Core Control Audit of the Royal Canadian Mounted Police External Review Committee
July 2012
Office of the Comptroller General
Objective and scope
The objective of this audit was to ensure that core controls over financial managementFootnote 1 within the Royal Canadian Mounted Police External Review Committee (ERC) result in compliance with key requirements contained in the corresponding legislation, policies, and directives. For the specific audit criteria please refer to http://www.tbs-sct.gc.ca/report/orp/2011/ccac-cvcb-eng.asp.
The scope of this audit included all transactions, records, and processes conducted by the ERC from April 1, 2011 to March 31, 2012. Note that payment and settlement of all transactions were not tested through this audit as this process is administered for the ERC by Public Safety Canada through a Memorandum of Understanding.
Transactions were selected from fiscal year 2011-2012. The audit examined a sample of transactions for each of the policies and directives listed in Appendix A of this report.
Conformance with Professional Standards
This audit was conducted in accordance with the Government of Canada Standards for Internal Audit that includes the Institute of Internal Auditors’ International Standards for the Professional Practice of Internal AuditingFootnote 2.
Anthea English, CA
Assistant Comptroller General
Internal Audit Sector, Office of the Comptroller General
Why this is important
Canadians expect the federal government to be well managed and to be accountable for the prudent stewardship of public funds, the safeguarding of public assets, and the effective, efficient and economical use of public resources. They also expect reliable and transparent reporting on how the government spends public funds to achieve results for Canadians.
The Financial Administration Act designates deputy heads as accounting officers for their department or agency. As accounting officers, deputy heads are accountable for ensuring that resources are organized to deliver departmental objectives in compliance with government policy and procedures; ensuring that there are effective systems of internal control; signing departmental accounts; and performing other specific duties assigned by law or regulation to the administration of their department or agency.
Audit Findings and Conclusion
Core controls over financial management regarding the transactions tested within the Royal Canadian Mounted Police External Review Committee (ERC) resulted in complianceFootnote 3 with the key requirements contained in three of twelve policies and directives and in partial compliance in three policies, directives and corresponding legislation tested. The ERC was not in compliance with six polices and directives tested.
It was noted that some expenditure initiation and fund commitments were not pre-approved, mostly in the areas of acquisition cards and hospitality. Secondly, financial authorities were delegated to one individual who had not received the mandatory training to exERCise their delegated authorities. Thirdly, documentation on file was insufficient to support most contracting decisions taken. Lastly, performance of account verification was not always done by someone with the delegated authority to do so, or segregated from the beneficiary of the transaction, particularly in the area of accountable advances.
Recommendations
The ERC should ensure that expenditure initiation is documented prior to expenses being incurred; that mandatory training is provided to all individuals that have delegated financial authorities; that contracting decisions are properly documented; that proper segregation of duties is put in place in the area of account verification and that it is consistently done by someone with the delegated authority to do so.
Management Action Plans
Management has accepted the audit findings and has developed an action plan to address the recommendations. The Management Action Plan is available on the ERC website.
The results of the audit and the Management Action Plan have been discussed with the Chairperson of the ERC and the Small Departments Audit Committee. The Office of the Comptroller General will follow-up on the Management Action Plan until all findings are resolved.
| Policies and Directives Tested | Compliance |
|---|---|
| Directive on Delegation of Financial Authorities for Disbursements | Not Met |
| Directive on Acquisition Cards | Partially Met |
| Directive on Accountable Advances | Not Met |
| Contracting Policy | Not Met |
| National Joint Council Travel Directive and the Directive on Travel Cards and Travellers Cheques | Met |
| Hospitality Policy/Directive on the Management of Expenditures on Travel, Hospitality and Conferences | Not Met |
| Directive on Leave and Special Working Arrangements | Partially Met |
| Casual Employees | Met |
| Performance Pay AdministrationFootnote 4 | Met |
| Directive on Financial Management of Pay Administration | Partially Met |
| Directive on Expenditure Initiation and Commitment ControlFootnote 5 | Not Met |
| Directive on Account VerificationFootnote 6 | Not Met |
| Legend | Legend of Compliance ThresholdsFootnote 7 |
|---|---|
| Met | Greater than or equal to 98% compliance. |
| Partially met | Greater than or equal to 80% and less than 98% compliance. |
| Not met | Less than 80% compliance. |
Royal Canadian Mounted Police External Review Committee (ERC)’s Opinion of the Audit Report:
The ERC has reviewed the findings and recommendations and, as far as the scope of this audit is concerned, these accurately reflect the state of control over financial management, contracting, travel & hospitality and human resources.
Catherine Ebbs
Chair
RCMP External Review Committee
Date: July 13, 2012
Management Action Plan
| Recommendations | Priority | Response and Planned Actions | Responsibilities (position title responsible for the action) |
Timelines (actual planned dates of implementation) |
|---|---|---|---|---|
| 1. The ERC should ensure that all employees receive mandatory training in accordance with requirements pertaining to financial management, contracting, and human resources, and validate their knowledge every five years. | High | Management agrees with the recommendation. ERC will ensure the registration of employees, where required, for training in financial management, contracting and human resources. Database to track recurring validation requirements will be developed . Employee Learning Plans will reflect these training and validation requirements. |
CFO | Training sessions in September or October 2012. Internal tracking procedure developed by October 2012. |
| 2. The ERC should ensure that an independent periodic verification of the accountable advances is performed when the custodian is the same individual for an extended period of time. | Low | Management agrees with the recommendation. Planned action is to put in place internal procedure to ensure independent periodic verification of accountable advance, namely a physical count performed by a person other that the fund custodian, along with a formal reconciliation. There will be a minimum of two random verifications conducted annually. |
CFO | Procedure to be developed and implemented by October 2012. |
| 3. The ERC should ensure that: - A statement of work is developed and documented prior to the contract award; - Non-competitive contract files contain justification for sole source in accordance with section 6 of government contract regulations; - Supporting documentation for best value analysis is kept on file; - Appropriate procurement vehicles are chosen and used in compliance with their terms and conditions; - Contract evaluations are signed by a minimum of two clearly identified evaluators; and - The contracts are signed by someone with the delegated authority for the amount of the contract. |
High | Management agrees with the recommendation. See also planned action for recommendation no. 1. ERC will ensure the registration of employees, where required, for training in contracting. The ERC will develop a contracting checklist that will include the following elements: - Contracting limits; - Requirements for every type of contracts (statement of work, the justification, and best value analysis); - Contracting selection process (methods available and the mandatory vehicles versus the optional vehicles); and - Documentation of evaluation process conducted by a minimum of two identified evaluators. |
CFO | Checklist to be developed and in place by December 2012. |
| 4. The ERC should ensure that all applicable leave is pre-authorized. | Low | Management agrees with the recommendation. The ERC will ensure the development of an internal policy on the administration of leave to emphasize the requirement that employees seek approval in advance. |
CFO | Internal policy in place by October 2012. |
| 5. The ERC should ensure that expenditure initiation is performed by an individual with the delegated authority to do so. | High | Management agrees with the recommendation. The ERC will ensure that financial management training (including expenditure initiation) identified in response to recommendation no.1 will be delivered to its employees where required. As an internal procedure to ensure proper expenditure initiation, the ERC will develop an expenditure initiation form. |
CFO | Training sessions in September or October 2012. Procedure to be developed and in place by October 2012. |
| 6. The ERC should ensure the performance of account verification is done by someone with the delegated authority to do so that did not directly or indirectly benefit from the expense | High | Management agrees with the recommendation. The ERC will ensure that financial management training (including account verification) identified in response to recommendation no.1 will be delivered to its employees where required. Furthermore, the ERC will develop an internal procedure to ensure that account verification is performed by a delegated authority who is not a beneficiary of the expense. When the person performing the account verification benefited from the expense, the account verification will be performed by two employees with the delegated authority. Where all ERC delegated authorities are beneficiaries of the expense, the ERC Chairperson will perform the account verification. |
CFO | Training sessions in September or October 2012. Procedure to be developed and in place by October 2012. |
Footnotes
- 1
See Appendix A for a complete list of policies and directives included in the scope of this audit.
- 2
The Office of the Comptroller General has not undergone an external assessment to support its conformance with this statement.
- 3
See Appendix A for ERC's overall compliance in the areas tested.
- 4
Includes the Policy on the Management of Executives, the Directive on Terms and Conditions of Employment for Certain Excluded and Unrepresented Employees and the Directive on Executive Compensation.
- 5
Includes Financial Administration Act, Section 32.
- 6
Includes Financial Administration Act, Sections 33 and 34.
- 7
Compliance thresholds for the transactions tested.
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