Audit of the Bilateral Development Program in Mali

Office of the Chief Audit Executive

April 2015

Executive Summary

At the request of the Senior Director of Development in Mali, the Office of the Chief Audit Executive at Foreign Affairs, Trade and Development Canada (DFATD) included this audit in its three-year risk-based audit plan for 2013–2016, which was recommended by the Audit Committee and approved by the Deputy Minister of Foreign Affairs.

Why is this Important?

Mali and Canada have been cooperating in the areas of peace, trade and development since 1972. In 2009, as part of the Aid Effectiveness Agenda, Mali was designated as a country of focus. Furthermore, the bilateral development program in Mali (Mali Program) has been decentralized since 2006. In its relations with Mali, Canada is especially interested in maternal, newborn and child health, food security, and security issues affecting the country and the Sahel region.

Mali experienced a multidimensional crisis from 2012 to 2013 that had a major impact on the level of development assistance, going so far as the suspension of cooperation with the Malian government. Since January 2014, Canada has gradually resumed its direct aid to the Government of Mali (GoM) with a commitment of more than $106 million per year for the next five years.

What did we examine?

The purpose of the audit was to provide DFATD’s managers and senior management with reasonable assurance that the key internal controls and processes related to the management of the Mali Program exist and can effectively support it in the achievement of its objectives.

The audit criteria (see Appendix A) were developed based on the policies of the Treasury Board of Canada and its management accountability framework, as well as on the directives, legislation and regulations that apply to DFATD.

The audit focused on the following aspects:

• Processes and practices for planning and implementing the bilateral development program in Mali (Mali Program);
• Processes and mechanisms for managing risks and results;
• Processes and mechanisms for managing the Mali Program following the 2012 coup d’état;
•  Projects that were in the planning phase, implementation phase or closed in October 2014; and
• Financial information for the period of 2011–2012 to 2014–2015.

The audit did not examine the mechanisms for policy dialogue, consultation and cooperation among the various stakeholders (GoM, donors, civil society) for the planning and implementation of the Mali Program.

What did we find?

The roles and responsibilities of the Mali Program management are clear and well understood, and its human and financial resources are managed with due diligence. The Mali Program put in place mechanisms for evaluating, managing and monitoring risks. The projects were planned and implemented based on DFATD’s thematic priorities and contribute to the achievement of Canada’s foreign policy objectives. Controls are in place to ensure that funds are disbursed in compliance with contractual and regulatory requirements. The Mali Program also monitors performance and takes corrective action when necessary. It also implemented various measures to manage the 2012–2013 crisis, as well as the suspension and resumption of assistance following the coup d’état in March 2012.

Some elements of a continuity plan are already in place. However, a formal business continuity plan should be developed to manage the development program in the event of future crises, in order to maintain the delivery of effective development assistance.

The roles and responsibilities for the management and monitoring of the Mali Program are understood.

The organizational structure and the various forums enable frequent communications between the different management levels, which have created a favourable environment for collaboration, cohesion and the comprehension of roles and responsibilities.

The Mali Program ensures that it has the skills needed to achieve its objectives.

Mali Program management ensures that it has a functional organizational structure in place, with the skills and knowledge needed to properly plan and implement the program.  

The Mali Program ensures that it meets its budget commitments.

The Mali Program has adopted a proactive approach and has implemented mechanisms and tools that made it possible not only to manage disbursements with due diligence, but also to mitigate the impact that the 2012–2013 crisis, as well as the suspension and resumption of direct aid to the GoM, had on its ability to meet its budget commitments.

The Mali Program ensures that it has implemented a risk management process.

The Mali Program has set up regular and robust risk monitoring and has implemented mitigation measures to support it in the achievement of its objectives in a constantly evolving environment.

The projects are planned and implemented based on thematic priorities.

The projects planned and executed by the Mali Program are in line with the Government of Canada’s strategic directions and DFATD’s thematic priorities.

Controls are in place to ensure that funds are disbursed in accordance with the various agreements and the regulatory requirements.

Existing practices and controls enable the Mali Program to ensure that funds are disbursed according to contract terms and conditions and regulatory requirements.

The Mali Program monitors progress based on risks and performance.

Based on risks and performance, the Mali Program monitors the progress made and takes corrective action when necessary.

The Mali Program implemented various measures to manage the 2012–2013 crisis, as well as the suspension and resumption of assistance. However, a formal business continuity plan will help prepare for any future crises.

The crisis and the impact of the suspension of cooperation with the GoM on program operations were managed by a series of decision and information memorandums. For the resumption of direct aid to the GoM, the Mali Program undertook a due diligence process in order to determine the favourable conditions for resuming projects. However, a formal business continuity plan should be developed to manage the program and development initiatives in the event of future crises in Mali.

Recommendations

The Assistant Deputy Minister, Sub-Saharan Africa, should ensure that the Mali bilateral development division creates a formal business continuity plan for managing the program and development initiatives in the event of future crises.

Statement of Conformance

In my professional judgment as Chief Audit Executive, this audit was conducted in conformance with the Institute of Internal Auditors’ International Standards for the Professional Practice of Internal Auditing and the Internal Auditing Standards for the Government of Canada, as supported by the results of the quality assurance and improvement program. Sufficient and appropriate audit procedures were conducted and evidence gathered, to support the accuracy of the findings and conclusion contained in this report, and to provide an audit level of assurance. The findings and conclusion are based on a comparison of the conditions, as they existed at the time of the audit, against pre-established audit criteria that were agreed upon with management and are only applicable to the entity examined, for the scope and time period covered by the audit.

Jean Goulet
Chief Audit Executive

1.0 Background

The Office of the Chief Audit Executive audited the bilateral development program in Mali (Mali Program) at the request of its senior director. This audit was approved as part of the three-year risk-based audit plan for 2013–2016.

Mali is one of the poorest countries in the world, with 50.4 percent of its population living on less than US$1.25 per day. In 2012, it ranked 182nd out of 187 on the human development index. It is also one of the 50 most corrupt countries in the world.

Mali experienced a multidimensional crisis from 2012 to 2013: a food and nutrition crisis, an armed conflict in the north of the country, and a political crisis that culminated in a military coup d’état. In reaction to the coup that occurred on March 22, 2012, Canada announced that it was stopping its cooperation with the Government of Mali (GoM), resulting in a partial or complete suspension of direct aid to the GoM. This suspension was lifted in February 2014. In the meantime, because of insecurity in the country, Canadian staff in the field was relocated twice during this period, from April to July 2012 and from January to March 2013.

The Mali Program falls under the West and Central Africa Bureau, under the Sub-Saharan Africa Branch. The senior director of the Mali Program is supported by a team of twenty-one (21) people:

• seven (7) people at headquarters (HQ); and
• fourteen (14) people in the field, including
  • nine (9) Canada-based staff, and
  • five (5) locally engaged staff.

The Mali Program also has a program support unit (PSU) that provides them with advice and logistical support.

Canada’s 2014–2019 bilateral development strategy with Mali has been developed but has not yet been approved (at the time of this report). Over the 2014–2019 period, DFATD intends to support the same thematic priorities as in the past: Children and Youth, Food Security and Governance. The amount allocated to these three thematic priorities was $106.5M for fiscal year 2014–2015. The Mali Program also manages a portfolio of activities as part of the Muskoka Initiative, which aims to improve maternal, newborn and child health. The amount allocated for those activities was $16.5M for fiscal year 2014–2015. To carry out its strategy, the Mali Program will use a variety of programming modalities: institutional support; program-based approaches, including budget support; and traditional projects.

2.0 Observations and Recommendations

2.1 Management and monitoring roles and responsibilities

Clearly established roles and responsibilities are essential in a decentralized program such as the Mali Program. Canadian cooperation must not only respond to the partner country, but must also collaborate and closely coordinate with other partners and the various divisions of DFATD to ensure the cohesion of the Mali Program and the achievement of its objectives.

As illustrated in Figure 1, the Senior Director of Development and the Head of Mission (HoM) both report to the Director General of the West and Central Africa Bureau, who is responsible for all of the programs. The Director General assumes a leadership role in ensuring consistency and integration between the Mali Program and the rest of the policies and programs of all DFATD activity sectors.

The HoM ensures consistency between the policies and programs and makes sure that they are integrated into all mission activities. The HoM is systematically involved in the strategic planning and decision-making process for the Mali Program. The HoM endorses and validates the strategic planning documents, such as Canada’s 2014–2019 bilateral development strategy with Mali and the annual investment plan. In addition, the HoM is involved in the project approval process.

The Senior Director of Development is responsible and accountable for the international assistance envelope, and for establishing, implementing and monitoring the general directions of the Mali Program and the policy dialogue with other donors and the Malian government.

Formal and informal forums are also in place at various levels to ensure oversight and information sharing. The main forums are:

• Weekly management meetings chaired by the Director General and including the DG’s management group, which the assistant director of the Mali Program at HQ attends. These meetings deal with corporate initiatives and decisions;
• The extended management group, made up of the Senior Director of Development, the Deputy Directors, the analyst and the sector head in Governance, meets weekly and deals with management issues related to the Mali Program;
• The core management group, made up only of the Senior Director of Development and the Deputy Directors, meets on an ad hoc basis to discuss sensitive issues related to human resources.

Figure 1. Organisation Chart

The organizational structure and the various forums enable frequent communications between the different management levels, which have created a favourable environment for collaboration, cohesion and the comprehension of roles and responsibilities.

2.2 Implementation of the bilateral development program in Mali

The Mali Program ensures that it has the skills needed to achieve its objectives.

Regular planning and monitoring of the development program’s human resource needs contribute to the achievement of its main operational and strategic objectives.

The Mali Program’s management team reviews its team’s range of skills based on needs (rotation of Canada-based staff, thematic priorities and programming modalities). It also ensures that it recruits candidates with the skills necessary for the program’s operational needs. Lastly, it assigns projects based on the officers’ skills, experience and interests.

Mali’s bilateral development team is also supported by the PSU, which consists of a team of experts. The PSU’s role is key: its advisers are an essential source of information and knowledge of the Malian context during program-level planning and decision making. They are also part of project teams and support these teams in the planning, delivering and monitoring of initiatives. The management team uses a matrix approach to assign projects to the various officers in the field or at HQ by area of focus and by project. The team leader is responsible for the project, supported by a colleague, in order to ensure that there is someone involved in the project at HQ as well as in the field.

Human resources planning is carried out by the Sub-Saharan African Branch. However, Mali Program management ensured that it had in place a functional organizational structure with the necessary skills and knowledge for the effective planning and implementation of the program.

This organization of the teams, the use of HQ and field counterparts, the presence of locally engaged staff and the PSU ensured business continuity when Canada-based staff were relocated as a result of the 2012–2013 crisis.

The Mali Program ensures that it meets its budget commitments.

The draft of Canada’s bilateral development strategy with Mali proposes a five-year spending estimate in terms of the programming budget and the operating budget. Multi-year budget planning and effective monitoring would enable the Mali Program to disburse the funds assigned and reduce fluctuations in the disbursements.

In addition to the organizational process for budget reviews in place at DFATD, the Mali Program has its own planning and budget management process, which includes the following:

• Regular discussion of the financial situation at meetings of management and the sectoral teams;
• Close monitoring of disbursements through the use of a customized tool;
• Analysis of various disbursement scenarios in order to prioritize commitments as necessary;
• Updating of real disbursements in SAP.

The examination of the budget review process demonstrated that the Mali Program has adopted a proactive approach and put in place mechanisms and tools that helped not only to manage disbursements with reasonable diligence, but also to mitigate the impact of the 2012–2013 crisis and the suspension and resumption of direct aid to the GoM on the meeting of its budget commitments.

The Mali Program has ensured that it implemented a risk management process.

The success of development programs and initiatives depends on the proper assessment, management and monitoring of risk. DFATD’s risk management directives require that risk management profiles and strategies be established for all country programs.

The Mali Program has established an integrated risk profile. Examination of the risk management process revealed that this profile is reviewed and updated on a quarterly basis. The risk profile update is preceded by a scenario analysis, internal and external consultations, and an examination of the Canadian and Malian contexts and the previous risk profiles. This profile also includes the main risk mitigation strategies that are assessed and updated. The examination of the 2013 and 2014 risk profiles indicates that the consequences of the 2012–2013 crisis were taken into account in the risk assessment. The challenges arising from the resumption in 2014 were incorporated as well. The Mali Program incorporated the main risks and their mitigation measures into the draft 2014–2019 bilateral development strategy of Canada with Mali.

Given the fragile sociopolitical, economic and security environment in which the Mali Program is operating, regular and thorough risk monitoring and the implementation of mitigation measures were established as needed.

2.3 Project planning and implementation

The country programs develop and implement initiatives that are carried out in accordance with their bilateral development strategy and with DFATD’s policies, directives and guidelines.

To examine the planning and implementation of the projects, the audit examined 18 projects funded through bilateral programming, representing 52% of the total budget of all projects that were in the planning or implementation phase, or closed in October 2014. This sample also included representative coverage of the three thematic priorities and funding and implementation mechanisms, as set out in Appendix B.

The projects are planned and implemented based on thematic priorities.

Programming is based on Canada’s bilateral development strategy with Mali, which sets out strategic directions and thematic priorities. The projects must be planned and implemented in accordance with these priorities and must help achieve the strategic directions of Canada and the partner country.

The examination of 18 projects revealed that the projects’ areas of focus were in line with the Mali Program’s thematic priorities. The anticipated objectives and results of the projects suspended in 2012 and resumed in 2014 continue to be consistent with the strategic directions and thematic priorities set out in the investment plan and the draft 2014–2019 bilateral development strategy of Canada with Mali.

Controls are in place to ensure that the funds are disbursed in accordance with the various agreements and the regulatory requirements.

Financial management is another major component of results-based management. Financial management includes the review and approval of annual budgets, the review of financial information communicated by the partner country and by the executing agencies (EAs), as well as payment processing.

Examination of the 18 projects demonstrated that financial management was sound. The financial management advisers examined the budgets when the project was approved. The project team also examined the overall and annual budgets based on the project implementation plan and the annual work plans.

Examination of the project files demonstrated that all of the agreements set out the payment schedule and terms. In addition, all payments were made based on an examination of the requests for payment in accordance with agreements, financial reports, budgets and annual work plans. The project team compared invoices and budget advances requested to annual work plans and to activity reports. It also analyzed discrepancies between planned and actual spending. Where necessary, the project team leaders required clarification or additional proof.

Examination of the projects revealed that the practices and controls in place ensure that the funds are spent in accordance with contract terms and conditions, and regulatory requirements.

The Mali Program monitors progress based on risks and performance.

Performance management includes integrated risk management and results-based management (RBM). Integrated risk management requires the proper assessment, management and monitoring of risks. RBM requires the monitoring of progress in terms of expected results, using appropriate indicators. Results-based monitoring is a process that collects, analyzes and uses performance information to support effective decision making in a project context. If no progress in terms of expected results is observed, corrective action may be taken.

For the projects examined, a risk register was completed during the planning stage and updated during the project’s operational stage. A logic model and a performance measurement framework were also developed, establishing the indicators on which the monitoring and progress measurements would be based.

Assessing risks at the program and bilateral development initiative levels includes an important component, that is, fiduciary risk. DFATD directives require the use of the Fiduciary Risk Evaluation Tool (FRET) to monitor and manage fiduciary risk for development assistance investments. This risk applies to partner countries and organizations. The Mali Program completed a FRET for the GoM and for all projects examined, when required.

Requirements with regard to monitoring activities and reports are established in agreements, according to the fiduciary risk evaluation. Field visits to the project site, reviews of the narrative and financial reports submitted by the EA, and monitoring and evaluation mission reports are the most common monitoring activities. These activities provide essential information for determining whether the EA is in compliance with the conditions of the agreement, and whether it is paying due regard to risk management. File reviews and interviews with the program’s staff confirmed that risk management at the project level has been implemented.

An examination of the projects selected demonstrated that when the EA’s poor performance was detected, the project teams applied a series of measures to rectify the situation. These measures included contacting the EA, adopting an action plan to address and correct the deficiencies, withholding part of the payment, carrying out financial compliance audits, and amending the agreement. Moreover, when difficulties were encountered, the Mali Program hired monitoring officers, evaluators and auditors, in addition to the planned monitoring activities.

In the context of budget and financial supports, performance measures and the communication of results are done according to the GoM’s procedures and structures. After examining projects and conducting interviews, it was noted that the GoM’s limited capacities in terms of RBM pose challenges in terms of the quality of the performance data and the establishment of results-based reports. The crisis and the suspension of cooperation by all partners slowed down efforts to strengthen the GoM’s capacities in terms of planning, implementation and public financial management. The resumption of budget support, along with policy and technical dialogue, is now giving the Mali Program some leverage for building the GoM’s capacities and energizing its public financial management reforms.

After examining the selected projects and conducting interviews, it was noted that monitoring activities can be used to inform the Mali Program of the projects’ performance and risks.

2.4 Management of the 2012–2013 crisis and the resumption of activities

Continuity management allows an organization to maintain its key activities after a major event and to prepare itself for future crises. Crisis management requires the establishment of a business continuity plan, which helps to identify essential functions and activities, to clarify roles and responsibilities, and to promote effective communication and coordination, as well as the integration of the decisions to be made. This plan should be formalized and updated regularly, based on risks.

There was a coup d’état in Mali in March 2012. In reaction, Canada and most donors announced that they were suspending their aid programs with the GoM. However, humanitarian and development assistance continued through non-governmental organizations (NGOs) and multilateral channels. The Malian crisis, the suspension of development programs with the GoM, the delocalization of staff and the changes in position status (which resulted in a complete rotation of Canadian staff on assignment in Bamako in the summer of 2013) had repercussions on the Mali Program’s operations.

To manage the crisis, the Mali Program modified its project management and monitoring practices, by using PSU staff and locally engaged staff after the delocalization of Canada-based staff in the context of Malian security. In addition, the implementation of certain projects was postponed, suspended or extended.

The management of the crisis and the impact of the suspension of Canadian cooperation with the GoM on program operations was also managed by a series of decision and information memorandums that included:

• Reflections and analyses of the suspension and of the resumption of cooperation with the GoM;
• Analyses of the Malian context and situation that led to the suspension of direct aid to the GoM;
• Internal and external consultations;
• An action plan that provided for the maintenance of the suspension of assistance to the GoM and support for the priorities of Mali’s transitional government;
• Analyses of the Malian context and situation after the transition;
• Indicators for lifting the suspension of direct aid to the GoM; and
• A strategy for the gradual return of Canadian staff to Bamako in 2013.

In January 2014, Canadian cooperation with the Malian government gradually resumed budget supports, which were subject to three conditions:

• Formal endorsement by the International Monetary Fund (IMF) of the government’s sound financial management;
• The ongoing satisfaction of key donors who resumed budget assistance; and
• A level of fiduciary risk that corresponded to DFATD’s requirements for program-based approaches.

Since the resumption of cooperation with the GoM, the Mali Program has assessed various elements related to fiduciary risk in all of its initiatives. The program has also entered into a policy dialogue with the Malian government and other donors to energize public financial management reforms. In addition, the program has consulted and reflected with donors in order to ensure a gradual, coordinated resumption of development assistance activities that is adapted to the new reality in Mali.

In terms of resuming budget and financial supports to the GoM, the Mali Program underwent a due diligence process to determine conditions that are conducive to restarting projects. It performed audits of the Canadian funding provided, and evaluated the management procedures and systems of the Malian government’s structures. The conclusions and recommendations from these efforts were communicated to GoM representatives, and action and implementation plans were developed. To manage the impact of suspending direct aid to the GoM, the Mali Program took a proactive approach, which consisted of extending initiatives affected by the suspension of direct aid to the GoM and of distributing the disbursements over several years.

The audit team did not find a formal response plan to manage the Mali Program’s operations during the 2012–2013 crisis. However, it was noted that the elements of such a plan were in place, notably communications with stakeholders, analyses, consultations, response procedures and an update of risks.

Given the fragility of the socio-political and security situation in Mali, the lack of an integrated and formal business continuity plan for managing future crises could compromise the effective delivery of development assistance.

Recommendation

The Assistant Deputy Minister, Sub-Saharan Africa, should ensure that the Mali bilateral development division creates a formal business continuity plan for managing the development program and initiatives in the event of future crises.

3.0 Conclusion

The roles and responsibilities of the Mali Program management are clear and well understood, and its human and financial resources are managed with due diligence. The Mali Program put in place mechanisms for evaluating, managing and monitoring risks. The projects were planned and implemented based on DFATD’s thematic priorities and contribute to the achievement of Canada’s foreign policy objectives. Controls are in place to ensure that funds are disbursed in compliance with contractual and regulatory requirements. The Mali Program also monitors performance and takes corrective action when necessary. It also implemented various measures to manage the 2012–2013 crisis, as well as the suspension and resumption of assistance following the coup d’état in March 2012. However, given the fragility of the socio-political and security situation in Mali, a formal business continuity plan should be developed to manage the development program and initiatives in the event of future crises, so effective development assistance can continue to be delivered.

Appendix A: About the Audit

Objective

The purpose of the audit was to provide DFATD’s managers and senior management with reasonable assurance that key internal controls and processes related to the management of the Mali Program exist and can effectively support it in the achievement of its objectives.

Scope

The audit focused on the following aspects:

• Processes and practices for planning and implementing the bilateral development program in Mali (Mali Program);
• Processes and mechanisms for managing risks and results;
• Processes and mechanisms for managing the Mali Program following the 2012 coup d’état;
• Projects that were in the planning phase, implementation phase or closed in October 2014; and
• Financial information for the period of 2011–2012 to 2014–2015.

The audit did not examine the policy dialogue, consultation or cooperation mechanisms among the various stakeholders (GoM, donors, civil society) for the planning and implementation of the Mali Program.

Because of the workload of Mali Program employees in the field as a result of the Ebola crisis, it was impossible for the audit team to perform a field mission in Mali. The audit’s scope was therefore limited and the work program was consequently amended.

Criteria

The criteria were developed after the detailed risk assessment and the study focused on the audit criteria related to the management accountability framework established by the Treasury Board Secretariat’s Office of the Comptroller General. These criteria are also called core management controls. The audit criteria were discussed with the entity audited and an agreement was reached. The detailed criteria are:

Criterion 1: The roles and responsibilities for the management and supervision of the bilateral development assistance program in Mali are clearly defined and communicated to support decision making.

Criterion 2:  The bilateral development assistance program in Mali is implemented based on its objectives and the principles of due diligence.

• 2.1 Human and financial resources planning are in line with the program’s strategic planning.
• 2.2 Management has put processes and mechanisms in place to mitigate risks in project planning and implementation.
• 2.3 There are controls in place to ensure that funding is disbursed only at the appropriate time and in accordance with the various agreements and regulatory requirements.
• 2.4 The projects selected are consistent with the program’s thematic priorities.

Criterion 3:  Results were monitored to ensure that the objectives of the bilateral development assistance program in Mali were achieved.

• 3.1 Monitoring roles and responsibilities are clearly established and communicated.
• 3.2 There are processes and mechanisms to monitor and analyze performance against expected results and to take corrective action when necessary.
• 3.3 Project monitoring is based on precise, available, complete and timely information.

Criterion 4: The Mali development division put mechanisms and tools in place to manage crisis situations.

• 4.1 The Mali development division put a crisis management process in place to manage the suspension and resumption of direct aid to the Government of Mali.
• 4.2 The Mali development management learned lessons from the management of the crisis that followed the 2012 coup d’état and it developed an intervention strategy to ensure diligent management and business continuity in the event of future crisis.

Approach and Methodology

In order to draw conclusions from the above criteria, from the key risks that were identified and assessed, and from the internal controls associated with the corresponding business processes, the audit’s approach and methodology included, but were not limited to, the following operations:

• Identify and study the applicable policies, directives, and legislation;
• Analyze the financial and non-financial information;
• Conduct several interviews with Mali Program staff and management, with key actors from central services at headquarters and in the field, and with PSU staff; and
• Review documents related to the bilateral development initiatives and program in Mali; a sample of 18 projects was selected and reviewed for the audit.

Appendix B: Sample of Projects

Appendix C:  Management Action Plan

Audit Recommendation: The Assistant Deputy Minister, Sub-Saharan Africa, should ensure that the Mali bilateral development division creates a formal business continuity plan for managing the development program and initiatives in the event of future crises.

Action taken by Management:

A business continuity plan will be created for the development program. This plan will complement the mission continuity plan. It will take into account the lessons learned from the 2012–2013 multidimensional crisis, changing security threats and other risks that might result in the total or partial suspension of the program (e.g. serious governance problems and pandemics). The continuity plan will be linked with the Mali Program Integrated Risk Profile.

Responsible: Senior director, Mali Development Program

Expected Completion Date: December 2015