Follow-up Audit of the P3 Canada Fund Due Diligence to Clear Conditions Precedent

Report Summary:
An internal audit of the P3 Canada Fund Due Diligence to Clear Conditions Precedent was completed in March 2015. The objective of this follow-up audit was to assess the implementation of the approved management action plan for the internal audit.

The scope of this audit engagement included the projects that have completed the due diligence to clear conditions precedent process during the period of April 1, 2016, to January 31, 2017. Specifically, the auditor conducted audit procedures in order to ensure the recommendations noted from the previous audit had been effectively implemented.

Overall, based on the scope above, the auditors found that management has addressed all of the recommendations from the March 2015 P3 Canada Fund Due Diligence to Clear Conditions Precedent Internal Audit. As part of the report, the auditor noted additional improvement opportunities which are described in the table below along with management’s response and action plan, and the current observation and conclusion.

Original Audit Recommendation

 Management Action Plan

Observations and Conclusions

We recommend that management finalize and approve the Investments business unit’s Due Diligence Guide and offer refresher training on the Guide. PPP Canada agrees with this recommendation. PPP Canada recognizes the importance of establishing a formal systematic process to support clearing CFA due diligence to clear conditions precedent. The Investments business unit will finalize the Due Diligence Guide and continue to provide one-on-one training to new staff and ongoing training to existing employees on the Guide as necessary.

√ - Recommendation adequately addressed

Management has finalized the Investments business unit’s Due Diligence Guide

Opportunity for improvement #1
Although the Investments business unit’s Due Diligence Guide was finalized, upon inspection of the document, it was noted that there was no version history or approval dates listed. It is recommended that version control history be added to the Guide to track the approval dates and revision history for the Investments business unit’s Due Diligence Guide.

Opportunity for improvement #2
Based on our interviews conducted, it was reported that training occurred upon finalization of the Due Diligence Guide, although no evidence of the training was retained. It is recommended that evidence of training conducted (e.g. training materials and record of attendance) be retained to demonstrate that training has taken place.

Management Response:
PPP Canada agrees with the observations noted above as they relate to opportunities for improvement of the Due Diligence Guide.

We recommend that management more clearly evidence completion of activities and formally evidence review and approval of key due diligence documentation by fully implementing electronic signatures capability in P3C Docs.

PPP Canada agrees with this recommendation. PPP Canada has already made significant progress implementing its Electronic Document and Record Management System (EDRMS); P3C Docs. Embedded within P3C Docs is value-added workflow functionality, which facilitates an auditable process of document approvals. More specifically, PPP Canada has operationalized the workflow feature associated with the due diligence process for a number of P3 Canada Fund projects. Implementation of the workflows has automated the business rules to decide when one step has been completed successfully and when the next step begins (i.e. a director-level approval will trigger a VP-level workflow request). Workflow functionality has also streamlined the review and approval process, including electronic signatures capability. PPP Canada will continue work on leveraging the full capabilities of the workflow process associated with the due diligence process.

√ - Recommendation adequately addressed

P3C Docs has been fully implemented and is being used to clearly evidence the completion of activities and formally evidence review and approval of the completed due diligence packages.

Opportunity for improvement #3

It was confirmed through inquiry that once an individual is terminated that their access is removed from P3C Docs. One terminated user was selected for testing in order to assess the design and implementation of the control. Although the individual selected for testing did have their access to P3C Docs appropriately removed, there was no formalized documentation kept to demonstrate that the access had been removed in a timely manner. It is recommended that formalized documentation concerning the removal of all terminated employees system and network access be maintained and retained for audit trail purposes.

Opportunity for improvement #4

Although the follow-up audit found that the workflows in P3C Docs are configured to ensure that reviews occur by both director- and VP-level employees, the current configuration allows any user to be selected to review as either the Director or VP, Investments, despite their role in the organization. It is recommended that reviewer access be restricted to directors and VPs who need such access in order to perform their job duties.

Despite this system limitation, it was noted that the completed due diligence packages selected for testing were appropriately approved by the Director, Investments, and VP, Investments. The risk is also mitigated by the very low volume of activity.

Management Response:

PPP Canada agrees with the observations noted above as they relate to opportunities for improvement of P3C Docs processes.

We recommend that management introduce a formal practice to seek client feedback on support provided by PPP Canada (e.g. survey, questionnaires, or lessons-learned discussions). 
PPP Canada agrees with this recommendation. PPP Canada has formal mechanisms in place, such as formative and summative evaluations which are specifically designed to capture client feedback on program design, management and performance. PPP Canada concluded a formative evaluation of the P3 Canada Fund in 2013. The evaluation provided tangible recommendations on ways PPP Canada could improve on its program management and performance. PPP Canada responded to all of the recommendations identified in the final evaluation report. A summative evaluation of the P3 Canada Fund is planned for FY 2015–16. The methodological approach of the summative evaluation will employ formal practices to seek client feedback on PPP Canada’s program management and performance of the P3 Canada Fund. It is anticipated that the scope of the summative evaluation will include, among other areas, stakeholder feedback on PPP Canada’s performance during the due diligence process. 

√ - Recommendation adequately addressed

The summative evaluation was completed for the 2015–16 fiscal year. It included feedback from clients on the due diligence process which was actioned by PPP Canada.
We recommend that management enhance controls to improve the standardization, consistency and relevancy of documentation and analysis that is used to demonstrate that conditions of the CFA have been met.
PPP Canada agrees with this recommendation. PPP Canada’s due diligence process has evolved significantly from Round 1 to Round 6. The due diligence process employed in the Investments business unit today has a greater set of controls and mechanisms in place to clear conditions precedent and document PPP Canada’s due diligence activities from project approval to the financial close stage. Knowledge transfer and information sharing within the Investments business unit have also been leveraged as opportunities to facilitate greater learning with regards to the intent and goals of the due diligence process. The Investments business unit continues to ensure staff members are equipped with the knowledge and tools to adequately complete the due diligence process on P3 Canada Fund projects.
√ - Recommendation adequately addressed

A sample of two projects were examined and it was confirmed that the process for completing the due diligence packages was standardized and all appropriate artefacts were noted as being included in the due diligence package.