May 7, 2004
Mr. Fraser Reilly-King
153 Chapel Street, Suite 104
Ottawa ON KIN 1H5
Re: Compliance program file number 2236-4-1-2003
Dear Mr. Reilly-King:
Further to my letter of April 16, 2004, I would like to provide you with a report on the status of your complaint.
Much work was undertaken as a result of your complaint and I thank you for your patience. My regular correspondence served as a means to provide you with regular updates on the progress of your complaint. Your letter was detailed and the allegations of non-compliance were examined carefully.
With this letter, I would like to provide you with as much information as possible in the hopes of demonstrating that the concerns you raised have been noted and addressed by EDC.
To recap, by way of letter dated July 28, 2003, you filed a complaint under EDC's compliance program. The letter outlined several allegations that EDC did not comply with its internal policy documents as related to the Cernavoda 2 nuclear power plant transaction.
In particular, you alleged that EDC did not comply with its Code of Business Ethics, Disclosure Policy, and Environmental Review Directive. You articulated the relevant sections of these policies and set out your concerns.
Pursuant to EDC's compliance program, after a detailed investigation, in October of 2003, I recommended to EDC Executive Management (Management) that a compliance audit be conducted into the allegations made in your letter regarding EDC's application of the three policies you cited, namely, the Code of Business Ethics, Disclosure Policy, and Environmental Review Directive to the Cernavoda 2 nuclear power plant transaction. This recommendation was accepted by Management.
Management requested that EDC's Internal Audit and Evaluation (IAE) team conduct the compliance audit. Because of the nature of the allegations of non-compliance, the work was divided into two parts.
The first part consisted of a compliance audit into the application of the Code of Business Ethics and Disclosure Policy to the transaction. This part has been completed and is the main subject of this reporting letter. IAE's Internal Audit Report is enclosed.
The second part is a compliance audit into the application of the Environmental Review Directive to the transaction. The work for this audit was conducted separately and will be dealt with in another report at a later date.
The standards used by EDC's internal audit team were those prescribed by the Institute of Internal Auditors (IIA). These standards are those used by professionals in the field of auditing and outline guidelines and procedures for the conducting of such audits. In pursuit of this compliance audit, EDC's internal auditors had full and unimpeded access to all relevant sources of information.
For this part of the compliance audit, IAE identified six main allegations of non-compliance relating to the Code of Business Ethics and Disclosure Policy. These six allegations were linked to key sections of the policies.
The extent of the compliance audit was established pursuant to appropriate internal audit standards, including the definition of criteria with which to measure compliance and the development of the investigative questions used to explore the allegations.
These criteria were relied upon when interviewing key EDC personnel involved in the transaction and provided structure to the file reviews that were conducted.
After conducting the internal compliance audit, the IAE auditors concluded that EDC complied with all relevant sections of the Code of Business Ethics and the Disclosure Policy as pertaining to the Cernavoda 2 nuclear power plant transaction.
Compliance Program Lessons Learned
As with any new program, lessons as to how the process works are learned. As far as program effectiveness is concerned, I have learned that although the process chart for the compliance program seems to cover every step, the inclusion of a couple of alternative steps may clarify the process. Lessons such as this will aide in my pursuit of the most effective and appropriate system for EDC.
EDC does value constructive input from the Halifax Initiative and takes every effort to review such feedback as thoroughly as possible.
Alison C. Lawford LL.B., L.L.M.