholders. It was noted that the health and safety of employees is a clear priority for the Program.

Areas for Improvement

Despite adhering to a sound proposal evaluation process, documentation on this area should be improved in order to maintain clear, written justifications for the selection of projects. In addition, collaborative agreements were drafted for all collaborative activities reviewed. However, they were only signed by both collaborative parties if the agreement had financial obligations. The Audit Branch considers that all agreements should be signed, even if there are no associated financial obligations. Finally, some issues were identified with respect to compliance with financial requirements.

Conclusion

Overall, the Audit Branch can provide reasonable assurance that the GEM Program has implemented sound management practices and processes. However, improvements in certain areas, such as documentation of the decision process, would help improve administration for project management as well as monitoring and compliance for financial transactions.

Statement of Assurance

In my professional judgement as Chief Audit Executive, sufficient and appropriate audit procedures have been conducted and evidence gathered to support the accuracy of the conclusion provided and contained in this report. The conclusion is based on a comparison of the conditions, as they existed at the time, against pre-established audit criteria that were agreed on with management. The conclusion is applicable only to the entity examined.

Christian Asselin, CA, CMA, CFE
Chief Audit Executive
Audit Branch

TABLE OF CONTENTS

INTRODUCTION

The Government of Canada is investing $100 million over five years (2008-2013) in the Geo-mapping for Energy and Minerals (GEM) Program. The Program is expected to provide the geoscience knowledge necessary for private sector exploration companies to guide investment decisions, as well as for government and Northerners to make informed land-use decisions such as the creation of parks and other protected areas.

GEM will focus mainly on mapping the Arctic using modern geological methods and standards to identify the potential for energy and mineral resources. Approximately 75% of Federal funds will be expended in the territories with the remaining 25% expended in the provinces. In addition, GEM will emphasize the training of the next generation of Canadian geoscientists required to address the future capacity gap in the geoscience area. Finally the Program will encourage economic stimulation in order to increase prosperity and well-being in Canada’s North.

GEM is being delivered via three strategies:

  • GEM-Energy;
  • GEM-Minerals; and
  • GEM-Knowledge.

Partnered project portfolios are in place in Nunavut, the Northwest Territories, the Yukon and most of the Provinces after extensive consultations with jurisdictional geoscience agencies.

The audit of GEM was approved by the Deputy Minister as part of the 2011-2013 Risk-Based Audit Plan.

Audit Purpose and Objectives

The overall purpose of this audit was to provide reasonable assurance that the Program has:

  • Implemented an effective and efficient governance and accountability framework;
  • Managed its projects, partnerships and collaborations to effectively and efficiently achieve the Program’s objectives in accordance with the terms and conditions of the TB submission; and
  • Implemented risk-based controls, monitoring and oversight for projects and payments.

Scope and Methodology

The scope of the audit covered controls for program delivery and included projects, grants and payments from May 6, 2008 to April 14, 2011.

The audit approach was based on Treasury Board guidelines on internal auditing and standards defined by the Institute of Internal Auditors (IIA) and included:

  • Review of relevant program documents;
  • Interviews with key corporate and program personnel;
  • Examination of program and corporate records; and
  • In depth review of transactions and projects.

More specifically, the audit included an examination of:

  • 8 scientific projects with total spending of over $23 million;
  • A random statistical sample of 113 financial transactions which included payments for expenditures for goods and services, travel claims, payments for grants and contributions and acquisition card transactions.

It should be noted that the assessment of expectations and results of the Program and projects selected was not part of the audit. The Department is completing an evaluation of these aspects of the Program.

Criteria

The criteria have been developed from the key controls set out in the Treasury Board of Canada’s Core Management Controls and relevant associated policies, procedures and directives. The criteria guided the fieldwork and formed the basis for the overall audit conclusion. Please refer to Appendix B for the audit criteria.

Findings and Recommendations

Documentation of Project Selection and Oversight

Summary Finding

The Program was administered well with respect to:

  • The development of strategic and operational plans. The audit found that plans were developed for all scientific projects which included budget and human resource considerations. Project deliverables were defined at the beginning of each project.
  • The development and implementation of risk management strategies were found throughout the audit. Examples included the reallocation of budgets, regular communication and health and safety training.
  • The appropriate training of staff. The audit found that controls were implemented to ensure that all staff going to the field had received the required training.
  • The communication of project information, both internally and externally. Project results were communicated to stakeholders through publications of journals and presentations at conferences. The results of field work could be found though various publicly accessible databases such as GeoScan and GeoPub.

The GEM Program has implemented project management processes. However, processes for project selection and scientific oversight have not been well documented. Without proper documentation, project management decisions are difficult to understand and adherence to the criteria established to support the rationale for the decision making process cannot be demonstrated.

RISK AND IMPACTFootnote 1
Risk Type Audit Risk Rating Impact
Operations Minor Without a documented decision making process, the ability to demonstrate that effective control has been exercised is reduced.

Supporting Findings

Project Selection

The audit assessed whether the selection of GEM projects was done in a manner that could demonstrate alignment with the terms and conditions of the Program. It was expected that a documented selection process would be available that supported the rationale and prioritization for the project portfolio. A total of 8 GEM projects were reviewed with a combined value of approximately $23 million. Through interviews and the review of documents provided, it was confirmed that project proposals were evaluated by the GEM management team. These evaluations were based on a logic model developed for the Program that considered eligible activities. However, documentation of the evaluation process was incomplete and should have provided more detail regarding the rationale for projects being approved or rejected. The absence of a fully documented selection process makes it difficult to determine whether the selection of scientific projects was based on clear, consistent scientific priorities and defined criteria.

The audit team found many examples of multi-year project plans which included financial and human resource considerations. Interviews demonstrated that project plans were reviewed on an annual basis. In order to mitigate funding risks, a budget re-allocation process was established to ensure unspent funding could be re-allocated to new or existing projects.

Roles and Responsibilities

In order to produce scientific deliverables effectively, strong administrative support is needed. In the beginning of the Program, scientific project leaders were responsible for many non-scientific tasks including managing relationships with external stakeholders, procurement, and human resources. These duties left less time available for providing scientific project management. GEM Management subsequently implemented positive changes by introducing business leads to provide administrative support to scientific projects.

Project Management

In order to assess whether effective project management was occurring, the audit expected that monitoring, oversight and reporting was taking place. Many examples of project monitoring and reporting were evident. As required by the Treasury Board Approval, the Program was monitoring and reporting on various financial and non-financial performance metrics including:

  • Private sector uptake;
  • Outputs produced;
  • Funding spent in the North; and
  • Development of highly qualified personnel.

Management oversight was demonstrated though regular meetings with program management discussing human resources and staffing, financial management and communication strategies. Various mechanisms were in place to ensure project results were communicated, such as marketing plans and communication strategies. The Geological Survey of Canada’s (GSC) management had in place effective controls to ensure staff had the required health and safety training before beginning fieldwork. Reports from this monitoring have been produced regularly through mid- and year-end reports (reporting at times directly to the ESS ADM or to GSC management committee). The audit team noted GSC management performed annual program assessment exercises in March 2010 and the GEM program was assessed in May 2011 and January 2012 to further strengthen scientific and strategic oversight.

The auditors found that multiple project management systems were used. This was due to the evolving environment and changes in GEM management. In year one of the Program, the Sector Project System (SPS) was used to capture and store project information. This system was discontinued by GSC management due to the implementation of a new integrated financial system - SAP. SAP does not yet have the project management capabilities needed for project management. In the interim, management has relied on various tools and templates for capturing and storing project related information. During the audit, documented evidence of scientific oversight was found, however it was not documented in a consistent manner. This oversight appears to be occurring in both an informal and formal manner. The lack of well documented scientific oversight reduces the ability for management to demonstrate appropriate decision making is occurring and to justify changes in scientific objectives or the reallocation of funding in between projects.

The audit noted that to respond to management challenges the GEM coordination office was established in October 2010. As a result, governance was firmed up and clear lines of reporting were established. To help improve communication within program management and ensure appropriate oversight, weekly GEM management meetings were established in October 2010. Key activities, issues and progress are discussed and decisions documented in Record of Decisions.

A review of GEM projects and activities was performed by the GEM Coordination office in early 2011. Projects and activities were evaluated against stated program objectives, reporting back to GSC management committee and CNCB DG in May 2011. This exercise identified the need and opportunity to expand GEM activities which resulted in the development of a new project: Operation GEM. This project was established to evaluate and augment the state of geoscience knowledge in selected areas outside of the current project areas. The geoscience results were used to help guide decision making and future planning for geo-mapping projects. During this exercise a process was established to better define and document project objectives, selection criteria and decision making. This process included documenting dialogues with Provincial and Territorial collaborators.

Recommendation

1. The Director General, GSC Central and Northern Canada should ensure a documented process is in place for project management to clearly demonstrate project selection, monitoring and reporting of scientific projects.

Management Action Plan and Time Frame

1. Management agrees.

Further Corrective Actions/Monitoring: In order to establish a more structured approach going forward, and learning from the decision making used for Operation GEM, selection criteria and measurements against those criteria will be used to create and implement a standardized project selection and reporting process with emphasis on trail documentation. This process will use the SAP Project Systems (PS) module (outlined below).

Follow up/Reporting: GEM is beginning its final year of a 5 year program. For this final budget exercise (2012-13), project information is being compiled and will be integrated into the departmental SAP Project System Module once available (expected launch of SAP module in April 2012). In addition, the coordination office is developing a new dashboard to report upward on GEM. The dashboard development has begun (February 1st, 2012) and will be validated by the GSC management committee and ESS ADM. Like other dashboard’s that have been developed within the sector, the GEM dashboard will be included in the mid- and year-end reporting exercises.

Responsible Position: Director General (DG), GSC Central and Northern Canada

Timing:  To address this recommendation the following two actions will be undertaken:

  1. GEM project information will be integrated and tracked in the SAP PS module.
  2. Dashboard development to report on GEM program progress and metrics.

February 2012

  • Compilation of project information.
  • Development of a draft version of the GEM dashboard.

March 1st, 2012

  • First version of the dashboard presented to GSC management committee for initial validation.

March 31st, 2012

  • All project information and decisions documented.

June 30th, 2012

  • Assuming full functionality of the new SAP PS module, integration of all project information.
  • Final GEM dashboard delivered to GSC management committee.

October 2012

  • First dashboard report delivered at mid-year.

March 2013

  • Second dashboard report delivered at year-end.

Establishing Collaborative Agreements

Summary Finding

A collaborative process was established to help define research priorities with Provincial and Territorial partners. Collaborative research agreements were drafted and included clauses such as intellectual property, limitation of liability and the scope of work to be done. However, 6 out of 9 agreements examined were not officially signed. Effective agreements can help minimize the exposure to risks for collaborative activities where shared governance and accountability frameworks exist.

RISK AND IMPACTFootnote 2
Risk Type Audit Risk Rating Impact
Operations Minor Without signed agreements in place, the Department exposes itself to higher risks.

Supporting Findings

Establishing Collaborative Agreements

NRCan has acknowledged the importance of developing effective Science and Technology (S&T) collaborative arrangements by establishing collaboration as a priority area and key direction in the 2010 Science and Technology Strategy. This direction is consistent with central agency requirements. The Treasury Board Project Management Policy requires project leaders to create adequate project management frameworks. Written agreements should define the details of tasks to be accomplished, as well as financial and reporting arrangements.

The audit noted that a collaborative framework is in place with provinces and territories (P/T) through the Intergovernmental Geoscience Accord (IGA). The National Geological Surveys Committee (NGSC) is the responsible body for implementing the IGA. The IGA describes how the federal and P/T governments work together and share information. The GEM TB Submission specifies that NRCan must adhere to the principles of the IGA. The GSC began a consultative process with Provincial and Territorial partners to determine what priorities existed. Subsequently, proposals for scientific research projects were submitted by the Provinces and Territories. These proposals formed the basis to establish collaborative research agreements. Although agreements were established, at the time of the audit, 6 out of 9 agreements examined were not signed. The IGA is a general agreement of cooperation between the Provincial, Territorial and Federal governments and states that collaborative geoscience activities should be covered by agreements with the province or territoryFootnote 3. The IGA does not include specific agreement for the scope of the work, the treatment of intellectual property or liability for potential losses. GEM management and partners decided that the purpose of these collaborative agreements was to exchange operational plans between organizations and therefore no signed agreement was necessary. Furthermore, the audit team was advised by the Program that partners considered these agreements as overly restrictive.  

GEM management told the audit team that this issue was brought to the NGSC by the responsible GSC DG for discussion in March 2011. The committee suggested that the word Accord replace the word Agreement in the document heading for collaborations that do not include financial obligations. This would allow signature to occur at a director level in the P/Ts.

Effective agreements can provide structure to help clarify the objectives, purpose and scope of collaborative research projects. Agreements can also minimize the exposure to risks where shared governance and accountability frameworks exist. Operational and financial risks may materialize if government priorities change. The result may be delayed or cancelled projects. Considerations, such as limitation of liability and indemnification clauses can help clarify liabilities if workplace incidents occur. The likelihood for these types of risks is increased due to the unpredictable working conditions in the North. Important clauses covering areas such as intellectual property may help prevent misunderstandings and ensure a common vision and the realisation of goals.

Recommendation

2. For future projects, The Director General, GSC Central and Northern Canada should ensure that appropriate agreements are established for all collaborative arrangements. These agreements should be signed by all parties.

Management Action Plan and Time Frame

2.  Management agrees.

Further Corrective Actions/Monitoring: GEM is beginning its final year. Although signed agreements have not been finalised, P/T collaborations have been very successful. To validate the level of risk related to unintended legal and financial liabilities, the GEM coordination office will perform a detailed analysis of all P/T commitments identified in annexes of the collaborative research projects. A report will be produced outlining and comparing the commitments agreed upon to what has been completed. Results from this exercise will be delivered to CNCB DG by Friday, February 17th, 2012. 

Follow up/Reporting: The CNCB DG will evaluate the need to pursue signing of collaborative research agreements for the final year of GEM based on the results of the validation exercise. GSC management will continue to work with the P/Ts through the NGSC to establish a mechanism to document collaborations in the future. Results from this report and discussions with NGSC committee will be reported in the GEM dashboard.

Responsible Position: DG, GSC Central and Northern Canada

Timing: To address this recommendation the following two actions will be taken:

  1. Risk level related to the unsigned agreements will be validated and reported to the CNCB DG.
  2. Results will be reported in the GEM dashboard.

February 17th, 2012

  • Evaluation of P/T commitments, report delivered to the CNCB DG.

March 1st, 2012

  • Final decision on signature of collaborative agreements.

March 8th, 2012

  • At the March 8, 2012, meeting of the NGSC, they agreed to develop a template for a project annex (charter) that will allow for sign off for future collaborative research agreements at the appropriate level.

Compliance with Financial Requirements

Summary Finding

The audit team selected a statistical random sample of 113 financial transactions for review. These transactions included expenditures for goods and services, travel claims, payments for grants and contributions and acquisition card transactions. When reviewing financial information the audit found several areas of non-compliance with financial requirements, specifically the Financial Administration Act (FAA) Section 34Footnote 4.

RISK AND IMPACT
Risk Type Audit Risk Rating Impact
Compliance Moderate Non-compliance with FAA Section 34 and undocumented transactions increase the risk that payments are approved for transactions where goods have not been received or services were not rendered.

Supporting Findings

Compliance with Financial Requirements

The audit team selected a statistical random sample of 113 financial transactions totalling $1.4 million for review. These transactions included expenditures for goods and services, travel claims, payments for grants and contributions, and acquisition card transactions.

The audit team recognized that conducting research in the North poses unique challenges. Northern Canada lacks much of the modern infrastructure that is available in other parts of Canada. There are often no financial institutions and many local vendors do not have the ability to provide official receipts. In the field, expenditures must be made on a cash basis, sometimes with no supporting invoices other than handwritten receipts. These circumstances were taken into consideration when reviewing financial information.

As of December 22, 2011, documentation for 7 transactions totalling $21,349 could not be located by program staff. Of the transactions reviewed, 12% (14 of 113) totalling $54,376 were processed without all supporting documents such as receipts or invoices. Missing documentation and incomplete supporting invoices increases the risk of inappropriate spending as expenditures are approved without evidence of receipt of goods or services.

In addition to the missing documentation and files mentioned above, 12 instances of non-compliance with FAA section 34 were found as follows:

  • Four instances totalling $1,662 where FAA Section 34 approval was not evident (no signature);
  • Five instances totalling $11,016 where FAA Section 34 approval was obtained without the appropriate delegation of authority (Individual had either never had authority or had expired authority);
  • Two instances totalling $933 where FAA Section 34 was approved for travel by the traveler themselves; and
  • One instance where the RC manager approved their own delegation of authority form, and subsequently certified FAA Section 34 for a transaction with a value of $263.

Non-compliance with FAA Section 34 increases the risk that payments are approved for transactions where goods have not been received or services were not rendered.

Management informed the audit team that issues with non-compliance with financial requirements under the FAA were identified following the establishment of the GEM coordination office in October 2010. The coordination office worked with Shared Services Office (SSO) to address issues and this collaboration continues. Furthermore weekly GEM management meetings are used to communicate lessons learned. Also, all cost center managers have the mandatory financial management training. In addition, the coordination office confirmed in January 2012, that 16 of the 17 have completed or updated their mandatory training within the last twenty four months.

Recommendation

3. The Director General, GSC Central and Northern Canada in consultation with SSO should monitor compliance with financial requirements by making certain RC managers include all supporting invoices for payment and that payments are processed with appropriate FAA Section 34 authority.

Management Action Plan and Time Frame

3.  Management agrees.

Further Corrective Actions/Monitoring: To ensure that the solution described above has lead to full compliance, the coordination office has initiated (February 1st, 2012) a self monitoring process, for section 34 FAA compliance. A random sample of 50 transactions will be pulled at the end of each month for the next six months. Subject to full compliance, monitoring will then be carried out on a quarterly basis until the end of GEM.

Follow up/Reporting: As indicated above, the coordination office is developing a new dashboard to report upward on GEM and will include the results of this monitoring. If required corrective measures will be put in place as soon as any issues are identified. Results from this monitoring will be put forward as a lesson learned and to guide monitoring for any future program.

Responsible Position: Director General, GSC Central and Northern Canada

Timing: To address this recommendation the following two actions will be taken:

  1. GEM coordination office will monitor FAA compliance within the program.
  2. Results of the monitoring exercise will be reported in the GEM dashboard.

February to July 2012

  • Review of samples transactions at the end of each month by GEM coordination office.

August 2012 to March 2013

  • Monitoring on a quarterly basis.

October 2012

  • Results from monitoring will be delivered in the mid-year dashboard report.

March 2013

  • Results from monitoring will be delivered in the year-end dashboard report.

Implementation of Human Resources Plan

Summary Finding

A human resources plan has been developed and training has been provided to staff to address Program needs. Training included wilderness first aid training, bear awareness training, helicopter safety training and firearms training. The ability to prepare staff for working in remote regions was an effective control to reduce health and safety risks. The Program has made progress on the staffing of vacant positions. However, the difficulties in staffing certain scientific and administrative positions could have impacted planned activities.

RISK AND IMPACT
Risk Type Audit Risk Rating Impact
Operations Minor Without the required personnel in place in a timely manner, the likelihood of completing project plans is reduced.

Supporting Findings

Execution of the Human Resources Plan

The GEM Program required the hiring of many scientific professionals in a short timeframe. The Program completed an assessment of the scientific and administrative skills needed and developed a prioritized plan to recruit employees with the required skills to supplement existing internal resources. Both long-term and short-term plans were developed to address gaps. These included:

  • Indeterminate staffing;
  • Term staffing;
  • Hiring students;
  • Partnering with industry; and
  • Partnering with academia.

In order to focus on building world class scientific and technological capacity, NRCan has emphasized the importance of recruiting appropriately skilled people in the 2010 Science and Technology Strategy. The scope, nature and quality of GEM project outputs will be largely dependent on the human resources skills available. However, the recruitment for some scientific positions was not completed due to competition from the private sector.

During the audit, it was found that the GEM Coordinator position was vacant for approximately one year. The turnover in this key management position affected planned recruitment activities. Due to these delays, the recruitment for some term positions was cancelled as the Program was nearing completion. At the time of the audit, 3 indeterminate scientific positions remained vacant. According to GEM management, it is not expected that the vacant positions will compromise the Program’s objectives. However, some scientific outputs were scaled back due to skill shortages.

Recommendation

There is no recommendation for this finding.

APPENDIX A – STANDARD RISK TYPES AND AUDIT RATINGS

Standard Risk Types

Our standard risk types are classified based on the COSOFootnote 5 Internal Control-Integrated Framework as follows:

Strategy – High-level goals, aligned with and supporting the Department's mission.
Operations – Effective and efficient use of resources.
Monitoring – Accurate assessments or evaluation of activities.
Reporting – Reliability of operational and financial reporting.
Compliance – Compliance with applicable laws, regulations, policies and procedures.

Standard Audit Risk Ratings

Audit findings are rated as follows:

Major: A key control does not exist, is poorly designed or is not operating as intended and the related risk is potentially significant. The objective to which the control relates is unlikely to be achieved. Corrective action is needed to ensure controls are cost effective and/or objectives are achieved.

Moderate: A key control does not exist, is poorly designed or is not operating as intended and the related risk is more than inconsequential. However, a compensating control exists. Corrective action is needed to avoid sole reliance on compensating controls and/or ensure controls are cost effective.

Minor: A weakness in the design and/or operation of a non-key process control. Ability to achieve process objectives is unlikely to be impacted. Corrective action is suggested to ensure controls are cost effective.

APPENDIX B – AUDIT CRITERIA

The audit criteria were derived from widely recognized control models (e.g. CICA Criteria of Control - CoCo). Actual performance was assessed against the audit criteria resulting in either a positive finding or the identification of an area of improvement. The following audit criteria were used to conduct the audit:

Objectives

Audit Criteria

Audit Objective 1: To ensure the GEM program is adequately managed through a sound governance and accountability framework. 1.1 We expected that management has an effective control framework for the design and delivery of the program.

1.2 We expect that roles and responsibilities for governance bodies, program management and staff to be clearly defined and communicated.
Audit Objective 2: To determine if GEM has managed its projects, partnerships and collaborations to effectively and efficiently achieve the programs objectives in accordance with the terms and conditions of the TB Submission. 2.1 We expect that GEM program management has developed and documented a strategic planning process that is aligned with the terms and conditions of the program.

2.2 We expect that GEM program management has effectively managed scientific projects, partnerships, and G&C’s to comply with all relevant laws, policies and procedures.

2.3 We expect that program management has developed a communication strategy to communicate program information to relevant stakeholders.
Audit Objective 3: To ensure that risk based controls exists and that monitoring and oversight is in place for projects and payments. 3.1 We expect that GEM program management has recorded financial information in a complete, accurate and efficient manner and in compliance with relevant policies and financial legislation.

3.2 We expect that GEM program management has developed a process to systematically monitor and report on the progress of GEM projects (financial and non-financial information) and make adjustments as needed.

3.3 We expect that GEM program assets are managed in accordance with Departmental policies.