8. Observations and Recommendations

Overall observation

During our audit, we found that most key financial controls over financial reporting for the selected expenditures were adequate. However, opportunities for improvement were identified during the audit. The OCL's financial processes are integrated with Government of Canada common financial systems; financial controls and directives are aligned with TB policies and directives.

Due to the small size of the OCL, there are challenges in ensuring segregation of duties. However, proper oversight and monitoring can ensure that a sound control environment exists. The recommendations in this report consider the OCL's size and available resources. The objective is to strengthen the effectiveness of the controls while ensuring that the proposed solutions are feasible.

8.1 Travel Expenditures

Audit Objective — Travel expenditures and Management of Individual Travel Cards

To confirm whether due diligence is being exercised in the management of travel expenditures and travel cards and to provide assurance to senior management that financial processes and controls in place at the OCL for the period of audit are effective and mitigate the risk of non-compliance to TB and OCL policies and practices.

Conclusion

Controls over financial reporting of travel expenditures, and the management of individual travel cards are effective and adequate to reduce the risk of non-compliance with Treasury Board Policies and OCL's Policies. However, we are recommending that improvements be implemented in some areas.

Observations

Delegation of financial authority — International travel

Currently, the OCL's Delegation of Signing Authorities allows only the Commissioner and the Chief Financial Officer authority to approve international travel expenses. We found one case where, in the absence of the Chief Financial Officer, the Deputy Commissioner approved international travel expenses incurred by the Commissioner. Given that the Commissioner is often required to travel internationally and the Chief Financial Officer may be absent at times, this situation could present itself from time to time.

Evidence of verification of travel claims

The processing and payment of travel expenses is done by the Canadian Human Rights Commission (CHRC), an external service provider. Selected CHRC Financial Officers verify travel claims, and have been delegated the authority to exercise FAA S. 33 authority. For the period under audit, travel invoices or claims were not signed by the CHRC financial officer as evidence that verification was undertaken prior to FAA S. 33 authority.

Personal time while on Departmental travel status

When employees complete a travel claim, they are required to include details about the number of days travelled, the travel dates, the kilometres travelled, etc., along with supporting documentation. Business trips are sometimes extended to include personal travel time. Total travel time, including personal travel time is pre-approved, but personal travel days are not clearly indicated in the Travel Authority and Advance (TAA) Form nor indicated in the expense claim. As part of our audit, we found that the lack of details provided with respect to personal travel days can be confusing when reviewing the claims and determining the eligible amount of per diems and other related travel costs by Financial Officers.

Cost for the use of personal vehicle

We found one instance where a travel claim included a route map showing a total distance travelled of 240 kilometres to Cornwall, Ontario for an annual meeting held in 2010, but the mileage claimed and paid was for 505 kilometres. There were no additional details on file to support the 505 kilometres claimed. A claim of 240 kilometres was made for the same annual meeting held in the same location in 2011. It appears that the 2010 travel claims was approved while overstated, indicating a weakness in the control.

OCL Policy on travel cards

Appendix A of the OCL's Policy on Travel Cards states that authorized charges for expenses normally charged to Departmental or Individual travel cards include air, rail, taxi, or other commercial travel. However, Section 3.3 of the TB Directive on Travel Cards and Travellers Cheques states that the individual designated travel card is the recommended method of payment to be used by employees and designated personnel to incur authorized government travel expenses, including accommodations, car rental, other travel expenses while on travel status (e.g., meals, taxis, local transportation costs, or purchase of travellers cheques), public and common carrier transportation costs when it is impossible to use the government-approved supplier and pre-approved hospitality-related expenses while on travel status. The OCL's Policy on Travel Cards does not specifically stipulate that the use of Public Works and Government Services Canada's Shared Travel Service (STS) is mandatory and that Individual travel card should only be used to book common carrier travel related to air or rail when it is impossible to use the government-approved supplier.

Monitoring of the use of Individual travel cards

The OCL's Policy on Travel Cards indicates that the OCL is liable for all authorized charges to Individual travel cards but that individuals who have been issued a travel card are responsible for ensuring that the travel cards are used only to pay for authorized government travel expenses within the limitations established in the policy and that all authorized charges on card statements are settled promptly. The Policy also stipulates that the OCL is responsible for monitoring and ensuring compliance with this Policy and that the Chief Financial Officer, who acts as the Departmental Travel Card Coordinator, is responsible for ensuring that the use and settlement of travel cards are monitored. Currently, there is no one assigned to the monitoring of travel cards' usage and settlement.

Individual travel cards

The OCL's Policy on Travel Cards stipulates that the individuals who have been issued a travel card are responsible for providing a written acknowledgement of responsibilities and obligations before receiving a travel card from the Departmental Travel Card Coordinator. Currently, the employees must sign an acknowledgement of receipt upon receiving a travel card. However, the form does not include an acknowledgement of responsibilities and obligations with respect to the use of the travel card.

Recommendations

  1. It is recommended that the Deputy Commissioner be provided with the financial authority to approve international travel.
  2. It is recommended that OCL discuss the appropriateness of control processes related to account verification procedures with CHRC, in order to ensure that the Financial Officers of CHRC providing accounting operation services sign and date travel claims as evidence that the claims were reviewed for completeness and accuracy prior to FAA S. 33 approval.
  3. For purposes of clarity and transparency, it is recommended that, when employees extend a business trip for personal reasons, personal travel days included within the total travel period be clearly indicated on the Travel Authority and Advance (TAA) form and on the travel expense claim.
  4. It is recommended that, in cases where travellers are using their personal vehicle, OCL develop a tool to enable travelers to report kilometres driven on a daily basis, in support of their travel expense claim.
  5. It is recommended that the OCL amend its Policy on Travel Cards to reflect the TB Directive on Travel Cards and Travellers Cheques, which specifically states that Individual travel cards can only be used to incur public and common carrier transportation costs when it is impossible to use Public Works and Government Services Canada's Shared Travel Service (STS) government-approved supplier while on travel status.
  6. It is recommended that the Departmental travel card coordinator develop and implement a mechanism to monitor the use and settlement of Individual travel cards. The process should provide for regular reviews of AMEX statements on-line to ensure that individual travel card account balances are being paid in a timely manner and used in accordance with the OCL's Policy on Travel Cards and the TB Directive on Travel Cards and Travellers Cheques.
  7. It is recommended that the acknowledgement of receipt form signed by the employees upon receipt of an individual travel card be amended to include an acknowledgement of responsibilities and obligations with respect to the use of the travel card.

Management Response

The Management Response and Action Plan are outlined in Section 2 of this report.

8.2 Hospitality Expenditures

Audit Objective — Hospitality expenditures

To confirm whether due diligence is being exercised in the management of hospitality expenditures and to provide assurance to senior management that financial processes and controls in place at the OCL for the period of audit are effective and mitigate the risk of non-compliance to TB and to OCL policies and practices.

Conclusion

Controls over financial reporting of hospitality expenditures are effective and adequate to reduce the risk of non-compliance with Treasury Board Policies and OCL's Policies. However, it was determined that improvements are required in two areas.

Observations

Evidence of verification of Hospitality transactions

The processing and payment of hospitality expenses is done by the CHRC, an external service provider. Selected CHRC Financial Officers verify hospitality expenditures, and have been delegated the authority to exercise FAA S. 33 authority. As indicated previously, for the period under audit, hospitality invoices or claims were not signed by the financial officer as evidence that verification was undertaken prior to FAA S. 33 authority.

Documentation

There were two instances where no evidence existed to support that the hospitality expenses were paid by the employee. The exceptions included a restaurant receipt without proof of payment and an e-mail certification by the employee stating that he/she forgot to obtain the receipt. In both cases, no proof of payment (i.e. credit card receipt or statement) was included with the expense claim.

Recommendations

  1. It is recommended that OCL discuss the appropriateness of control processes related to account verification procedures with CHRC, in order to ensure that the Financial Officers of CHRC providing accounting operation services sign and date hospitality claims as evidence that the claims were reviewed for completeness and accuracy prior to FAA S. 33 approval. (Similar to recommendation # 2)
  2. It is recommended that all hospitality claims be supported with original invoices and payment receipts that indicate method of payment as proof of payment and as substantiation that the method of payment was appropriate. Purchase invoices paid in cash should be supported by a receipt indicating "paid cash" where possible.

Management Response

The Management Response and Action Plan are outlined in Section 2 of this report.

8.3 Management of Cellular and BlackBerry Expenditures

Audit Objective — Management of Cellular and Blackberry Expenditures

To confirm whether due diligence is being exercised in the management of Cellular and Blackberry expenditures and to provide assurance to senior management that financial processes and controls in place at the OCL for the period of audit are effective and mitigate the risk of non-compliance to TB and to OCL policies and practices.

Conclusion

Controls over financial reporting of cellular and Blackberry expenditures, and the use of cellular and Blackberry devices are effective and adequate to reduce the risk of non-compliance with Treasury Board Policies and the OCL's Policy on the Use of Cellular and Other Mobile Wireless Devices. However, it was determined that one improvement is required with respect to the review of expenses with respect to FAA S. 33 authority.

Observation

The processing and payment of Cellular and Blackberry expenses is done by the CHRC, an external service provider. Selected CHRC Financial Officers verify expense claims, and have been delegated the authority to exercise FAA S. 33 authority. For the period under audit, not all cellular and Blackberry invoices were signed by the financial officer as evidence that verification was undertaken prior to FAA S. 33 authority.

Recommendation

  1. It is recommended that OCL discuss the appropriateness of control processes related to account verification procedures with CHRC, in order to ensure that the Financial Officers of CHRC providing accounting operation services sign and date all cellular and Blackberry invoices as evidence that they were reviewed for completeness and accuracy prior to FAA S. 33 approval. (Similar to recommendation # 2 and # 8).

Management Response

The Management Response and Action Plan are outlined in Section 2 of this report.

8.4 Management of Material and Safeguarding of Assets

Audit Objectives — Management of Material and Safeguarding of Assets

To confirm whether due diligence is being exercised in the management of material and safeguarding of assets, and to provide assurance to senior management that financial processes and controls in place at the OCL for the period of audit are effective and mitigate the risk of non-compliance to TB and OCL policies and directives.

Conclusion

Based on interviews with management, review of process documentation, and testing of inventory listings, we determined that the OCL controls are effective and adequate to reduce the risk of non-compliance with Treasury Board Policies with regards to the management and safeguarding of assets. However, we found one element in the control framework that could be improved.

Observation

As part of our audit, we found that there is no documented internal directive outlining the OCL's processes and procedures on the management and safeguarding of assets. Such a directive would help preserve the corporate memory with respect to the management of assets.

Recommendation

  1. It is recommended that the OCL document the processes and procedures related to the management of assets, including a detailed description of the related responsibilities.

Management Response

The Management Response and Action Plan are outlined in Section 2 of this report.

8.5 Executive Compensation

Audit objective — Executive Compensation

To confirm whether due diligence is being exercised in the management of executive compensation and to provide assurance to senior management that financial processes and controls in place at the OCL for the period of audit are effective and mitigate the risk of non-compliance to TB and to OCL policies and practices.

Conclusion

Controls over financial reporting of executive compensation are effective and adequate to reduce the risk of non-compliance with Treasury Board Policies. However, we found one file documentation issue.

Observation

As part of our review of the OCL's Senior Counsel employment file, we noted that the letter of offer dated December 2008 contained the provision that: "due to the nature of its duties, the position (LA-2B) had been proposed for exclusion from collective bargaining". The file did not contain any information regarding the outcome of the request for exclusion. Positions excluded from the Agreement between the Treasury Board and the Association of Justice Counsel for the Law Group are subject to different conditions of employment. Currently the Legal Counsel position is included, and is compensated under the terms of the Agreement between the Treasury Board and the Association of Justice Counsel. There is a risk that the exclusion status of OCL's Senior Counsel position be contested in the future and, consequently, that OCL be at risk.

Recommendation

  1. It is recommended that written confirmation be obtained from the appropriate authority regarding the exclusion from collective bargaining of the Senior Counsel position at OCL.

Management Response

The Management Response and Action Plan are outlined in Section 2 of this report.

8.6 Other Observations and Recommendations

Observation

OCL Specimen Signature Cards at CHRC

Selected Financial Officers of CHRC, the external service provider, have been delegated financial authority by OCL for the performance of payment authority under FAA S. 33. However, signature cards for these Financial Officers did not exist at the time of our audit.

Recommendation

  1. It is recommended that OCL discuss with CHRC the appropriateness of control processes related to signature cards for the Financial Officer exercising FAA S. 33 on behalf of OCL.

Management Response

The Management Response and Action Plan are outlined in Section 2 of this report.