Inadequate controls allowed a conflict of interest and improper payments of more than $3.2 million

(Chapter 6—Selected Contribution Agreements—Natural Resources Canada - Spring 2009 Report of the Auditor General)

Ottawa, 12 May 2009—Natural Resources Canada (NRCan) failed to identify a conflict of interest when a consultant who helped it develop two contribution programs also worked for organizations that received funding under the same programs, says Sheila Fraser, the Auditor General of Canada, in her Report tabled today in the House of Commons. Her office undertook the audit of the management of five contribution agreements in response to concerns raised by NRCan’s internal auditors.

“We are very concerned that knowing all of the circumstances, the Department went ahead with these contribution agreements without identifying this obvious conflict of interest,” said Ms. Fraser.

In one case the consultant signed a contribution agreement with NRCan as President of a recipient organization. Furthermore, the Department made over $3.2 million in payments to this organization despite evidence that it was insolvent and was not paying its subcontractors, contrary to the terms and conditions of the contribution agreement.

In addition, making these payments was contrary to the payment requirements of the Financial Administration Act, essential controls over the spending of public money.

While the Department has made some changes in response to the internal audits, they are not sufficient to keep the problems from recurring.

“Natural Resources Canada needs to develop policies and guidance on conflict of interest for contribution agreements to prevent a recurrence of this type of problem,” said Ms. Fraser.

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The chapter “Selected Contribution Agreements” is available on the Office of the Auditor General of Canada website.

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