Atlantic Canada Opportunities Agency
Symbol of the Government of Canada

Audit of Due Diligence BDP

Management Action Plan

January 2011

Recommendation 1:

More attention should be given to the profile section of the Project Summary Form (PSF). A good profile provides a concise overview of key information containing at minimum: client history; ownership structure; highlights of financial performance, physical and human resources; its reputation and standing of its goods and services; and other relevant information.

Recommendation Type:

Key recommendation

Management Response:

Agree

Action Plan:

Review existing policies and procedures and support tools (help files, wikis, etc.) to ensure clarity of guidelines and directives.

Responsibility:

Director of Programs

Expected Completion Date:

March 31, 2011

Action Plan:

Place emphasis on proper documentation requirements as part of ongoing QAccess/work process training.

Responsibility:

Director of Programs

Expected Completion Date:

Ongoing

Action Plan:

Audit findings to be discussed at Enterprise Development (ED) regional directors table and regional program managers table – people approving PSFs have a responsibility to ensure standards are met.

Responsibility:

Director of Programs

Expected Completion Date:

January 31, 2011

Action Plan:

Audit findings to be discussed in the regions with program delivery staff.

Responsibility:

ED Regional Directors

Expected Completion Date:

March 31, 2011

Recommendation 2:

The result of assessing whether the proponent meets the SME definition should be clearly documented in the PSF.

Recommendation Type:

Key recommendation

Management Response:

Disagree. Small and medium-sized enterprises (SMEs) are defined as businesses having less than 500 employees and less than $50M in sales; over 95% of businesses in Atlantic Canada meet this definition; not meeting the definition does not make them ineligible for funding. Company sales and full-time equivalent (FTE) levels are considered in the evaluation process; writing out a comment for each project as to whether a proponent “meets the SME definition” adds no value and does not impact on the decision.

Action Plan:

Revise existing policies and procedures and remove any reference to the need to document in each PSF whether the proponent meets the definition of an SME.

Responsibility:

Director of Programs

Expected Completion Date:

September 30, 2011

Recommendation 3:

Measures should be taken to encourage account managers to conclude on each step/part of the assessment process. In addition, minimum levels of analysis/documentation and support should be established for all key areas of commercial file assessments.

Recommendation Type:

Key recommendation

Management Response:

Agree

Action Plan:

Review existing policies and procedures and support tools (help files, wikis, etc.) to ensure clarity of guidelines and directives.

Place emphasis on proper documentation requirements as part of ongoing QAccess/work process training.

Audit findings to be discussed at ED regional directors table and regional program managers table – people approving PSFs have a responsibility to ensure standards are met.

Responsibility:

Director of Programs

Expected Completion Date:

March 31, 2011

Action Plan:

Audit findings to be discussed in the regions with program delivery staff.

Responsibility:

ED Regional Directors

Expected Completion Date:

March 31, 2011

Recommendation 4:

Material differences between the information received on the application form and the one documented in the PSF should be clearly identified and explained.

Recommendation Type:

Key recommendation

Management Response:

Agree

Action Plan:

Review existing policies and procedures and support tools (help files, wikis, etc.) to ensure clarity of guidelines and directives.

Place emphasis on proper documentation requirements as part of ongoing QAccess/work process training.

Audit findings to be discussed at ED regional directors table and regional program managers table – people approving PSFs have a responsibility to ensure standards are met.

Responsibility:

Director of Programs

Expected Completion Date:

March 31, 2011

Action Plan:

Audit findings to be discussed in the regions with program delivery staff.

Responsibility:

ED Regional Directors

Expected Completion Date:

March 31, 2011

Recommendation 5:

Procedures should be implemented so that signing authority is verified and confirmed before finalizing an investment decision. If more than one shareholder exists, signing authorities should be confirmed in writing by all shareholders and regular monitoring should be performed. Legal advises should also be obtained in that area.

Recommendation Type:

Key recommendation

Management Response:

Agree

Action Plan:

Policies and procedures to be revised to establish and/or add specificity as to minimum standards which need to be met.

Responsibility:

Director of Programs

Expected Completion Date:

March 31, 2012

Action Plan:

Audit findings to be discussed at ED regional directors table and regional program managers table.

Audit findings to be discussed in the regions with program delivery staff.

Responsibility:

ED Regional Directors

Expected Completion Date:

March 31, 2011

Recommendation 6:

Measures need to be implemented to ensure that incomplete applications are followed-up and that necessary information/data is obtained and recorded in our database and that any information necessary to the evaluation process is obtained and on file.

Recommendation Type:

For improvement

Management Response:

Agree

Action Plan:

Policies and procedures to be revised for added specificity as to minimum standards which need to be met.

Responsibility:

Director of Programs

Expected Completion Date:

March 31, 2011

Action Plan:

Audit findings to be discussed at ED regional directors table and regional program managers table.

Audit findings to be discussed in the regions with program delivery staff.

Responsibility:

ED Regional Directors

Expected Completion Date:

March 31, 2011

Recommendation 7:

Account managers should be responsible to assess and document their independence as well as the independence of any other person involved in the assessment of a project. More specifically, account managers should document their identification and evaluation of circumstances and relationships that create threats to independence, as well as the actions taken to eliminate these threats or to reduce them to an acceptable level through the application of safeguards. A new form could be created for that purpose and included in each project file.

Recommendation Type:

For improvement

Management Response:

Disagree. We disagree that account managers should be required to attest or document their independence in each individual file. Employees have an obligation to comply with their employment code and conflict of interest regulations which in our opinion suffices. Dealing with this on a per file basis provides no further added value as either way the responsibility rests with the individual to consider and/or declare conflict of interest.

Action Plan:

The issue will be raised at ED Regional Directors table for consideration, particularly in the context of whether we may have account managers who have had the same clients for a very long time and whether there may be risks of “being too close”. Should occasional portfolio shuffles be considered?

Responsibility:

Director of Programs

Expected Completion Date:

March 31, 2011

Recommendation 8:

Current policy should be revised to clarify minimum requirements in terms of appropriate supporting information and appropriate third party evidences. For example, the documentation level of evidences that project costs are challenged for accuracy and reasonableness should be communicated to account managers.

Recommendation Type:

Key recommendation

Management Response:

Agree

Action Plan:

Review existing policies and procedures and support tools (help files, wikis, etc.) to ensure clarity of guidelines and directives.

Place emphasis on proper documentation requirements as part of ongoing QAccess/work process training.

Audit findings to be discussed at ED regional directors table and regional program managers table – people approving PSFs have a responsibility to ensure standards are met.

Responsibility:

Director of Programs

Expected Completion Date:

March 31, 2011

Action Plan:

Audit findings to be discussed in the regions with program delivery staff.

Responsibility:

ED Regional Directors

Expected Completion Date:

March 31, 2011

Action Taken:

In the last 15 months, 5 training events on Commercial Due Diligence have been held. In total approximately 100 officers have been exposed to this training – challenging assumptions for accuracy and reasonableness is covered in this training.

Recommendation 9:

Corporate registry searches should be performed with all new application and should be closely compared to the information provided by the proponent. All discrepancies should be investigated in detail before finalizing the investment decision. Furthermore, those corporate registry searches should be updated/reviewed on a regular basis. For projects that are delayed before final funding approval is obtained, a time limit should be established to determine the duration of which corporate registry search can be relied upon without performing a new search.

Recommendation Type:

Key recommendation

Management Response:

Agree

Action Plan:

Review existing policies and procedures to establish and/or add specificity as to minimum standards which need to be met in this area.

Audit findings to be discussed at ED regional directors table and regional program managers table – people approving PSFs have a responsibility to ensure standards are met.

Responsibility:

Director of Programs

Expected Completion Date:

March 31, 2011

Action Plan:

Audit findings to be discussed in the regions with program delivery staff.

Responsibility:

ED Regional Directors

Expected Completion Date:

March 31, 2011

Action Taken:

Program Delivery Unit is currently engaged in consultations with legal in order to develop policies and procedures specifically in this regard.

Recommendation 10:

As per the policy, assessment of incrementality should be predicated on the applicant’s statement and should be substantiated through review of the applicant’s alternative investment opportunities and options, financial projections and requirements, availability of financing, and whether irreversible commitments for significant project costs are in place. Evidence of this assessment should be documented on project files.

Recommendation Type:

Key recommendation

Management Response:

Agree

Action Plan:

Review existing policies and procedures and support tools (help files, wikis, etc.) to ensure clarity of guidelines and directives.

Place emphasis on proper documentation requirements as part of ongoing QAccess/work process training.

Audit findings to be discussed at ED regional directors table and regional program managers table – people approving PSFs have a responsibility to ensure standards are met.

Responsibility:

Director of Programs

Expected Completion Date:

March 31, 2011

Action Plan:

Audit findings to be discussed in the regions with program delivery staff.

Responsibility:

ED Regional Directors

Expected Completion Date:

March 31, 2011

Recommendation 11:

Credit checks should be performed for all new application. A defined timeframe should be established to determine how long a credit check can be relied upon, and how often it should be updated.

Recommendation Type:

Key recommendation

Management Response:

Agree

Action Plan:

Review existing policies and procedures and support tools (help files, wikis, etc.) to ensure clarity of guidelines and directives and specify minimum standards.

Audit findings to be discussed at ED regional directors table and regional program managers table – people approving PSFs have a responsibility to ensure standards are met.

Responsibility:

Director of Programs

Expected Completion Date:

March 31, 2011

Action Plan:

Audit findings to be discussed in the regions with program delivery staff.

Responsibility:

ED Regional Directors

Expected Completion Date:

March 31, 2011

Action Taken:

Monthly credit updates are done on ALL commercial clients through an automated process which has been in place for over a decade; if report on a client contains a negative occurrence (NSF cheque, action, lien, judgment, etc.) since last monthly update, an e-mail notification is automatically sent to the lead officer on the file to flag it.

Recommendation 12:

The sensitivity analysis tool in the PSF module in QAccess should be modified in order to provide account managers with more flexibility.

Recommendation Type:

Key recommendation

Management Response:

Agree. The existing tool was developed as a compromise solution due to technology limitations (cost/benefit) at the time the module was designed (over a decade ago). It’s been identified as a priority issue for some time. New technologies are now available and enabling us to re-visit this issue.

Action Plan:

The tool is to be replaced with a more flexible and adequate solution.

Responsibility:

Director of Programs

Expected Completion Date:

December 31, 2011

Action Taken:

A working group is already in place and engaged in identifying/developing a new solution aligned with identified needs.

Options are under consideration (off-the-shelf solutions versus custom-built with Microsoft supported tools).

Recommendation 13:

Measures should be taken to clearly establish and state the minimum level of due diligence procedures to be performed, based on the type of amendments. (Third party verifications to be completed, standards for credit checks and registry check, third party confirmations, etc.)

Recommendation Type:

For improvement

Management Response:

Agree

Action Plan:

Review existing policies and procedures and support tools (help files, wikis, etc.) to ensure clarity of guidelines and directives.

Place emphasis on proper documentation requirements as part of ongoing QAccess/work process training.

Audit findings to be discussed at ED regional directors table and regional program managers table – people approving PSFs have a responsibility to ensure standards are met.

Responsibility:

Director of Programs

Expected Completion Date:

March 31, 2011

Action Plan:

Audit findings to be discussed in the regions with program delivery staff.

Responsibility:

ED Regional Directors

Expected Completion Date:

March 31, 2011

Recommendation 14:

An official structure for mounting files should be established and followed by each region. This approach would ensure consistency across the regions and also improve monitoring efficiency and quality since it would facilitate identifying missing information and monitoring.

Recommendation Type:

For improvement

Management Response:

Agree. A common approach has been established in the past (requirement to have a client master file in addition to project files – with defined content/filing expectations). Evidently it was not implemented/adopted consistently across the regions. 

Action Plan:

Review existing policies and requirements.

Review existing and best practices in each of the regions.

Consider implications beyond ED/BDP.

Establish corporate standard to be followed in all regions.

Develop an implementation plan.

Responsibility:

HO & Regional Program Managers

Expected Completion Date:

March 31, 2012

Recommendation 15:

The review process for program managers should be reviewed and clarified. More specifically, more guidelines should be developed and minimum steps and documentation level should be established as part of management review and approval process. 

Recommendation Type:

Key recommendation

Management Response:

Agree. Agree that roles, responsibilities and expectations of managers in conducting file reviews should be better defined and clarified. Managers are expected to provide a challenge function and governance in ensuring that corporate standards are met. Disagree that more guidelines are required. Greater consistency in how guidelines are interpreted and applied across the regions is what needs to be achieved.

Action Plan:

Audit findings to be discussed at ED regional directors table and regional program managers table – people approving PSFs have a responsibility to ensure standards are met.

Consider options to ensure that review process is effective in meeting corporate standards and adds value to the decision making process.

Responsibility:

HO & Regional ED Directors

Expected Completion Date:

March 31, 2011