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Report of the Auditor General of Alberta

July 2013
 

Auditor General’s Message

We are the auditors of every ministry, department, fund and provincial agency, including universities, colleges and Alberta Health Services. Our audit work focuses on areas that improve governance and ethical behaviour, the safety and welfare of Albertans, and the security and use of the province’s resources. Within this scope are six lines of interrelated but different types of auditing—financial statements, compliance with laws, systems, performance measures, results analysis and research, and advice.

This report contains work related to our systems auditing, sometimes referred to as value-for-money auditing. Systems audits can take the form of a stand-alone audit, which looks at major programs or initiatives necessary to achieve organizational goals, or they can be by-products of other audit work. For both stand-alone and by-product systems audits, our goal is to add value by identifying the root causes of inadequate systems and making recommendations for improvement.

NEW AUDITS

Of particular note in this report:

Aboriginal Relations—Systems to Assess First Nations Development Fund Grants (page 17)

The First Nations Development Fund is a lottery grant program for First Nations in Alberta, supported by revenue from government-owned slot machines in First Nation casinos. In February 2012, the Enoch Cree Nation applied for a grant of $317 million over seven years to refinance and operate the River Cree Resort and Casino. We examined whether the department’s systems used to assess the eligibility of the Enoch Cree Nation grant application were followed and were consistent with the grant program and grant agreement. We also included other First Nations’ projects during the audit and concluded that improvements could be made to the department’s systems.

We found that the department has a process to make informed decisions on funding uses; however, it did not always follow the process. We also found that the department needs to formalize and communicate its interpretation of eligible uses of grant program funds. Further, the department needs to consistently monitor and correct non-compliance with grant agreements.

Consistent and appropriate eligibility decisions by the department on these grant applications will give Albertans, particularly First Nations members, confidence that the grant program supports social, economic and community projects that enable First Nation communities to fully participate in Alberta’s economy.

Enterprise and Advanced Education—Collaborative Initiatives Among Alberta’s Post-secondary Institutions (page 41)

The government wants Alberta’s 26 post-secondary institutions to collaborate—a goal referred to as Campus Alberta. The goal is to provide accessible and affordable learning opportunities for students, to avoid duplication and to reduce overall costs.

We examined three non-academic collaborative initiatives to assess if the institutions had well-designed systems to plan, govern, implement and sustain them. We found institutions do not clearly understand how the Minister of Enterprise and Advanced Education wants to achieve the Campus Alberta goals.

Senior management at institutions lack a clear understanding of the department’s strategic direction for Campus Alberta and of how specific initiatives fit. This confusion is because the department and institutions do not have a clear structure for their collaborative relationships, and institutions do not have a collective strategic or business plan for collaboration. There are no performance measures or targets for financial and non-financial reporting to determine if collaboration is working.

Without well-designed systems in place the department and institutions will not achieve the potential within Campus Alberta.

Enterprise and Advanced Education—Medicine Hat College International Education Division (page 55)

Since 2001, Medicine Hat College has sought to bring an international focus to its campus. The International Education Division offers courses at campuses in other countries and seeks to draw international students to its campus in Medicine Hat.

We examined the college’s systems to deliver, evaluate and report on the division’s cost effectiveness. We found that the college does not have effective systems to deliver and manage the risks of international programming. The division operated independently and largely outside the college’s control systems. Board oversight of international education has failed.

Municipal Affairs—Systems to Deliver Affordable Housing Grants (page 81)

In 2007, the Alberta Affordable Housing Task Force recommended the government increase capital resources for affordable housing supply. In September 2011, the Department of Municipal Affairs reported it had met its objective of approving funding for the development of 11,000 affordable housing units for low-income Albertans. In total there was an investment of $2.2 billion—$1.1 billion from the department plus another $1.1 billion from partnerships with municipalities, non-profit groups and the private sector.

We examined the department’s systems to plan, award, monitor, report on and evaluate the two affordable housing grant programs it operates. We found that the department could have better aligned grant eligibility criteria with the programs’ objectives; did not document its awarding process well enough; and has not sufficiently monitored grant recipients to ensure they comply with their obligations.

We also found the department does not have an evaluation strategy for its affordable housing grant programs. The questions that should be answered are: what impact did the programs have on overall provincial demand for affordable housing; was the supply targeted at the right segments of the population and in the right locations; and was value for money achieved?

Treasury Board and Finance—The Budget for Financial Reporting Purposes (page 101)

Because the fiscal approach and scope of activities used in Budget 2013 is different from the accounting standards that will be used to prepare the province’s 2013-2014 financial statements, a comparison will be difficult to explain and understand as complicated adjustments and modifications will be required.

The Department of Treasury Board and Finance has informed us that it intends to construct a budget for financial reporting purposes that will be included in the province’s 2013-2014 financial statements.

FOLLOW-UP AUDITS

Included in this report are a number of follow-up audits on prior recommendations to the Departments of Energy, Enterprise and Advanced Education, Environment and Sustainable Resource Development, Human Services, Justice and Solicitor General, and Treasury Board and Finance. In the main, prior recommendations have been implemented. However, we note the following:

Energy—Bioenergy Grant Programs (page 107)

Based on the evidence gathered to follow up on the original recommendation we identified areas in which the department could improve the ongoing credit program and the ongoing reports it requires for the biorefining and infrastructure programs, as they relate to emissions reductions.

Environment and Sustainable Resource Development—Natural Resources Conservation Board—Confined Feeding Operations (page 125)

To fully implement our recommendations, the NRCB must:

Groundwater—Implement a process to effectively monitor its compliance with its approaches for leak detection, water well reporting, risk-based compliance programs and responding to complaints.

Surface water—Demonstrate reasonable progress in implementing its surface water plan by evaluating the collected data and assessing whether its current surface water approach is working. Implement a process to effectively monitor internal compliance with its data collection requirements in the surface water plan.

OUTSTANDING RECOMMENDATIONS

Each year, we make about 75 recommendations for improvements or changes to government systems and financial controls. We then follow up all recommendations and report publicly whether or not they have been implemented. Follow-up audits confirm that sustainable change has taken place and are the payback on the investment of audit resources that produced the recommendation in the first place. We will repeat our recommendations when management has not satisfactorily implemented them.

Generally, we try to complete follow-up audits within three years. At October 2012, we reported 233 outstanding recommendations, of which 84 were ready for us to complete follow-up audits. This number was reduced from the 308 that we reported as outstanding in our October 2010 report. We continue to actively manage these outstanding recommendations to reduce the number to approximately 150, which represents about two years of recommendations.

We are pleased with the response from government to our recommendations. We believe that management is developing appropriate implementation plans.

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