ARCHIVED - Audit of Administrative Monetary Penalties (AMPs)
March 2015

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Table of Contents

1.0 Executive Summary

The Agriculture and Agri-Food Administrative Monetary Penalty Act (AAAMPA) was passed in 1995. The supporting Agriculture and Agri-Food Administrative Monetary Regulations (AAAMPR),which allow the Agency to use administrative monetary penalties (AMPs), came into force in May of 2000. AMPs are a non-criminal administrative response to regulatory non-compliance.

The AAAMPR currently applies to provisions of the Health of Animals Act, the Plant Protection Act and the regulations made under them, and as of July 16, 2014, apply to the Meat Inspection Act and Meat Inspection Regulations.

The objective of the audit was to assess the adequacy and efficiency of processes for Notices of Violation (NOVs), with or without penalty, levied in the Animal and Plant Business Lines in order to inform the extension of the AMPs regime to provisions of the Safe Food for Canadians Act and Regulations, once the Act and Regs are in force and the necessary amendments have been made.

We found that processes for issuing NOVs within the Animals and Plant Business Lines are consistent with respective acts and regulations. Nevertheless, we found that while regulatory timelines were respected, delays were occurring in issuing NOVs and rendering decisions of Ministerial Reviews on appealed AMPs. The Agency has not yet developed time standards for the issuance of NOVs and appeals, and is not able to track and address timeliness.

The audit also found that graduated enforcement measures, to be applied in the case of repeat violators, are not applied as designed. As a result, the Agency may not be providing a graduated and consistent approach to non-compliance in some cases.

Finally, while some performance reporting to Senior Management is occurring, enhanced performance information is required to gauge the effectiveness of the AMPs regime.

The report makes two recommendations regarding the application of graduated enforcement measures and the development of performance indicators. With respect to the Animal and Plant Business Lines, addressing the recommendations would enhance the efficiency and effectiveness of AMPs as a key enforcement tool. With respect to the future expansion of AMPs to provisions of the Safe Food for Canadians Act and Regulations, addressing the recommendations would facilitate the integration of AMPs into the suite of existing enforcement tools.

Conclusion

The application of AMPs is generally consistent with the AAAMPA and Regulations, and with internal CFIA policies and procedures from a compliance perspective. Nonetheless, the audit identified notable opportunities for efficiency improvements. As the application of AMPs is introduced in the Food Business Line, there is a need to develop a more fulsome performance management system within the Agency's enforcement strategy to assess the effectiveness and efficiency of the AMPs regime, and to ensure that graduated enforcement measures can be easily applied and demonstrated.

2.0 Introduction

2.1 Background

Since 2000, the AAAMPA has provided the CFIA with the authority to issue AMPs for violations of the Health of Animal Act, the Plant Protection Act, and their related regulations.

AMPs take the form of a Notification of Violation (NOV) with a written warning or a NOV with a penalty. The AAAMPA classifies violations as minor, serious or very serious and the AAAMPR sets penalty amounts that may vary from $500 to $15,000.

AMPs do not replace existing inspection and enforcement tools, but instead provides the Agency with additional flexibility in managing non-compliance in situations where simple warnings may not be sufficient, but where prosecution may be considered too harsh.

The penalty to be levied is prescribed in the AAAMPR for each of the three levels of severity of the violation (i.e., very serious, serious or minor). The Regulations also allow for an increase/decrease of up to 50% of AMP amounts for very serious and serious violations occurring in the course of business, depending on the history and intent of the violator and the harm or potential harm caused by the violation.

Potential violations are initially identified by CFIA inspectors in the Areas as part of their inspection activities and are documented on Inspector Non-Compliance Reports (INCRs). INCRs and accompanying documentations (e.g. inspection reports, notes, photos, etc.) are reviewed with inspection managers / supervisors and with Enforcement and Investigation Services (EIS) in the Areas. Currently, EIS personnel prepare AMP files and recommend enforcement actions, including AMPs when the contravention is considered to be a violation to legislation enforced by the CFIA. Regional Chief Inspectors, Operations Branch have been designated as having the authority to issue Notices of Violation.

Within 30 days of receiving a NOV, the recipient may request a review of the facts conducted either by the Minister of Agriculture and Agri-Food Canada (i.e. Ministerial Reviews) or the Canada Agricultural Review Tribunal (CART), an independent organization. Area EIS personnel prepare file documentation for purposes of both reviews. Area Directors General (ADGs) of Operations have the delegated authority for conducting Ministerial Reviews. Also, within 30 days of receiving a Notice of Violation and instead of opting for a review of the facts, violators who have been issued a monetary penalty of $2,000 or more can request to enter into a Compliance Agreement with the Minister of Agriculture and Agri-Food Canada where they can apply up to double the penalty amount to invest in expenditures to address the area of non-compliance. Finally, regulated parties that choose to pay may benefit from a 50% discount if payment is made within 15 days of the issuance of the NOV.

In addition to AAAMPA and AAAMPR, activities and practices related to AMPs are guided by the CFIA Compliance and Enforcement Policy; an EIS Directive; and Animal and Plant Health Enforcement Guidelines.

Based on data obtained from EIS, a total of 1,223 NOVs, 662 with penalty, and 561 with warning, issued by the Agency were recorded from April 2012 to March 2014. Approximately $3 million of AMPs have been recorded from April 2012 to February 2014.

The Audit and Evaluation Branch (AEB) completed an Evaluation of AMPs in 2012. The report identified opportunities to strengthen learning / training, performance measurement and the integration of AMPs into the Agency's overall compliance and enforcement strategies.

AEB also completed an Audit of EIS in 2011. The report identified opportunities to strengthen enforcement and investigation services in the areas of: policies and strategic direction, governance, guidance and procedures, implementation of a risk-based approach, and EIS case load distribution.

NOVs with warnings or penalties are currently being utilized as an enforcement mechanism in response to violations by the Animal and Plant Business Lines. On November 21, 2013, the Minister of Health announced the intention to expand the use of AMPs as a response option to violations under the Meat Inspection Act and its regulations.

The audit of AMPs was approved to be conducted in the 2014/15 fiscal year as part of the CFIA's Risk Based Audit Plan for 2013/2014 to 2015/2016.

2.2 Objective

The objective of the audit was to assess the adequacy and efficiency of processes for Notices of Violations, with or without penalty, levied in the Animal and Plant Business Lines in order to inform the future expansion of the AMPs regime to provisions of the Safe Food for Canadians Act and Regulations.

2.3 Scope

The scope of the audit covered all AMPs related processes in place during the 2012/13 and 2013/14 fiscal years. The Conduct Phase field work was conducted at Headquarters and in the four Areas. The audit expanded on issues identified in the Audit of EIS and the Evaluation of AMPs.

2.4 Approach and Methodology

Detailed audit criteria were developed to serve as standards against which our assessment could be made, and form a basis for the conduct of the audit. The criteria were developed from the Agency's Compliance and Enforcement Policy, Animal and Plant Health Enforcement Guidelines, Enforcement and Investigation Services Directive EIS-05-01, AAAMPA, AAAMPR, and the Office of the Comptroller General's Audit Criteria related to the Management Accountability Framework: A Tool for Internal Auditors. The audit criteria were:

  1. Roles and Responsibilities related to the AMPs regime are clear and communicated.
  2. Plans and priorities are in place to guide the issuance of Notices of Violation.
  3. Notices of Violation are issued on a timely basis.
  4. Processes related to the issuance of Notices of Violation support graduated enforcement measures.
  5. Ministerial Reviews are conducted in a timely manner, and the rationale for decisions is documented on file.
  6. Compliance Agreements are being established, monitored and carried out on a timely basis in accordance with agreement terms and conditions.
  7. Lessons learned from overturned or withdrawn Notices of Violation, during the appeal process, are used to inform the AMPs regime.
  8. A performance measurement framework is in place and is operating as intended.

The audit approach included data mining and analysis, and site visits to all Areas for a review of selected files and interviews with Agency staff. The audit team also benchmarked with some other AMP regimes within the Federal Government.

2.5 Statement of Conformance

The audit conforms to the Internal Auditing Standards for the Government of Canada, as supported by the results of the CFIA's internal audit quality assurance and improvement program. Sufficient and appropriate auditing procedures were performed and evidence gathered in accordance with Institute of Internal Auditor's International Standards for the Professional Practice of Internal Auditing and to provide a high level of assurance over the findings and conclusion in this report. The findings and conclusions expressed in this report are based on conditions as they existed at the time of the audit, and apply only to the entity examined.

3.0 Findings and Recommendations

3.1 Timeliness of Issuance of AMPs

AMPs were issued within the time frames prescribed by the regulations. However, delays occur in the process, and there are no time standards to measure performance.

The timeframe to issue an AMP is prescribed in the AAAMPR. For minor violations, the Agency has six months from the date the Minister is made aware of the violation until the issuance of the AMP. The timeframe allowed for serious and very serious violations is two years. We expected that AMPs would be issued on a timely basis to encourage compliance.

We found, in our file review of serious and very serious violations, that all the AMPs had been issued within the two year time frame prescribed by the regulations. However, we observed that delays were occurring throughout the process.

Based on our sample review, delays can occur at the point of the preparation of the INCR package by the inspector, and its approval, which was usually done by the Regional Chief Inspector (formerly known as the Regional Director). The time taken from the moment of the observation of violation until the receipt of the INCR by EIS was as much as several months in some of the samples. Interviewees pointed out that inspectors are not generally allocated the time required to prepare INCR packages and the multi-stage referral and approval process required in many cases result in delays in reporting non-compliance to EIS.

Delays also occur within EIS. Based on interviews, these may be caused by varying caseloads, and the time it takes to gather evidence once an investigation has been initiated. The time taken may depend on the type of violation, as the evidence for some types of violation is simpler to obtain than others.

The delays can impact the CFIA's ability to apply graduated enforcement measures (see finding 3.3). The perceived fairness of the AMPs regime and the Agency's ability to recover penalties may also be affected.

The process of issuing AMPs can be complex and time consuming, and it can be expected that some delays may occur. At present there are no CFIA time standards for the steps in the process of issuing AMPs. As a result, the Agency is not able to monitor the timeliness of issuing AMPs, and cannot determine whether delays are acceptable. This is further discussed in finding 3.4, on performance measurement.

3.2 Ministerial Reviews

Ministerial Review decisions were supported by documentation. However, no time standards exist to measure timeliness of decisions.

Regulated parties that disagree with an AMP decision may request a review by the Minister. As a result of the review, the AMP may be upheld, or overturned. At the CFIA, Ministerial Reviews are delegated to the Director Generals of the Areas (previously known as Area Executive Directors). We consider that timely well-supported decisions are essential to the perceived fairness of the appeals process. We expected that decisions would be supported by documentation, and would be made on a timely basis.

In a sample of 14 Ministerial Reviews for the audit, we found that all had a documented rationale to support the Minister's decision. Nine of the 14 took over a year to complete, and five took under a year. We note however, that the Regulations do not prescribe the timeframe afforded to the Minister to complete the review, and that the Agency has not developed expectations as to the timeliness of completion of the reviews.

With no set timelines, Ministerial Reviews compete with the many urgent operational priorities of the Area Director Generals, which can result in delays. In our benchmarking we noticed the existence of a separate review body for appeals in other departments. Without any time standards for completion, we cannot determine whether the time taken to complete a Ministerial Review is reasonable. Please refer to finding 3.4 about performance measurement.

3.3 Graduated Enforcement Measures

There is some graduation of enforcement measures for repeat violators, however; this is inhibited by the current application approach.

The Animal and Plant Health Enforcement Guidelines state that the CFIA has a compliance and enforcement framework that provides for a fair, graduated and consistent approach when dealing with non-compliance. We expected that the Agency would apply this principle in its dealings with repeat violators.

The Animal and Plant Health Enforcement Guidelines provide a recommended range of five enforcement actions, available for first, second and third (or more) instances of non-compliance, in relation to the seriousness of the non-compliance, as follows:

Graduated Enforcement Measures
Level of non-compliance First non-compliance Second non-compliance Third or more non-compliance
Minor Table Note 1, Table Note 2 or Table Note 3 Table Note 2 or Table Note 3 Table Note 3, Table Note 4 or Table Note 5
Serious Table Note 2, Table Note 3 or Table Note 4 Table Note 3 or Table Note 4 Table Note 3, Table Note 4 or Table Note 5
Very Serious Table Note 3, Table Note 4 or Table Note 5 Table Note 3, Table Note 4 or Table Note 5 Table Note 4 or Table Note 5

Table Notes

Table Note 1

Letter of Non-Compliance

Return to table note 1

Table Note 2

AMP Warning

Return to table note 2

Table Note 3

AMP Penalty

Return to table note 3

Table Note 4

Actions on Licences and Permits

Return to table note 4

Table Note 5

Prosecution

Return to table note 5

Based on our audit sample, we did not observe the application of a graduated approach to enforcement beyond the issuance of an AMP. Our observations are limited to the Agency's ability to increase penalty base amounts within the AMPs regime.

Penalty amounts for serious and very serious violations can increase or decrease up to 50% of the base penalty, determined by the assessment of harm, history, and intent. Harm takes into consideration the seriousness of harm or potential harm of the non-compliance; history considers the history of the regulated party with respect to the existence of previous instances of non-compliance for the same violation; and intent considers the intent of the regulated party to commit a contravention or cause harm. Each factor is assessed on a score from 0 – 5 and the sum of the three scores is used to calculate the amount of the penalty, as follows:

  • A total score of 0-5 results in reduction of the base penalty
  • A total score of 6-10 results in no change to the base penalty
  • A total score of 11-15 results in an increase of the base penalty

For example, a score of 13 would result in an increase of 30% to the base amount. A serious violation of $6,000 would increase to $7,800.

We found some degree of graduation being applied. Generally, the first violation was a warning, and a second violation attracted a monetary penalty. For repeat violations, the penalty usually increased; however, we noted the following:

  • The maximum 50% increase over the base penalty amount was never levied, even for repeat violators with a large number of previous violations. Interviews with Area EIS revealed that this was due to the difficulty in assessing intent and the concern of having the assessment challenged by the Canada Agricultural Review Tribunal (CART).
  • There were almost no decreases in the base penalty amount. Based on our analysis, a combination of scores of history, harm and intent that would result in a decrease is difficult to obtain.
  • There are a number of violations for repeat violators where a warning was issued after a monetary penalty had previously been assessed, or that the amount was lower than the amount previously assessed. Our analysis indicated that delays in the processing of EIS files and the lack of adequate systems to track the assessed penalties may often be the cause of inconsistent graduation.

Based on our review of Agency AMPs data and a sample of files, we noted that 30% of all NOVs served between April 2012 and March 2014 were issued to repeat violators. When a regulated party violates repeatedly, this could indicate that the AMP regime may not be effective in encouraging compliance with regulations. We noted that a number of repeat violators take advantage of the early payment discount of 50%. The limited options to increase the penalty may result in situations where paying the AMP is simply seen as a cost of doing business.

The audit team benchmarked AMPs regimes in other federal departments / agencies and found that they generally have more graduated enforcement measures. In other regimes, AMPs penalties can range up to $25,000, penalty amounts rise steeply for repeat violators based primarily on the number of previous violations (intent is not considered), and no discounts are applied for prompt payment.

Recommendation 1.0:

The Vice President of Operations, in collaboration with the Vice President of Policy and Programs Branch, should review the approach and the application of AMPs, specific to its graduated enforcement, to ensure that penalties are increased appropriately for repeat violators, and that graduated enforcement measures are taken when warranted.

3.4 Performance Measurement

There is some performance reporting to Senior Management, but key performance indicators must be identified, tracked and reported to gauge the effectiveness of the AMPs regime.

CFIA Management needs to know whether the AMPs regime is effective in achieving its goals. We expected to see a performance measurement framework in place, where key performance indicators would be identified, tracked, and reported on.

We found that Senior Management at the CFIA receives regular updates on the number of AMPs issued and the collection of monetary penalties. In addition, information about issued AMPs, along with information about repeat violators is published on the CFIA web site.

The National Enforcement Tracking System (NETS) database, and separately developed spreadsheets are being used by Headquarters and Area EIS to track AMPs related data. We found that the NETS database and spreadsheets generally track data throughout the AMPs lifecycle from issuance of NOVs to file closure.

The number of issued NOVs alone, without being related to a measure of transactions subject to inspection (e.g. number of inspections, instances of non-compliance), does not provide an indicator of whether AMPs enhance compliance. Also, based on the performance information provided to senior management, the Agency is not able to track and monitor the timeliness of processes related to the issuance of NOVs (finding 3.1), or to the appeals process related to Ministerial Reviews (finding 3.2).

The 2012 Evaluation of AMPs recommended the development of a performance measurement strategy. Performance indicators developed are not giving a fulsome measure of performance of the AMPs regime within the Agency's enforcement strategy. The Policy and Programs Branch as lead Branch responsible for establishing policies and designing programs should be involved in measuring the effectiveness of strategies and policies applied to CFIA AMPs.

We note that the current NETS system does not provide information prior to the issuance of NOVs. For example,

  • The date on which the "Minister is made aware" of violations, for purposes of tracking compliance to meeting time limits for the issuance of Notices of Violation;
  • The number of Notices of Violation that "fall off the table" due to the expiry of the prescribed time limit for their issuance, or other reasons, such as insufficient evidence provided; and
  • The number of INCRs that are not referred to Area EIS by the inspectorate.

We understand that the proposed Electronic Service Delivery Platform (ESDP) system would permit a better measure of performance. In anticipation of the ESDP system, the Agency should develop key performance indicators to strengthen the measurement of performance of the AMPs regime.

Recommendation 2.0:

The Vice President of the Policy and Programs Branch, in collaboration with the Vice President of the Operations Branch should develop and implement a more fulsome performance management system for AMPs within its enforcement strategy in anticipation of AMPs to the Food Program.

Appendix A: Management Response and Action Plan

Management Response: Management agrees with the recommendations.

Management Action Plan
Audit Recommendations Proposed Management Actions Responsible Official(s) Implementation Date

Recommendation 1:
The Vice President of Operations, in collaboration with the Vice President of Policy and Programs Branch, should review the approach and the application of AMPs, specific to its graduated enforcement, to ensure that penalties are increased appropriately for repeat violators, and that graduated enforcement measures are taken when warranted.

The Operations Policy and Systems Directorate in collaboration with the Program, Regulatory and Trade Policy Directorate will conduct a review of the approach and the application of AMPs specific to its graduated enforcement in order to identify gaps in either policy or operational guidance. The Operations Branch will use the findings of this review as the basis to:

  1. Develop and implement operational guidance to ensure that applicable gravity values are reflected in penalty amount calculations; and,
  2. Develop and implement operational guidance to ensure that graduated enforcement measures are taken when warranted.

The Policy and Programs Branch will ensure that it will address any key gaps in policy or program design specifically identified during the course of the review or through the development of operational guidance as being essential to support the development of items A and B.

Executive Director, Operations Policy and Systems, Operations Branch

October
2015

Recommendation 2:
The Vice President of the Policy and Programs Branch, in collaboration with the Vice President of the Operations Branch should develop and implement a more fulsome performance management system for AMPs within its enforcement strategy in anticipation of AMPs to the Food Program.

The Program Performance and Emergency Management Directorate, in collaboration with the Operations Policy and Systems Directorate and the Innovation, Architecture and Digital Solution Directorate will develop a performance measurement strategy in order to collect, analyze, and report on the efficacy of the use of AMPs as an administrative measure within the CFIAs graduated enforcement regime. Data from this strategy will be used to inform program design and program renewal. The performance measurement strategy for the AMPs programs will also be integrated into the overall System Performance Measurement Strategy so as to contribute to the continuous improvement of the entire Program.

Lead - Executive Director, Program Performance and Emergency Management, Policy and Programs Branch

Support/Contributor - Executive Director, Operations Policy and Systems, Operations Branch

Support/Contributor - Executive Director, Innovation, Architecture and Digital Solution Directorate, Information Management and Information Technology Branch

October
2015

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