Audit of the Hydrogen Early Adopters Program

3.1.2 Review and Processing of Investment Outlines

Technology Partnerships Canada should:

Project proposals are assessed against their relevance to the objectives of the program and the extent to which they demonstrate: contribution to the strategic objectives of the government; a comprehensive working complex of a hydrogen economy; technological feasibility, and that the group possesses the requisite technological/ managerial capabilities/ financial resources, to achieve the objectives of the project; a contribution is necessary to ensure that the project proceeds with the desired scope, timing or location; and, the eligible recipients have current and planned involvement in the Canadian economy.

Director, Environmental Technologies and Hydrogen Early Adopters Program

(i) Ensure that the proposal checklist is completed on a consistent basis and that they are maintained on file for each submitted outline. In order to demonstrate program recommendations of submissions to the PAC, the proposal checklist should include a sign-off by the Acting Program Director; and

(i) From the onset of the program to about one year ago, checklists were prepared only for those proposals deemed ready to be presented to the PAC. Over the last year, a checklist is routinely prepared for all project proposals received by the program.

Checklists will continue to be completed on a consistent basis and will be kept on file. In addition, and as recommended, the checklist template will be modified to include a sign-off by program management.

(i) Effective date: June 1, 2006

(ii) Maintain minutes of staff meetings related to the evaluation process and relevant recommendations.

(ii) The current practice is for the staff to meet and to review the documentation based on program criteria and objectives. In addition, and as recommended, the program will draft minutes of any staff meetings where decisions are made regarding proposal evaluation and recommendation.

(ii) Effective date: June 1, 2006

3.2.1 Monitoring Financial Stability of Recipient

Technology Partnerships Canada should continue to monitor the financial stability of each recipient on a more regular basis (i.e. at a minimum on an annual basis and more often if appropriate). Proactive monitoring of the financial stability of the recipients would assist in the program's ability to effectively forecast any changes in disbursements of the contribution budget in the event that the recipient is unable to continue the funded project and will support the reasonability of claims submitted.

As part of the annual risk assessment process, risks of the h₂EA projects are evaluated on a number of factors including: technological feasibility; technological capability; managerial capability; financial risk; compliance; and benefits to Canada.

Risks are assessed annually, and if need be, more often. This practice will be maintained. The TPC Risk Analyst will ensure compliance with this particular activity on a more regular basis.

Director, Economic and Business Case Analysis

Ongoing

3.2.2 Monitoring Recipients for Compliance with Stacking Rules

Technology Partnerships Canada should conduct a stacking provision test as additional funding information is obtained for a particular recipient. This will allow the h₂EA program to evaluate whether recipients are still in line with the stacking rules as required by the program's Terms and Conditions.

Stacking issues and calculations will continue to be discussed in all investment decision documents (IDD) and specific stacking clauses are found in all contribution agreements. In the event that additional funding information is obtained, program staff will recalculate the stacking numbers as required. Mechanisms will remain in place, to allow the reduction or claw backs of investments if deemed necessary, and are found in each contribution agreement, as per the terms and conditions of the program.

Director, Economic and Business Case Analysis

Completed

In conjunction, a question regarding stacking included on the claim report template.

Director, Environmental Technologies and Hydrogen Early Adopters Program

Completion date: June 1, 2007

As well, stacking tests will be conducted accordingly and periodically as follow-ups occur during annual visits.

Director, Environmental Technologies and Hydrogen Early Adopters Program

Effective date: June 1, 2006

3.2.3 Receipt of Annual Reports and Completion of Annual Visits

Technology Partnerships Canada should continue to ensure that reporting requirements are being met by recipients and that annual site visits are scheduled with recipients and completed within the required timeframe.

The program will continue its current practice, as outlined in h₂EA's contribution agreement, as follows:

• Recipients submit periodic reports with claims on a quarterly basis;
• Recipients submit an annual project progress report;
• TPC officials meet recipients, at a minimum, once annually;
• Upon completion of the project, recipients submit a final report on project benefits.

Director, Environmental Technologies and Hydrogen Early Adopters Program

Ongoing

In addition, any delay to annual visits will be justified on a quarterly basis.

Effective date: June 1, 2006

3.2.4 Compliance with Applicable Legislation (Lobbyist Registration Act)

Technology Partnerships Canada should:

(i) In conjunction with the recently designed procedures, develop a process to ensure the operational effectiveness of the new guideline. This process should be documented and communicated to staff appropriately; and

(i) TPC will ensure the operational effectiveness of the new guideline by continuing its current procedures. The current procedures are posted on the TPC Intranet site, accessible by all TPC staff. Supporting documents are listed as direct links in addition to the guidelines. Updates of guidelines and supporting documents are communicated to staff through special announcements, interaction with TPC's Quality Assurance Unit and the monthly online newsletter sent to all staff. Note that investment decision document templates must include a paragraph to ensure that the company is in compliance with the lobbyist registration requirements. Mandatory training on the issue is provided to TPC staff.

Director, Investment Management

Ongoing

(ii) Continue to actively monitor the status of applicants' registration with the Lobbyist Registration System and continue to actively monitor changing requirements of the LRA to evaluate the impact of any changing requirements on program operations.

(ii) Officers will continue to actively monitor the status of applicants' registration by search the LRA database for evidence of registration, printing out the search parameters and search results, and including these documents as part of the file that is produced for approval by senior management. The Annual Information. Update will continue to contain certifications of compliance to which companies must attest annually.

Director, Investment Management

Ongoing

3.2.5 Claims Review

Technology Partnerships Canada should:

(i) Continue to document the process related to Section 34 account verification and continue to ensure that unit performing this verification has up-to-date signing authority cards;

(i) TPC will continue to document the process related to Section 34 account verification and will continue to do so as needed. TPC management will continue to ensure appropriate communication to responsible parties on Section 34 — both to authorized signatories and to the unit performing the verification and maintaining the authority cards.

Director, Finance, Management and Regional Partnerships

Ongoing

(ii) Continue to remind recipients of the requirements of their contribution agreements, including the requirement to submit claims no later than 45 days after the end of the claim period; and

(ii) Requirements are outlined in the contribution agreement. Program staff will continue to remind project proponents of this requirement on an ongoing basis.

Director, Environmental Technologies and Hydrogen Early Adopters

Ongoing

(iii) Continue to ensure that supporting documentation is provided where appropriate for labour costs. This could include timesheets or payroll reports from the recipient organizations.

(iii) TPC will continue to ensure that supporting documentation is provided where appropriate for labour costs. All claims are subject to a review process prior to payment. The objective of the process is to ensure that costs claimed are eligible, accurate and in conformity with TPC project cost principles and the statement of work; both of these are schedules to the contribution agreement. With regards to labour costs, TPC will continue to follow departmental policy by requesting information on hour and rates per employee/subcontractor. In addition, project proponents are required to provide at the time of their first claim, timesheets and payroll reports for a sampling of their employees. As well, recipient audits will continue to be conducted annually based on risk.

Program Director, Finance, Management and Regional Partnerships

Ongoing

3.3.1 Performance Indicators

Technology Partnerships Canada should continue to put in place a process to monitor and measure required performance indicators as per the program's RMAF. This may include the introduction of a tool to support these monitoring activities such as an expanded utility function within the Contribution Management Information System (CMIS).

The Terms and Conditions of the program outline the following outcomes: to foster the development and early introduction into the marketplace in Canada of technologies, such as fuel cells and those used to produce, store, and distribute hydrogen, that support the transition to a hydrogen economy.

Director, Environmental Technologies and Hydrogen Early Adopters Program

Ongoing

In order to measure its performance with regards to these outcomes, h₂EA will continue to collect related data, from numerous internal and external sources. To this end, data will continue to be collected against a number of indicators outlined in the program RMAF.

Director, Finance, Management and Regional Partnerships

A formative review will be done this fiscal year and will help to further measure performance.

Director, Economic and Business Case Analysis

Completion date: March 31, 2007

As recommended, an appropriate tool to support these monitoring activities will be developed. Given the complex nature of developing systems which must be approved by a senior level IT Governance Committee of Industry Canada and then developed by the CIO of the Department, the completion of this could take a year.

Chief Information Officer

Completion date: May 3, 2007

3.3.2 Annual Audit Risk Assessments

Technology Partnerships Canada should continue to develop its annual recipient risk assessment process and criteria to ensure that recipients with high audit risks are identified, monitored and appropriate actions taken. There should be a coordinated effort (between program operations and Audit & Special Review) to ensure a risk assessment for each contribution agreement is performed on a timely basis.

TPC will continue to use the investment decision document as the initial risk assessment, following which assessments are performed on a yearly basis.

Director, Economic and Business Case Analysis

Ongoing

In addition, TPC the Agency will continue to conduct annual risk-based planning exercises (recipient audits). Only projects ranking high relative to the overall portfolio of projects being managed by the Agency will figure in these exercises.

Director, Finance, Management and Regional Partnerships

3.4.1 Lapses in Program Budget

Technology Partnerships Canada should consider escalating the communication and impact of lapses in approved funding and any identified barriers to the achievement of program strategic objectives to senior departmental management to ensure visibility and the development of an appropriate course of action.

The program Risk Based Audit Framework (RBAF) outlines a number of strategic, technical, project and internal risks. It proposes response strategies in the event that barriers are encountered.

TPC Management Team

As noted in the RBAF, the program targets pre-commercial demonstrations. The RBAF observes that Canadian firms may not be ready for this advanced stage of demonstration and that as a result, program uptake may not be as strong in the early years of the program. As well, the program terms and conditions call for each eligible recipient to be jointly and severally liable with the other eligible recipients for executing the contribution agreement. It is believed that this has been a barrier to program uptake.

Senior management will continue to be informed through the yearly budgetary exercises. Funds will continue to be transferred as required to minimize lapses.

Ongoing

With regards to the achievement of program objectives, the management team will consider options, including the development of a response based on the program RBAF.

Completion date: June 30, 2007

Expected results will continue to be reviewed on a yearly basis and communicated to senior departmental management.

Ongoing