Compliance Audit of the Terms and Conditions of the Income Assistance Program for COVID-19 Funding

Context

Indigenous Services Canada's (ISC) Income Assistance (IA) program provides eligible individuals and families living on reserve as well as those that are Status Indians^{Footnote 1} in Yukon with funds to cover their living expenses at comparable rates to provincial and territorial income support programs.

To help ensure that First Nations individuals and families who rely on IA were able to cover their essential living expenses during the COVID-19 pandemic, the Minister provided two rounds of COVID-19 benefit funding. The first round of the benefit totaled $124.4 million (including service delivery funding), with $300 per month per household distributed to all IA clients for the period of April 2020 to June 2020. The second round provided additional funding of $99.1 million, which was also distributed as $300 per month per IA client household for the period of January 2021 to March 2021.

There were no differences between the administration of the regular IA funding and the COVID-19 funding, and as such there were no changes to the Income Assistance program Terms and Conditions in the delivery of the COVID-19 funding; however, additional flexibility was provided in the scope of eligible expenses. These flexibilities were communicated to the funding recipients through question-and-answer guidance documentation. The existing Income Assistance funding recipients and clients were automatically eligible for the COVID-19 benefit.

Why it is important

This audit supports the Department in demonstrating its due diligence with respect to the Income Assistance program's COVID-19 funding as it accelerated the delivery of financial support to First Nations communities. The audit is also important because it ensures sufficient funding was made available for support during the COVID-19 pandemic.

What we examined

The audit objective was to provide assurance that the IA program has respected key existing terms and conditions and new guidance in the delivery of its COVID-19 funding.

What we found

Overall Conclusion

The audit recognized that the pandemic had an unprecedented impact on First Nations communities and their needs. The Income Assistance COVID-19 funding had to be delivered quickly and have sufficient flexibility to allow First Nations to prioritize the needs of their communities as well as new needs that would evolve during the pandemic. The approach to compliance with the terms and conditions of the funding had to consider this context and the ability of First Nations to respond to funding agreement requirements while dealing with the urgent impacts of the pandemic in their communities.

The audit concluded that for the COVID-19 funding, there was compliance with the terms and conditions related to eligibility of funding recipients, regional monitoring and follow-up of annual reports that were not received as well as review of the annual financial reporting packages that included the IA program's COVID-19 funding. Furthermore, the methodology chosen ensured sufficient funding to First Nations communities even though there was limited time allotted to determine caseload estimates. In addition, despite the late reporting found across the Income Assistance program, the majority of reports are received with a two-year period. The relevance of the data available impacts decision-making, and there is opportunity to ensure key data points such as caseload numbers for the program are current.

Statement of conformance

The audit conforms with the Institute of Internal Auditors' International Standards for the Professional Practice of Internal Auditing and the Government of Canada's Policy on Internal Audit, as supported by the results of the Quality Assurance and Improvement program.

Management's Response

Management is in agreement with the findings, has accepted the recommendation included in the report and has developed a management action plan to address it. The management action plan has been integrated into this report.

Roles and Responsibilities

Within ISC, the Education and Social Development Program and Partnerships (ESDPP) Sector is responsible for administering the program, including the program structure and the transfer of funds to the Regional Operations (RO) regional offices. The regional offices are responsible for the delivery of funds to the funding recipients. In addition, they are responsible for planning budgets, setting rates, providing communications and guidance to First Nations and organizations, tracking expenditures, analyzing financial statements and reports as well as ensuring compliance with program requirements.

Policies and Guidance Documents

The 2012 Treasury Board Policy on Transfer Payments outlines the overarching requirements for the administration and effective monitoring and oversight for funding programs. The IA program is subject to the requirements of the Policy.

The Grants and Contributions to Provide Income Support to On-Reserve Residents guidance prescribes the terms and conditions to which the IA program is subject.

The National Income Assistance Guidelines set out the delivery requirements and standards for funding recipients of the IA program that have entered into a funding agreement with ISC. The guidelines also set out the monitoring and oversight requirements for program delivery by ISC.

The Reporting Guide sets out the detailed reporting requirements to gather information on whether funds provided under the IA program were spent on the purposes intended, that terms and conditions of funding agreements were met and that the recipient's financial situation was sufficiently stable in order to assure continued delivery of services.

Income Assistance & COVID-19 Funding

To help ensure that First Nations individuals and families who rely on Income Assistance were able to cover their essential living expenses during the first phase of the COVID-19 pandemic, the Minister of Indigenous Services announced that $270 million would be provided to address the increased demand related to COVID-19, including $124.4 million for COVID-19 benefits and $145.6 million for program integrity funding. Program integrity funding is funding provided to First Nations and Provinces to ensure that ISC's program matches annual provincial rate increases (Price) or additional clients (Volume) that need income assistance support due to socio-economic reasons.

The COVID-19 benefit of $300 per month to all IA client households retroactively for April 2020 to June 2020 totaled $88.4 million. It was provided with guidance on how a First Nation community or organization could consider alternative options if there were other, more effective ways of meeting the needs of Income Assistance clients during the pandemic.

The program also provided additional funding of $36 million to First Nations for service delivery during the pandemic.

Recognizing that there was further need related to COVID-19, the program provided additional funding of $99.1 million, which was also based on a $300 per month COVID-19 benefit per Income Assistance client household for January 2021 to March 2021.

There were no differences between the administration of the regular IA funding and the COVID-19 funding, and as such there were no changes required to the IA program Terms and Conditions to accommodate the delivery of the COVID-19 funding. The only difference was the additional flexibilities provided for the type and nature of expenses eligible under this funding.

ISC distributed decision letters and formal Questions & Answers (Q&A) documents to the recipients to communicate the provision of the additional funding and the parameters surrounding the funding. These documents also communicated that First Nations recipients had significant flexibility to utilize alternative fund distribution methods in an effort to quickly and effectively respond to the challenges the communities were facing during the pandemic. Alternative options of providing Income Assistance supports to clients, instead of the temporary $300 per month COVID-19 benefit, could be pursued by recipients if deemed by Chief and Council to better meet the needs of Income Assistance clients.

2.1 Why it is important

This audit supports the Department in demonstrating its due diligence with respect to the Income Assistance program's COVID-19 funding as it accelerated the delivery of financial support to First Nations communities. The audit is also important because it ensures sufficient funding was made available for support during the COVID-19 pandemic.

2.2 Audit Objective

The audit objective was to provide assurance that the IA program had respected key existing terms and conditions and new guidance in the delivery of its COVID-19 funding and that the program had developed a methodology to determine the appropriate level of funding for COVID-19 related assistance.

2.3 Audit Scope

The scope of the audit included the targeted COVID-19 funds, which included the COVID-19 benefits and the service delivery funding administered under the IA program. The program integrity funding is an ongoing element of the IA program and was not introduced as a result of COVID-19. As such, the program integrity funding was scoped out of this audit.

The compliance audit assessed the requirements or eligibility, type and nature of eligible expenditures, due diligence as well as reporting. The scope of the audit excluded terms and conditions that may have been lower risk for the COVID-19 funding, including those related to intellectual property, official languages, maximum amounts payable and similar terms and conditions.

The audit also looked at the methodology used in determining the level of COVID-19 funding, including rationale used to develop the methodology for developing the estimate for increases in case loads due to the pandemic.

The audit covered the period from April 1, 2020 to June 30, 2022. This period was chosen because it reflects key COVID-19 dates, such as the funding delivery deadlines and reporting deadline and allowed for review of reporting activities while accounting for more current information with respect to reporting activities.

2.4 Audit Approach and Methodology

The audit was conducted in accordance with the requirements of the Treasury Board Policy on Internal Audit and followed the Institute of Internal Auditors International Professional Practices Framework. The audit examined sufficient, relevant evidence and obtained sufficient information to provide a reasonable level of assurance in support of the audit conclusion.

The audit fieldwork was performed from November 2021 to January 2022 and from May 2022 to June 2022 and consisted of three phases: planning, conduct and reporting. The main audit techniques used included:

• Interviews with key stakeholders, including the IA program management, regional office management, funding services officers, field operations managers and social programs staff;
• Review of relevant documentation related to the terms and conditions of the program, administration and operations of the COVID-19 funding, and other relevant procedures and guidelines;
• Recalculation of estimates and analysis of reporting data;
• File testing to test compliance with the applicable requirements; and,
• Follow up requests/meetings to validate preliminary testing observations.

The approach used to address the audit objective included the development of audit criteria, against which observations and conclusions were drawn. The audit criteria can be found in Annex A.

3.1 Eligibility of Funding Recipients and Clients

3.2 IA Program Activity and Expenditure Reporting

3.3 Monitoring and Annual Reporting

3.4 Overall Conclusion

The audit recognized that the pandemic had an unprecedented impact on First Nations communities and their needs. The Income Assistance COVID-19 funding had to be delivered quickly and have sufficient flexibility to allow First Nations to prioritize the needs of their communities as well as new needs that would evolve during the pandemic. The approach to compliance with the terms and conditions of the funding had to consider this context and the ability of First Nations to respond to funding agreement requirements while dealing with the urgent impacts of the pandemic in their communities.

The audit concluded that for the COVID-19 funding, there was compliance with the terms and conditions related to eligibility of funding recipients, regional monitoring and follow-up of annual reports that were not received as well as review of the annual financial reporting packages that included the IA program's COVID-19 funding. Furthermore, the methodology chosen ensured sufficient funding to First Nations communities even though there was limited time allotted to determine caseload estimates. In addition, despite the late reporting found across the Income Assistance program, the majority of reports are received within a two year period. The relevance of the data available impacts decision making, and there is opportunity to ensure key data points such as caseload numbers for the program are current.

Audit Criteria