Core Control Audit - January 2013

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.

Core control audits are important as they provide deputy heads with assurance regarding the effectiveness of core controls over financial management in their respective organization. By doing so, core control audits inform deputy heads of their organization's level of compliance with key requirements contained in selected financial legislation, policies and directives.

About the Transportation Appeal Tribunal of Canada

The Transportation Appeal Tribunal of Canada (TATC) principal mandate, as a multi-transportation modal administrative law review body, is to hold Review and Appeal Hearings at the request of interested parties with respect to certain administrative actions taken under various federal transportation Acts. Its objective is to provide the transportation community with the opportunity to have enforcement and licensing decisions of the Minister of Transport reviewed by an independent quasi-judicial body. In 2011–12, TATC had planned spending of approximately $1.5 million and planned human resources of 12 FTEs (full-time equivalents) and 25 part-time Governor in Council appointments.

Core Control Audit Objective and Scope

The objective of this audit was to ensure that core controls over financial management[1] within TATC result in compliance with key requirements contained in selected financial legislation, policies and directives.

The scope of this audit included financial transactions, records and processes conducted by TATC. Transactions were selected from fiscal year 2011–12. The audit examined a sample of transactions for each of the selected policies and directives. The Appendix provides a complete list of policies and directives included in the scope of the audit and the overall compliance in areas tested.

For the 2011–12 financial transactions selected, TATC supporting documentation to justify expenditure commitments was not accessible to auditors. Due to this scope limitation, a small sample of additional financial transactions was selected from fiscal year 2012–13 to determine whether commitments were recorded at the value expected. Finally, Section 33 (payments and settlements) of the Financial Administration Act was not reviewed because it is administered by Transport Canada through a Memorandum of Understanding.

Conformance With Professional Standards

This audit was conducted in accordance with the Internal Auditing Standardsfor the Government of Canada. A practice inspection has not been conducted.

Anthea English, CA

Assistant Comptroller General
Internal Audit Sector, Office of the Comptroller General

Audit Findings and Conclusion

Core controls over financial management regarding the transactions tested within the TATC resulted in compliance[2] with the key requirements contained in 1 of 11 policies and directives and in partial compliance in 1 of 11 policies, directivesand corresponding legislation tested. The TATC was not in compliance with 9 policies and directives tested.

It was noted that delegation instruments were appropriate, current and approved in accordance with the directive and that employees received appropriate training. Weaknesses were identified in the administration of the acquisition card program. Documentation on file was insufficient to support contracting decisions, and mandatory standing offers provided by Public Works and Government Services Canada were not always considered. For government travel and hospitality, supporting justification for expenditures was not always documented, and applicable limits for reimbursement were not always respected or justified. Furthermore, the requirements to have travel, hospitality and contracting expenditures proactively disclosed on the entity's website were not always respected.

For leave, some instances were found where approval was given by someone who did not have the delegated authority and after the leave was taken. In the area of pay administration, terms and conditions were not always documented. Weaknesses were identified in expenditure initiation, where pre-approval was not provided, mostly in the areas of acquisition cards, travel and hospitality, contracting, pay administration, and leave. For account verification, proof of execution was not always performed on a timely basis and not always properly supported.

Recommendations

The Chair and Chief Executing Officer of TATC should:

  1. Ensure that signed acknowledgement of acquisition card responsibilities and signed acquisition card application forms are on file for all acquisition cards.
  2. Ensure that acquisition cards and accountable advances are used solely for authorized business-related purchases of goods or services.
  3. Develop business processes to ensure that procurement activities are performed in compliance with the Treasury Board Contracting Policy.
  4. Develop business processes to ensure that travel expenses are performed in accordance with related directives.
  5. Ensure that designated senior level Government of Canada travel and hospitality expenses are proactively disclosed.
  6. Ensure proper documentation of justification when average cost limits identified in the Directive on the Management of Expenditures on Travel, Hospitality and Conferences are exceeded.
  7. Ensure that leave is approved by someone with the appropriate delegated authority prior to the leave being taken or immediately after leave is submitted in situations where the leave could not be planned.
  8. Ensure that terms and conditions for casual employees are administered correctly.
  9. Ensure that a proper departure report and checklist process to sign off are completed and documented on file.
  10. Ensure that expenditure initiation is properly documented and performed by an individual with the delegated authority before expenses are incurred.
  11. Ensure that account verification is supported by complete documentation and that payment and settlement are carried out on a timely basis.

Management Response

Management has accepted the audit findings and has developed an action plan to address the recommendations. It is expected that the management action plan will be fully implemented by December 2013.

The results of the audit and the Management Action Plan have been discussed with the Chair and Chief Executing Officer of TATC 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.

Appendix: Policies and Directives Tested

Policies and Directives TestedCompliance
Directive on Delegation of Financial Authorities for Disbursements Met
Directive on Acquisition Cards Not Met
Directive on Accountable Advances Partially Met
Contracting Policy Not Met
National Joint Council Travel Directive and the Directive on Travel Cards and Travellers Cheques Not Met
Hospitality Policy and Directive on the Management of Expenditures on Travel, Hospitality and Conferences Not Met
Directive on Leave and Special Working Arrangements Not Met
Casual Employees Not Met
Performance Pay Administration Policy for Certain Non-Management Category Senior Excluded Levels Not Met
Directive on Expenditure Initiation and Commitment Control[3] Not Met
Directive on Account Verification[4] Not Met

Legend of Compliance Thresholds[5]

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.

[1]. See the Appendix for a complete list of policies and directives included in the scope of this audit.

[2]. See the Appendix for TATC's overall compliance in the areas tested.

[3]. Includes the Financial Administration Act, Section 32.

[4]. Includes the Financial Administration Act, Section 34.

[5]. Compliance thresholds for the transactions tested.