for the year ended March 31, 2000
Ministry Financial Statements
I conducted an audit of the financial statements of the Ministry of Economic Development as at and for the year ended
March 31, 2000. My auditor’s report contained two
reservations of opinion. The first reservation resulted from the Ministry not recording all capital assets, the second from not recording all expenses that related to the Ministry operations.
The auditor’s report itself should be read for full details of the reasons for the reservation. On page 264 of this report, I have provided a summary of the reasons for reservations in my auditor’s reports on Ministry and Department financial statements.
Scope of the audit work In addition to the annual financial audit the following work was completed:
• A follow up examination of the business planning process
• An examination of the new tourism framework
• Application of specified audit procedures on the Ministry’s Performance Measures
Controls over management of assets and payments
We recommend that the senior financial officer of the Department ensure that key internal controls over the management of assets and payments be complied with.
We identified the need for improved controls over the security of assets
We identified a number of concerns with the management of assets where the control procedures had been sound but because of work pressures or vacant positions, the control had not been followed. However, the senior financial officer has to ensure that controls are maintained at all times.
Reconciliations of foreign bank accounts, follow up on outstanding staff advances and updating of the inventory listing of computer equipment did not occur in a timely manner.
We also identified the need for improved controls over payments
We also identified weaknesses in payment controls in the tourism program. For example, we observed overpayments to some contractors because invoices and reports were not adequately scrutinized. As a result, the Department and a contractor reviewed other payments and a total overpayment of $141,434 was identified. Also, the contractor agreed to improve the reporting and invoicing process to prevent future overpayments on partnered projects. However, the
Department’s own controls must be capable of preventing or detecting overpayments.
Assets recorded as grants Recommendation No. 12
We recommend that the Department of Economic
Development ensure that expenses and assets arising from new initiatives are disclosed in its financial statements based on the substance of the transactions.
The Department is participating with the private sector and other government organizations in a number of areas. One such arrangement was the promotion of Alberta’s interests at Expo 2000 in Germany, from June through October 2000.
The Department failed to disclose a bank account in its financial statements
The Department entered into an agreement with a contractor to open and maintain a bank account for receiving
contributions and payments of expenses for this project. At March 31, 2000 the Department had contributed over
$700,000 into this account. This amount has been treated as a grant expense in the Department’s financial statements.
Although a contractor manages the account, that is done under the direction and supervision of the Department. As the bank account belongs to the Department, it should have been included in its financial statements as an asset and the transfer of funds into the bank account should not have been recorded as an expense.
Branch business plans In our 1997-98 Annual Report, we made a recommendation that the Department prepare plans for each of its significant branch operations. Management agreed to this
recommendation and we reviewed the actions taken to implement the recommendation. The branches in the Department have made significant improvements to their business plans and, in general, most criteria we used to assess branch plans have been met. However, we noted that plans did
did not always include budget information.
Branch plans We again recommend that the Department ensure that its branch plans encompass all significant activities of the Department’s operations and indicate how all funds in the budget are to be used.
Branch plans did not include all significant areas of operation
The Department uses branch plans to manage the
implementation of the Ministry business plan. We found however, that 35% of the Department’s budget was not included in branch plans. For example, the Regional Development branch did not indicate how any of its
$3.2 million budget was to be spent. Also, we found that not all significant areas of operation were included in branch plans. For example, the International Offices Branch did not include all its foreign operations.
Excluding significant activities reduces the usefulness of plans
The purpose of branch plans is to explain what is to be done with resources allocated to a branch. The exclusion of
significant activities and relevant budget information reduces the usefulness of these plans.
Tourism In our 1996-97 Annual Report, we made a recommendation that the Department of Economic Development consider re-negotiating the Agreement with Alberta Tourism Partnership Corporation to improve the accountability framework and performance reporting. This recommendation was accepted.
The audit assessed the new tourism marketing system, and confirmed that our recommendation had been satisfactorily dealt with
In January 1998, the Minister cancelled the contract with Alberta Tourism Partnership Corporation. Subsequently, the Ministry initiated a process to develop an alternative system for delivering tourism marketing in Alberta. During
1999-2000, the Ministry established a number of contracts and processes under the new system. The primary purpose of the audit was to assess whether or not the recommendations made in 1996-97 had been implemented. Our work assessed the new system in relation to the criteria we used in evaluating the former contract. In addition, we examined the bidding process and contract monitoring and reporting for the tourism
marketing and call centre contracts. Based on the evidence obtained during the audit, we concluded that the criteria were substantially met and therefore our recommendation has been satisfactorily dealt with.
Guidance to reader
The Ministry comprises the Department of Environment, the Environmental Protection and Enhancement Fund, the Natural Resources Conservation Board, and the Environmental Appeal Board. The Ministry’s mission emphasizes the stewardship and sustainable development of Alberta’s renewable natural resources. The Ministry implements its mission through its two core businesses, resource management and environmental hazard management. In 1999-2000, the Ministry recorded$174 million (1998-99 $156 million) of external revenue while expending $449 million (1998-99 $484 million) on its businesses.
The Department has wide-ranging responsibilities, including forestry management, wildlife management, fish management, habitat preservation, and regulatory functions. The
Department has developed numerous automated and manual systems to manage and report their businesses. This year, we revisited some of the systems used to manage fish populations in the Province. Since our recommendations concerning fish management in 1993-94, the Department has redesigned its planning processes and has designed, developed, and implemented two major database systems. These systems represent a significant improvement in the Department’s ability to manage the fish resource. Our work this year
indicates that the Department’s challenge now is to ensure that these systems are consistently applied, capture critical data, and are effectively utilized to manage fish populations in the Province.
A number of systems have been implemented in the past few years that impact the financial administration of the Ministry.
These systems include IMAGIS (the government-wide financial and human resource system) and TPRS, the Timber Production and Revenue System. We examined the controls in and around these critical systems and found opportunities where control and efficiency can be enhanced.
The Ministry has created six Delegated Administrative Organizations (DAOs), independent entities that deliver programs on behalf of the Minister. Monitoring the
effectiveness of these DAOs is important because, given the arm’s length relationship of the parties, the Ministry does not exercise direct control over the programs for which it
continues to be responsible. We have examined the Ministry’s
the recommendation that we made in 1998-99. Monitoring appears to be strong for four of the six DAOs. However, we have made recommendations for improvement with regard to monitoring and managing the relationship between the Ministry and the other two DAOs.