Audit of the International Education Strategy

Global Affairs Canada
Office of the Chief Audit Executive

March 2017

Executive Summary

In accordance with Global Affairs Canada‘s approved 2016-2019 Risk-Based Audit Plan, the Office of the Chief Audit Executive conducted an audit of the International Education Strategy. 

Canada’s International Education Strategy^{Footnote 1} (IES) is the blueprint to attract talent and prepare Canada for the 21st century, and aims to support the pursuit of commercial success by Canadian companies and investors in key foreign markets and generate new jobs and new opportunities. It supports international education and is designed to enhance Canada’s position as a world leader in higher education and research, and to contribute to Canada’s future prosperity. The International Education Strategy complements existing policies and programs of the federal government, and leverages provincial and territorial efforts to promote education opportunities abroad. The International Education Strategy leverages the International Scholarships Program (ISP) to achieve its objectives.

Why is this audit important?

The 2011 Economic Action Plan announced funding for the development of a comprehensive International Education Strategy and called for the establishment of an advisory panel to make recommendations to the Ministers of International Trade and Finance. In 2012, the Advisory Panel made 14 recommendations to expand marketing efforts and improve the coordination of policy and programming in light of a strong international competition on branding and scholarships. The Advisory Panel’s report^{Footnote 2} recommended a strategy to maximize economic opportunities for Canada and a revised international education strategy.

The 2014 International Education Strategy responded to the recommendations of the Advisory Panel and complemented the Global Markets Action Plan^{Footnote 3} (GMAP) announced in November 2013. The GMAP consisted of comprehensive actions to advance the interests of Canadian businesses in a specific group of key foreign markets. It included international education as one of the 22 priority sectors where Canada enjoys a strong competitive advantage.

International education has a significant economic impact on Canada. Based on a recent study^{Footnote 4} , it was estimated that more than 438,150 long and short term international students were studying in Canada in 2014. The study estimates that these students spent $11.4 billion on tuition, accommodation, and other expenses, which is equivalent to 11% of Canada’s total service exports. International student expenditures also helped sustain employment for some 122,700 Canadians and generated $2.1 billion in tax revenues. ^{Footnote 5}   

Global Affairs Canada is the lead department responsible for the international promotion of Canada as a study destination and for the coordination of international education activities. In addition to Global Affairs Canada, other government departments are also involved in the IES including Immigration, Refugees and Citizenship Canada (IRCC) and Innovation, Science and Economic Development Canada (ISED). The Department works closely with provincial and territorial partners and sector stakeholders, such as associations and institutions, to advance education priorities and objectives in the context of federal-provincial-territorial relations.

The Department is allocated $5 million per year to support the IES, including key activities such as brand development, digital marketing, and in-market services. The IES also leverages existing scholarships and bursaries that are part of the International Scholarships Program. The ISP itself currently has a total funding allocation of approximately $7 million per year for transfer payments - grants and contributions. The ISP is governed by its own set of Terms and Conditions and is mainly administered by a third party contractor.

What did we examine?

The audit team examined processes and controls in place to support the achievement and accountability for results, and the stewardship of resources of the International Education Strategy at Global Affairs Canada.  The audit also examined the International Scholarships Program including the allocation and administration of funds to grants and contributions recipients by the third party contractor.  The audit focused on:

• Governance structure;
• Program management;
• Performance measurement;
• Financial management;
• Contracting processes; and,
• Tools and training available to Global Affairs Canada staff.

The audit period included activities from April 1, 2014 to December 31, 2016.

What did we find?

The audit team concludes that processes and controls are in place to manage the resources allocated to the IES, and to support the achievement of Global Affairs Canada’s objectives. However, some weaknesses were noted in the areas of stewardship of resources and accountability for results.

Based on interviews with Global Affairs Canada’s International Education Division and Education Trade Commissioners at Headquarters and missions, documentation examination and file review, the audit found:

• Objectives and priorities, including actions for implementing the International Education Strategy were established and were aligned with Global Affairs Canada’s Strategic Outcomes.
• Performance measures were developed to report on the International Education Strategy results.
• Some ad-hoc reporting is provided to departmental senior management or parliamentarians relating to statistical data or general information on a particular activity, program or a country.
• Training is offered to Education Trade Commissioners. Guidelines and tools are also available online in various formats.
• Processes were established and implemented to ensure that International Education Strategy funds were requested, approved and reported on in accordance with the prescribed guidelines. 
• Other than minor issues related to file maintenance, there is adequate control over contract initiation, management and payment to ensure contract related spending is consistent with legislation, policy and guidelines.
• Processes established by the third party ISP contractor for monitoring the grants and contributions program provided assurance that terms of the agreements were generally respected and fulfilled by the recipients.
• Reporting of progress on activities was not fully communicated to senior management.
• The International Education Division’s review of quarterly reports submitted by the third party ISP contractor was insufficient to identify significant unused funds that should be returned to the Receiver General for Canada.

Recommendations:

Based on the above findings, the audit team made the following recommendations:

1. The Assistant Deputy Minister, International Business Development, Investment and Innovation, should:
• Ensure performance measures for both the International Education  Strategy and the International Scholarships Program are reviewed regularly; and,
• Based on the revised performance measures, provide a consolidated report to management on the objectives and achievements for both the International Education Strategy and the International Scholarships Program, to assist management in making timely, strategic and operational decisions.
2. The Assistant Deputy Minister, International Business Development, Investment and Innovation, should:
• Ensure sound stewardship of public funds by providing strong financial oversight and reporting on the use and performance of financial resources;
• Ensure that the third party ISP contractor provides clear and complete quarterly and annual financial reports, including disbursements, interest accrued, cash on hand and unused funds to be returned; and that these requirements are clearly stated in future contracts; and,
• Ensure the Department puts in place a clear process to thoroughly review and reconcile expenditures incurred by the third party ISP contractor, including determination of unused funds and their timely return to the Receiver General for Canada.

Statement of Conformance

In my professional judgment as the 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 with 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 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, against pre-established audit criteria that were agreed upon with management and are only applicable to the entity examined and for the scope and time period covered by the audit.

____________________________
Brahim Achtoutal
Chief Audit Executive

1. Background

The audit of the International Education Strategy was included in the Global Affairs Canada 2016-19 Risk-Based Audit Plan. The Plan was recommended by the Departmental Audit Committee on September 27, 2016 and subsequently approved by the Deputy Minister. More details on the audit objective, scope, criteria and methodology are included in Appendix A at the end of this report.

Canada’s International Education Strategy^{Footnote 6} (IES) is the blueprint to attract talent and prepare Canada for the 21st century. It supports international education and is designed to enhance Canada’s position as a world leader in higher education and research, and to contribute to Canada’s future prosperity. Incoming students and researchers contribute to Canada’s prosperity by consuming educational services and goods; addressing demographic challenges and skill gaps in Canada; and, improving Canada’s economic competitiveness as a result of research, innovation and commercialization.   

The IES builds on the Edu-Canada initiative - a pilot education promotion initiative that was in place from 2007 to 2012 - which was created to enhance Canada’s profile abroad and attract international students to Canadian education institutions. With the sun-setting of Edu-Canada in 2011-12, the 2011 Economic Action Plan announced funding for the development of a comprehensive strategy and called for the establishment of an advisory panel to consult and to make appropriate recommendations to the Ministers of International Trade and Finance for consideration as the Government of Canada developed its strategy. Published in summer 2012, the Advisory Panel’s report made 14 recommendations to expand marketing efforts and improve the coordination of policy and programming in light of a strong international competition on branding and scholarships. The report^{Footnote 7} recommended a strategy to maximize economic opportunities for Canada and a revised international education strategy. While the 2014 International Education Strategy did not adopt all of the recommendations of the 2012 Advisory Panel’s report, it did draw heavily upon its analysis and recommendations.

The IES complemented Canada’s Global Markets Action Plan announced in November 2013 and which consisted of comprehensive actions to advance the interests of Canadian businesses in 22 priority sectors—including education— where Canada enjoys a strong competitive advantage. The Advisory Panel and the IES identified six priority markets with greatest immediate growth potential for Canada: Brazil, India, China, Vietnam, Middle East and North Africa (including Turkey) and Mexico. The IES also suggested that Canada must maintain the advantage it currently enjoys in international education with traditional markets in countries such as France, the United Kingdom, the United States of America, Germany, South Korea and Japan; and take advantage of opportunities in emerging markets such as Southeast Asia.

The IES includes other commitments, such as refreshing the existing international education brand to better promote the proposition for international education and develop appropriate promotional tools, including customized marketing strategies that have powerful targeted messages to potential students. Another suggested way to attract international students is to enhance links between Canadian and international institutions, deepen research partnerships, and promote greater coordination among federal, provincial and territorial governments and education stakeholders, including the private sector.

The IES leverages the International Scholarships Program (ISP), a program that provides grants and contributions to support international education through the use of learning, scholarship, research, academic relations cooperation and dialogue in order to improve awareness of Canada’s international policies and priorities and facilitate Canada’s economic prosperity. Results from the ISP such as institutional partnerships, student and researcher mobility and the promotion of Canadian education and research excellence abroad contribute to the success of the IES.

Responsibilities

While education in Canada falls within provincial and territorial legislative jurisdictions, Global Affairs Canada fills an important coordination role with policy, trade and development activities for international education. Global Affairs Canada is the lead department responsible for the international promotion of Canada as a study destination and for the coordination of international education activities. In addition to Global Affairs Canada, other government departments are also involved in the IES, including Immigration, Refugees and Citizenship Canada (IRCC) and Innovation, Science and Economic Development Canada (ISED). The Department works closely with partners and sector stakeholders to advance education priorities and objectives in the context of federal-provincial-territorial relations.

Authority related to international education activities within Global Affairs Canada is shared:  international education falls under both the Minister of International Trade and the Minister of Foreign Affairs (see Appendix B).

The Minister of International Trade is ultimately accountable for international education promotion and the implementation of the IES. The Assistant Deputy Minister of Investment, Innovation, Business Development and Chief Trade Officer is responsible for the administration of the IES as part of this portfolio.

The Minister of Foreign Affairs is responsible for ensuring Canadian representation at multilateral fora and official meetings, and has authority for the coordination of bilateral and multilateral education policy activities and the International Scholarships Program. As such, the Minister of Foreign Affairs approves the composition of international education delegations, including the selection of federal representatives as appropriate, for participation in official international education ministerial level meetings and fora.

The International Education Division, within a Trade Sector Bureau under the Assistant Deputy Minister of Investment, Innovation, Business Development and Chief Trade Officer, is responsible for managing both the IES and the ISP.

The Department is allocated $5 million per year to support the IES, including key activities such as brand development, digital marketing, and in-market services. More details are provided in Appendix C- Figures 1 and 2. The IES also leverages existing scholarships and bursaries that are part of the International Scholarships Program. The ISP is governed by its own set of Terms and Conditions and currently, it has a total funding allocation of approximately $7 million per year for transfer payments - grants and contributions.

Allocation of International Education Strategy Funds to Missions

Funds for promotional and marketing activities under the IES are allocated to Canadian missions on a competitive basis through the Department’s Trade business planning process. Every year, Canadian missions, under the Strategia business plan process, submit their plans of proposed initiatives in support of education promotion. Each initiative provides a description of the activity, timelines, expected outcomes and results, and the funding requested.

Criteria were established to assess the business plans and help in determining how to allocate funds. The criteria take into account the IES’s market priorities, eligible and non-eligible expenses, number of resources assigned to education at the mission, past performance, as well as cost-sharing of the initiatives with other sources of funding. The allocation of funds is ultimately based on the strategic focus and quality of the business plans. 

Administration of the International Scholarships Program

The International Scholarships Program (ISP) is a transfer payment program under the responsibility of the Minister of Foreign Affairs and managed by a unit within the International Education Division. The ISP is comprised of grants and contributions for international education awarded to eligible recipients, including academic institutions and in the case of grants, students.

The eligibility requirement of recipients varies depending on the scholarship program. Once applications are reviewed and eligibility is verified, recipients are selected based on determined criteria and agreements are prepared and signed by both parties: the International Education Division and the recipients.

The agreements stipulate the reporting requirements expected from the recipients. This includes progress, financial and activity reports to be submitted by recipients on an annual basis. Cash flows statements are submitted twice annually and serve as the financial request mechanism. These statements are reviewed prior to the disbursement of funds in accordance with the agreement. 

Under the International Education Division’s supervision, several programs of the International Scholarships Program are administered by a third party contractor. The current contract was awarded by Public Works and Government Services Canada (now known at Public Services and Procurement Canada) in March 2012 through a request for proposals. The contract has been extended for two years via amendments until March 2017. At the time of the audit, the ISP Unit was in the process of signing an extension for the contract until August 2017 while it worked on a request for proposals to solicit bids for a new contract.

The third party contractor is paid an annual fee of $875,000 for professional services to administer approximately $6.1 million in Grants and Contributions annually^{Footnote 8}. This work involves preparing letters of agreement and contribution agreements with scholarship recipients (colleges, universities, or individuals), disbursing the funds to recipients and tracking the number of students by scholarship awarded as well as the total funding provided per institutional or individual recipient.

2. Observations and Recommendations

Audit results were derived from examination of documentation, interviews and file review. The audit team reviewed key documentation including relevant policies, directives and guidance, strategic and planning documents, operational processes, and performance reports. The team conducted 19 interviews with employees involved in the International Scholarships Program and the International Education Strategy at Headquarters (HQ) and in missions, as well as employees of the third party contractor who administers the scholarships program.

The file review was comprised of files for both the International Scholarships Program and International Education Strategy. For the International Scholarships Program, the audit team reviewed 21 scholarship recipients’ files covering the last three fiscal years, and the scholarship administrator’s contract management documentation, including monthly invoices and quarterly advance payment requests. For the International Education Strategy, file review included 15 missions’ education business plans and reports and ten contracts for goods and services related to operations at HQ and at missions.

Based on this work, observations and recommendations were developed under the themes of:  

• Objectives and priorities;
• Governance, oversight and performance results;
• Allocation of funds;
• Training and tools; and,
• Stewardship of resources.

2.1 Objectives and Priorities of the International Education Strategy

The audit team expected to find a well-documented strategic plan with clear objectives and results for the IES that is communicated to program staff.  More specifically, we looked for a plan that provides a clear link between the program mandate and its operational requirements, such as program priorities, allocation of funds, stakeholders’ roles and responsibilities, as well as monitoring and reporting.

The audit team reviewed strategic and planning documents and found that objectives and priorities, including actions for implementing the IES, were established and aligned with Global Affairs Canada’s Strategic Outcomes. Examination of documents and interviews with Education Trade Commissioners in five missions and with one Regional Education Trade Commissioner, responsible for a geographic region, indicated that the IES’s objectives and priorities were clearly communicated to program staff and Education Trade Commissioners. The audit team also found that performance measures had been developed, allowing the International Education Division to report on the results of the IES and the International Scholarships Program.

Overall, the audit team came to the conclusion that objectives and priorities of the IES are well set out.

Consultations with Key Stakeholders

The IES was developed following extensive consultations with various stakeholders including provinces and territories, education institutions, and private sector organizations. At that time, discussions took place to elaborate the IESs overarching theme and priorities. Documents confirm regular meetings took place with the provinces and territories to coordinate activities through the Council of Ministers of Education, Canada (CMEC) and the Federal-Provincial Consultative Committee on Education-related International Activities (FPCCERIA). For example, in 2016, in a collaborative exercise, the federal, provincial and territorial governments agreed on a new brand name and logo for international education promotion; guidelines for entering into Memoranda of Understanding with foreign governments were also developed via this forum, demonstrating coordinated efforts to advance international education priorities and objectives.

2.2 Performance Information, Reporting on Results and Accountabilities

Oversight and Accountabilities

The audit team examined whether clear accountabilities were established for achieving the objectives of the IES and whether they were supported by a governance structure.

The audit team reviewed performance objectives of senior management in the International Education Division and found them to be in alignment with the IES’s objectives and departmental priorities and objectives. As well, the auditors noted that organizational charts demonstrated the program structure for the IES, including responsibilities for Deputy Directors. Accountabilities were noted to be well-understood by the International Education Division management and the Education Trade Commissioners at missions. Overall, accountabilities, authorities and responsibilities for meeting the IES’s objectives, including the International Scholarships Program, were clearly defined, documented and are linked to departmental priorities.

The International Trade Senior Management Meeting (ITSMM) is the oversight body in place for the IES. The ITSMM is a meeting scheduled to take place on a weekly basis, chaired by the Deputy Minister of International Trade at which all assistant Deputy Ministers (ADMs) responsible for trade provide an update on the latest developments in their files. Since 2014, the International Education Division staff have participated at these meetings twice, in February and October 2016. At these meetings, they provided information to the committee members on achievements regarding the new brand and the digital strategy for international education.

Performance Information and Reporting

The audit team examined whether performance information was sufficient and appropriately documented to track progress and report on objectives. Documentation examined by the auditors showed that expected outcomes and performance measures were established and in line with objectives of both the IES and the International Scholarships Program.

However, those performance measures and outcomes were established in 2014 at the initiation of the IES and have not been revised. Management of the International Education Division recognizes that some of these indicators are repetitive and need to be refreshed. It is important to ensure that performance measures are up to date to reflect current programming and that results are reported to management for timely and accurate decision-making purposes. In the absence of updated performance measures, program staff is not provided with clear information on progress they are trying to achieve and how to measure success. With strong performance measurement in place, program management would be better positioned to assess its performance and use the results to manage and improve programs, policies and services.

The auditors noted that performance indicators for activities at missions were tracked and measured on an ongoing basis and reported on a monthly basis by Education Trade Commissioners at missions. The results were shown as key performance indicators (KPIs) in TRIO and Strategia, which are two departmental reporting tools, used by Trade sectors, and were rolled up into Trade Mission reports. Other performance indicators for activities under the IES are measured and reviewed on a continuous basis, such as those related to international scholarships and partnerships. For example, the number of bilateral agreements signed with foreign governments on international education is tracked.

Regarding communications and reporting, the International Education Division informs the ADM International Business Development, Investment and Innovation and the Director General Trade Sectors Bureau on key IES developments through informal weekly meetings. Since 2014, information has been presented to the International Trade and Foreign Affairs Deputy Ministers and Ministers through briefing memos on the statistics and key results of activities such as the number of international students, the brand, the digital strategy, scholarships, and issues and challenges encountered.

In addition to high-level performance results and indicators reported annually in the Departmental Performance Report, a status report was prepared by the International Education Division in 2014 to report on the performance measures encompassed in the IES. This document, which included performance measures for the International Scholarships Program was used to brief the Deputy Minister of International Trade at a series of meetings, and included updates on progress of the activities covered by the IES and the next steps for implementation. However, this exercise was discontinued in 2015. The work was repeated in 2016 but it was not provided to the ADM, Deputy Minister or Minister of International Trade, to inform senior management of results and progress of a program closely linked to the priorities of the Department.

In summary, for the past two years, ad-hoc reporting was provided in the form of briefing notes to departmental senior management or parliamentarians relating to statistical data or general information on a particular activity, program or a country. In the absence of a consolidated performance report that includes strategic information, senior management is limited in its ability to demonstrate or understand achievements or progress towards the Department’s priorities and to make results-based decisions and adjust course as needed.

In conclusion, the IES’s performance measures could benefit from a review to ensure they continue to be relevant and appropriate, and reporting could be strengthened in particular at the senior management level.  As Results for Canadians increasingly becomes a key delivery requirement for Global Affairs Canada, opportunities should be taken to ensure a comprehensive and timely reporting to enable an evidence-based decision-making by senior management.

Recommendation 1:

1. The Assistant Deputy Minister, International Business Development, Investment and Innovation, should:
• Ensure performance measures for both the International Education Strategy and the International Scholarships Program are revised regularly to align with the Department’s mandate and priorities; and,
• Based on the revised performance measures, provide management with performance information on both the International Education Strategy and the International Scholarships Program, to assist management in making timely strategic and operational decisions.

2.3 Allocation of Funds to Missions

The audit team examined whether resources were appropriately allocated and monitored to allow for the achievement of the IES’s objectives. The team reviewed the process to allocate the funds to missions, as well as the controls in place to ensure sound stewardship of these resources. Funds for the International Scholarships Program are allocated through a different process for transfer payments (refer to Section 2.5 Stewardship of Resources, for details)

The audit team examined the business plans submitted by missions to request funds for international education promotion and marketing activities, and their reports on funded activities. In total, 15 missions out of the 112 who participate in education promotion activities^{Footnote 9} were selected for review. The auditors found that for all items tested, the files were compliant with established guidelines and no significant weaknesses were identified. Initiatives were assessed based on defined criteria and were approved based on available funding. The audit team noted that the results of initiatives were reported on and that key performance indicators for Trade sectors were tracked. The audit team concluded that processes were established and implemented to ensure that International Education Strategy funds were requested, approved and reported on in accordance with the prescribed guidelines. 

The audit team also examined whether the allocation of funds to missions was in accordance with the priority markets established in the IES. Since 2014-15, more than 90 Canadian missions based in more than 80 countries received approximately $1 million in international education promotion and marketing funds annually from the competitive business planning process (refer to Appendix C - Figure 2 for details). It was found that the IES priority markets received the highest levels of funds. In 2014-15, 47% of available funds were allocated to missions in priority markets^{Footnote 10} , and in 2015-16, they accounted for 45%^{Footnote 11} of the total.

2.4 Training and Tools

There are considerable and diverse training and tools for the trade international education portfolio at Global Affairs Canada. Formal training and self-guided training for Education Trade Commissioners is offered online on the Intranet through the International Education wiki and on iTrain – the Trade Learning Portal. Training sessions for Trade Commissioners involved in education activities are offered every year before the launch of the business planning process.

Online material includes webinars and documents on Canada’s education systems; how to prepare a business plan and which criteria to address; and how to report on results.  Education Trade Commissioners are kept informed of material and updates via regular Newsletters and by email. Through interviews, Education Trade Commissioners indicated that they are familiar with the IES and its objectives and they know where to find the material needed in order to do their jobs. They also confirmed that they are well supported by the International Education Division and Regional Education Trade Commissioners, who serve as a point of contact for policy and guidance.

2.5 Stewardship of Resources

Spending under the International Education Strategy

The audit team analysed the expenditures for the IES for 2014-15, 2015-16 and 2016-17^{Footnote 12} to determine whether they were compliant with applicable legislation, policies and guidelines. More specifically, the audit team focused on contracts related to operations at Headquarters and at missions.

The audit team selected ten contracts for goods and services for review of controls over related spending.  Controls for contract initiation, contract approval and payment reviewed in the ten files were found to comply with legislation, policy and guidelines. While the audit team did note some minor issues related to file maintenance within the International Education Division, auditors concluded that there is adequate control over contract initiation, management and payment to ensure contract related spending is consistent with legislation, policy and guidelines.

Spending under the International Scholarships Program

Auditors selected 21 transfer payment files for examination: six grants and 15 contributions. For all six grant files tested, agreements were signed by the appropriate authority, and recipients fulfilled the reporting requirements according to the established schedule.

As for the contribution files examined, all agreements were signed by the appropriate authority. In all completed cases examined^{Footnote 13} , recipients fulfilled the reporting requirements in accordance with the agreements. Financial reports, activity reports, progress reports, results surveys, and cash flow statements were completed and submitted as required by the terms of the agreement. In all 15 files reviewed, financial commitments stated in the agreement matched those in the final financial reports.

Overall, the file review demonstrated that the process established by the third party contractor - and the International Education Division in the case of one program - for monitoring the grants and contributions program provided assurance that the terms of the agreements were generally respected and fulfilled by the recipients.

Management and Monitoring of the Contract for the Administration of the International Scholarships Program

As already mentioned, a third party contractor is responsible for administering several scholarships within the International Scholarships Program on behalf of Global Affairs Canada. The third party contractor administers approximately $6.1 million in grants and contributions annually. 

As part of the contract, the third party contractor is required to provide:

• Yearly budget forecasts;
• Quarterly financial reports accompanied by an advance payment request for the next quarter;
• A narrative report to detail events and activities of the first half of the year; and,
• An annual report including events and activities for the second half of the year, as well as financial statements and statistical information.

The audit team assessed the adequacy of the oversight processes established by the Department to ensure due diligence in monitoring and managing the contractor. We expected to find ongoing monitoring, verification of contract deliverables and payment approval processes rigorously applied. This is necessary to ensure that the contract is well managed, and that services are delivered consistently, efficiently and in compliance with the contract terms and conditions.

Auditors examined three monthly invoices for the contractor’s professional services rendered for administering the International Scholarships Program. The audit team concluded that the payments were appropriately reviewed to ensure compliance with contract terms and conditions and authorized for payment by the delegated authority.

However, the audit team has concerns with one area of responsibility for the third party contractor: advance payment requests did not always present projected expenditures and unused funds. These concerns came to light when the audit team examined quarterly advance payments, which are reviewed by a Senior Program Manager and recommended for approval to either the Deputy Director or Director. Auditors found that the advance payment requests reviewed did not always clearly present projected final expenditures and projected unused funds. This information was missing in three of the four reports accompanying the quarterly advance payment requests. As well, auditors noted that interest accrued was inconsistently reported in these reports.

Advance payment requests provide the International Education Division with financial and non-financial information with which to assess the performance of the program. The information is also used to determine how to reallocate scholarship funds within the program. Without this information clearly documented, the Department is presented with only partial information, which in turn does not permit appropriate budget monitoring and furthermore, does not facilitate decision-making.

Another area of concern is with regard to unspent funds.  A review of the third party contractor’s annual reports for the years 2013-14 through 2015-16 indicated that the contractor did not consistently report on unspent funds. The reports reviewed did not always disclose how much funding was unused and would be returned to the Receiver General for Canada. Consequently, the annual reports do not provide the Department with sufficient information and a full picture of financial results of the International Scholarships Program.

Through interviews conducted with the International Education Division auditors were advised that there is a significant amount of unspent funds from previous fiscal years that remains with the third party contractor that ought to have been returned to the Receiver General for Canada. This issue was identified by the International Education Division prior to the audit and was brought to the contractor’s attention in May of 2016. Discussions between the two parties took place to determine the amount owing to the Receiver General.

Subsequent to these discussions, the contractor provided documentation establishing the value of unused funds at more than $500,000, accumulated since fiscal year 2014-2015.  There is no clear or documented explanation as to why these funds were not returned to the Receiver General as they had been in previous years (up to 2013). At the time of writing the report, the International Education Division advised that they had reconciled outstanding amounts owed by the third party contractor as an unused balance and determined that $613,912 was due. Auditors were also advised that the Division received the funds to return to the Receiver General for Canada.

The audit team concluded that monitoring activities need to be improved to determine the amount of unused funds by the contractor that ought to be returned to the Receiver General, and to ensure that funds, in fact are timely returned. If such a situation continues, it puts the Department at risk of non-compliance with the Treasury Board Policy on Transfer Payments and in particular the Directive on Transfer Payments which calls for Departmental Managers to take appropriate action to recover any amounts that are repayable or recoverable from recipients.

Recommendation 2:

2. The Assistant Deputy Minister, International Business Development, Investment and Innovation, should:
• Ensure sound stewardship of public funds by providing strong financial oversight and reporting on the use and performance of financial resources;
• Ensure that the contractor provides clear and complete annual and quarterly financial reports, including disbursements, interest accrued, cash on hand and unused funds to be returned; and that these requirements are clearly stated in future contracts; and,
• Ensure the Department puts in place an effective process to thoroughly review and reconcile expenditures incurred by the third party ISP contractor, including determination of unused funds and their timely return to the Receiver General for Canada.

Conclusion

Overall, the audit team concluded that the International Education Strategy and the International Scholarships Program are well implemented.  This decision was reached because a governance and consultation structure is in place; authorities, responsibilities, and priorities for meeting both the IES and the International Scholarships Programs’ objectives are established and in line with Departmental priorities. The process to allocate funds to missions is well structured. Training and tools are available to staff implementing the IES abroad and in Headquarters.

Financial management over the IES was generally sound except for reporting and reconciliation practices for funds at year end. Management practices and controls were established and implemented over International Education Strategy contract related spending.

The processes established to administer scholarship agreements were functional and funds were spent in accordance with the terms and conditions of the agreements.

Opportunities for improvement were noted with regard to performance information and reporting, as well as the stewardship of scholarships resources.

Appendix A: About the Audit

Objective

The objective of this audit is to provide assurance that processes and controls are established to effectively manage the International Education Strategy, to ensure good stewardship of resources, accountability for results, and to support the achievement of Global Affairs Canada’s objectives.

Scope

The scope of the audit included governance, processes and controls, financial management and contracting, tools and training in place to support project management, performance measurement, stewardship of resources and accountability for results of the International Education Strategy.

The audit period under examination included activities from April 1, 2014 to December 31, 2016.

The audit did not focus on:

• Activities regarding the International Education Strategy carried out by other government departments or the provincial and territorial governments.
• Activities carried out by academic institutions – universities and colleges.
• Development-related education activities of Global Affairs Canada as they fall outside of the scope of the IES and the ISP.

Criteria

The criteria were developed following the completion of the detailed risk assessment and considered the Audit Criteria related to the Management Accountability Framework developed by the office of Comptroller General of the Treasury Board Secretariat. The audit criteria were discussed and agreed upon with the auditees. The following table outlines the audit criteria developed to meet the stated audit objective and audit scope:

The following criteria were developed based on the controls expected to be in place to manage high risk areas, and are designed to conclude on the audit objective within the defined audit scope.

Approach and Methodology

In order to conclude on the above criteria, and based on identified and assessed key risks and internal controls associated with the related business processes, the audit was conducted in accordance with the Treasury Board Policy on Internal Audit, Directives, and the Internal Audit Standards for the Government of Canada and conforms to the International Standards for the Professional Practice of Internal Auditing of the Institute of Internal Auditors.

These standards require that the audit be planned and performed in such a way as to obtain reasonable assurance that the audit objective is achieved. 

In order to conclude on the audit objectives, the following methods were used to gather evidence:

• Identify and review relevant policies, directives, and guidelines;
• Review and analyze relevant documents related to operations;
• Data analysis;
• Interviews with departmental officials;
• Walkthroughs of processes and systems, and identify key controls;
• Select samples of transactions for conducting detailed testing;
• Analyze financial and non-financial information; and
• Other relevant methods as deemed necessary by the audit team.

Appendix B: Overview of departmental responsibilities on education

Source: International Education Division, Overview of Global Affairs Canada’s Engagement in Education

Appendix C: International Education Expenditures

Source: International Education Strategy expenditures, data provided by the International Education Division as of November 2016.
Note: Of the $5 million the Department receives for the IES, $951,771 is allocated to salaries and internal services and not reflected in this table.

Source: International Education Strategy expenditures, data provided by the International Education Division as of November 2016.

Source: International Scholarships Program expenditures, data provided by the International Education Division as of November 2016.

Appendix D: Management Action Plan

Appendix E: Acronyms