Audit of the Financial Management Controls and Practices of the Canadian Army

August 2018

1259-3-0017 (ADM(RS))

Reviewed by ADM(RS) in accordance with the Access to Information Act. Information UNCLASSIFIED.

Assistant Deputy Minister (Finance)
Assistant Deputy Minister (Review Services)
Canadian Army
Canadian Armed Forces
Corporate Departmental Accounting Office
Chief Financial Officer
Department of National Defence
Delegation of Authority
Defence Resource Management Information System
Expenditure Management Review
Financial Administration Act
Financial Administration Manual
Fiscal Year
Office of Primary Interest
Post Payment Verification
Regional Departmental Accounting Office
Staff Inspection Visit/Staff Assistance Visit

Overall Assessment

Financial management controls and practices are effective in some areas at ensuring the integrity of financial management and supporting the resource management process of the CA. Training, monitoring and guidance should, however, be improved to better support this process.

Figure 1
Figure 1. CA Financial Management Organizational Structure.Footnote 1   This figure illustrates the financial management structure of the CA.
Figure 1 Details – CA Financial Management Organizational Structure

2.1.1 FAA and Departmental Policy Compliance

The FAA is the cornerstone of the legal framework for financial management within the federal government and confers financial authorities on Ministers and Deputy Heads. As it is not practical for these individuals to carry out all of these responsibilities, they delegate their authority through the DOA process to positions within the Department. Authority limits are conferred on positions within the Department through the Delegation of Authorities for Financial Administration Matrix. DOA forms are then used to identify the specific individuals occupying those positions, confirm that required training has been completed, and allow individuals to exercise the authorities associated with their positions. By 2017, DOA forms were centrally stored in the DRMIS, though the system does not include automated controls to restrict authorities based on the forms. The DOA process helps to ensure that financial controls are put in place to regulate the expenditure of public funds. Sections 32, 33 and 34 of the FAA describe the financial authorities for the expenditure process. Table 1 describes the key controls in expenditure management and the audit tests performed.

During this audit, a sample of transactions was reviewed to determine if internal controls were operating as intended. For transactions reviewed, internal controls were operating effectively in many areas, including Section 34, Section 33, acquisition cards, revenues, payables at year-end, financial coding and segregation of duties. Areas requiring improvement included Section 32, delegation of financial authorities, contracting and supporting documentation.

Table 1. Expenditure Management Process. This figure describes the controls in the expenditure management process, and the audit tests performed for each control.
Control Responsibilities Tests Performed
Section 32 – Expenditure Initiation and Control of Commitments Ensure expense is legitimate, represents most efficient and economical means and provides best value.
Ensure budget has sufficient funds available and set up a commitment in DRMIS.
Commitment is established.
Documentation indicating Section 32 exists.
Certified by person with delegated authority.
Expense is approved prior to the event.
Contracting Authority to enter into a contract. Valid contract provided.
Contract or call-up signed by person with delegated authority.
Contract was in place before the provision of goods or services.
Terms and conditions of the contract or call-up have been met.
Minimum number of quotes have been obtained.
Section 34 Verification of accounts and preparation of requisitions for payment or settlement.
Certification of an account pursuant to FAA Section 34.
Invoice total is calculated correctly.
Vendor information is accurate and complete.
Documentation exists indicating Section 34 approval.
Certified by person with delegated authority.
Section 33 Certification of requisitions for payment or settlement pursuant to FAA Section 33. Payment on due date.
Documentation exists indicating Section 33 approval.
Certified by person with delegated authority.
Payment of correct amount to the correct vendor and is within contract limits.
Table 1 Details – Expenditure Management Process

ADM(RS) Recommendation

Recommendations related to improving training, guidance and monitoring as described in section 2.2 and 2.3 of this report are expected to address identified weaknesses in internal controls.


ADM(RS) Recommendation

Good Practices

The Army Comptroller uses a reporting schedule that outlines the reporting mechanisms for effective decision making, to which the Divisions must adhere. This schedule helps to manage the process and ensure timely and complete reporting from the multiple organizations involved in the financial management process.

ADM(RS) Recommendation

ADM(RS) Recommendation (Moderate Significance)

ADM(RS) Recommendation (Moderate Significance)

Table 2. Internal control test and sample size. This table lists the applicable sample size for each internal control area tested.
Internal Control Testing Sample Size
Proof of Section 32 authorization 119
Expense incurred after Section 32 authorization, including appropriate DOA 119
Proof of Section 34 authorization including appropriate DOA 119
Proof of Section 33 authorization, including appropriate DOA 75
Appropriate segregation of duties 131
Compliance with acquisition card requirements 40
Compliance with contracting requirements, including appropriate DOA 102
Compliance with revenue and payables at year-end requirements 12
CDAO PPV transactions 30
Appropriate supporting documentation 132
Table 2 Details – Internal Control Test and Sample Size

Back to Table of Contents

Page details

Date modified: