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Foreign Affairs, Trade and Development Canada

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Audit of the Consulate General Canada (Specific Mission)

October 2010

(PDF Version, 229 kB) *

 

Personal and sensitive information has been edited from this report (shown in the report as "*****") in accordance with the provisions of the Privacy and Access to Information Acts.

Table of Contents

Executive Summary

This report presents the results of the internal audit of the financial management practices in place at the Consulate General of Canada, ***** Mission during the auditors' visit in April 2010.

Introduction

This audit work is not part of the Foreign Affairs and International Trade Canada's (DFAIT) Risk-Based Audit Plan. The request for audit work came from Financial Operations, Domestic and International (SMF) in consultation with the Office of the Inspector General (ZID). Over the past year, Financial Operations, International (SMFF) has provided the Mission with assistance, sending financial advisors ***** in May and June 2009, ***** in July and August 2009 and subsequently the regional manager, *****, in January 2010 to assist the Mission with its backlog of financial management actions. The backlog was the result of significant absences from work by some of the Mission's administration staff.

During the course of their work at the ***** Mission, Financial Operations, International became concerned with some of the management practices by the Mission's senior managers. Principal among the concerns noted were the use of acquisition cards and commercial accounts for personal expenditures and the lack of invoices to justify many hospitality claims.

The concerns described above, the prolonged absences of the ***** and the office's ***** and the upcoming transfer of financial responsibilities to the ***** Regional Service Centre resulted in the request from Financial Operations, Domestic and International for audit assistance.

Audit Objectives

The setting of audit objectives resulted from consultations with representatives of the International Platform Branch (ACM), Corporate Finance & Operations (SCM) and the Geographic Group ***** and resulted in the following:

  • Examine the areas of concern identified by Financial Operations, Domestic and International (SMF) pertaining to the use of acquisition cards and commercial accounts for personal expenditures and the use of travel expense claims to repay those personal expenditures;
  • Examine the reporting relationships between the Branches and the Mission and determine whether and the extent to which the responsible executives were informed of the situation in a timely manner; and,
  • Develop and document the process for future transfers from Missions to Regional Service Centres.

Results in Brief - Key Observations and Recommendations

Use of Acquisition Cards and Commercial Accounts for Personal Use
The audit confirmed that acquisition cards (the Mission has five) and commercial accounts ***** and ***** were used by some of the Mission personnel, including the *****, for personal expenditures. These practices do not comply with the Treasury Board and DFAIT financial policies. An informal accounting system was used by the Mission to record and track the reimbursements of the personal expenditures. The audit also confirmed that travel expense claims were inappropriately used to reimburse these informal accounts.

Recommendation:
It is recommended that the use of acquisition cards and commercial accounts for personal expenditures cease immediately at the Consulate General of Canada, ***** and that all employees at the Mission be informed that this is contrary to Treasury Board and DFAIT policy. It is also recommended that confirmation be obtained that all personal expenditures made in this manner have been reimbursed.

Horizontal Communication
The events leading to the Mission's request for accounting assistance took place over a two-year period. Some groups at headquarters were involved in providing assistance, including the International Platform Branch, Corporate Finance and the Office of the Inspector General. However, during this period, none of the above groups informed the ***** Branch, the group responsible and accountable.

Recommendation:
It is recommended that the Geographic Group and the International Platform Branch examine existing structures, including those within the existing Governance Structure, and propose horizontal communication processes to ensure that appropriate headquarter branches are informed in a timely manner as issues are identified at Missions.

Transfer of Responsibilities to Regional Service Centres
The audit found that the preparation for the transfer in this case was made much more difficult because the ***** and ***** had frequent and prolonged absences from the Mission over the past two years. Most importantly, auditors found that although there were strategic plans related to the Regional Service Centres developed and discussed in the Department, the implementation plan was not ready. Management of the International Platform Branch explained that the Regional Service Centre model has been delayed about six months. An implementation plan is currently being developed; however, the urgency of the ***** Mission moving to the Regional Service Centre model resulted in a transfer before this plan was ready. The lack of guidance for the Head of Mission, implicated staff and the Regional Service Centre was an outcome of the timing for this rapidly executed pilot project. Auditors would expect to find an implementation plan, based upon clearly delineated roles, responsibilities and accountabilities for the Head of Mission and Mission Staff addressing fundamental steps such as: the preparation of financial records; employee positions affected at the Mission; transition activities; training plans; and, the implementation of a standardized service agreement between the Regional Service Centre and the Missions.

Recommendation:
The International Platform Branch should ensure that a comprehensive implementation plan is developed, that all affected missions have been fully informed and that in turn, these Missions have developed their Mission specific plan to implement the changes required by the Branch in a timely manner. This would also serve to confirm with the Branch that Missions are not only informed but prepared to support the Departmental Initiative.

Original signed by:

Yves Vaillancourt, Chief Audit Executive, October 1, 2010

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1.0 Background

The Office of the Inspector General last conducted an inspection of the Canadian Consulate General, ***** in December 2003. The report confirmed that “the Mission has a solid management team… Administration is providing good support to all programs and basic systems and procedures are in place and working well.” However, the report also made the following observations relevant to this audit:

  • The *****'s frequent travel and other absences had limited his involvement in day-to-day operations.
  • Although mention is made of the importance of the role of the *****, there is no indication of the extent to which he is meeting expectations.
  • Various Human Resource issues are noted in the inspection report including:
    • a failed staffing action in Immigration;
    • the management of overtime;
    • a Locally Engaged Staff (LES) committee;
    • the job description of the Driver/Clerk/Messenger position; and,
    • under the Financial Operations section, the redistribution of workload to the Material/Property and to the Administration Assistants to alleviate the Accountant's heavy workload.

The auditors found that the unresolved Human Resource issues, in particular the redistribution of work load, are most likely to have contributed significantly to the conflicts that followed and ultimately, the Mission's subsequent calls for assistance. Indeed, during interviews, auditors were informed that the question of work load re-distribution from the ***** and/or the ***** to the Material/Property and Administration Assistants remained unresolved. According to the information provided, this situation degenerated considerably as per the chronology that follows:

  • Prevention and Conflict Resolution Office (DRC) was approached by Values and Ethics (ZVE) (contact person not confirmed) in late 2007, because of workplace-related conflict;
  • Prevention and Conflict Resolution Office visited Mission in mid-January 2008 after which there were several communications including conflict resolution training at the Mission;
  • Prevention and Conflict Resolution Office indicated having been in communication with the Prevention and Conflict Resolution Office, Mission Client Services (ASM) and the Head of Mission during this period;
  • Two harassment complaints received by Values and Ethics in Sept 2008, same date that the Head of Mission received them;
  • Prevention and Conflict Resolution Office - In January 2009, attempt to mediate conflict failed;
  • Values and Ethics - obtained approval from HOM to start harassment investigation in March 2009;
  • Values and Ethics - final reports from the investigator provided in June 2009;
  • Financial Operations - International (SMFF) - responded to Mission requests for assistance between May and August 2009 and then again in January 2010 and during the audit in April 2010;
  • Mission Client Services informed ***** Policy ***** on March 17, 2010; and,
  • The Embassy of Canada in ***** had several communications with *****'s ***** beginning March 9, 2010, and ongoing into April to assist in resolving several administrative issues.

One of the consequences of the resulting conflicts, harassment complaints and general tension is that beginning in 2009, both the ***** and the ***** health were significantly affected resulting in numerous and sometimes prolonged absences. In fact, at the time of the audit during the week of April 25, 2010, the ***** was absent on sick leave and it was not known when he would be back to work. In addition, the ***** had resigned from her employment at the Mission. These absences created financial administration issues at the Mission, leading to Financial Operations-International (SMFF) providing the office with assistance on several occasions as described in this report.

It was following Financial Operations-International (SMFF)'s visit to ***** in January 2010, where they observed questionable transactions around the use of government acquisition cards and commercial accounts that SMFF sought audit assistance.

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2.0 Observations and Recommendations

2.1 Acquisition Cards and Commercial Accounts for Personal Expenditures

In examining this question, auditors had full access to all office records. This document review was complemented by interviews with Mission staff including the Head of Mission.

Based on a careful examination of the records, the auditors concluded that considerable attention had been given to keeping an accurate and complete accounting of all personal expenditures made using acquisition cards (the Mission has five) and the commercial accounts. Two of these commercial accounts were set up; one with an ***** store located near the official residence and, another with *****.

The system put in place at the Mission was that approved travel expense claims would be used to reimburse these personal expenditures. Furthermore, auditors found that this practice had been implemented prior to the arrival of the current Head of Mission, who, after arrival, continued using this system. Finally, auditors noted that the ***** was not the only user, but by far, the principal user of this system.

In researching Treasury Board Policy on this matter, auditors referenced the following sections from the Directive on the use of acquisition cards:

"Acquisition cards are charge cards that provide a convenient and practical method of procuring and paying for goods and services while maintaining financial control. They simplify the process of procuring and paying for goods and services thereby generating savings in procurement and expenditure processing. Procurements using an acquisition card are subject to the requirements of contracting policies and various Acts, Regulations …"
and
"Cards are to be used solely for authorized government business-related purchases of goods, services and pre-approved hospitality expenditures"

Auditors observed that the use of acquisition cards and commercial accounts at the Mission, as well as the method of reimbursement with travel claims raised the following issues:

  • Both Treasury Board and departmental policy prohibit the use of government acquisition cards for personal use.
  • The use of travel claims to “offset” or reimburse personal expenditures compounded the problem. The ***** as the principal user is best placed to control his amount of travel. Using those claims to repay purchases could well be perceived as influencing the amount of travel on government business he decides to take.
  • As mentioned in the background section of this report, the Mission had already been at grips with a work distribution issue for many years. This system put in place compounded that problem by increasing the Mission Administration Officer's and Senior Accountant's work loads.
  • The recording of assets by the Mission was made more difficult by adding the steps required to distinguish between personal and departmental property. In fact auditors found that the Mission's inventory was not maintained or current. Therefore it was not possible to verify or confirm that the contents of staff quarters or the official residence were personal property or government assets.

On this matter, auditors confirmed that invoices were being reviewed by administrative staff to identify personal expenditures and that all amounts due had been repaid.

The audit found many examples where the ***** exercised either Section 33 or Section 34 authority when the payment was for him personally. Section 4.4 of DFAIT's Account Verification policy 2004 expresses clearly that "No person shall exercise spending (Section 34 of the FAA) or payment (Section 33 of the FAA) authority for a payment which that person may personally benefit."

Recommendations:

1. It is recommended that the Consulate General of Canada, ***** be the subject of a full inspection by the Office of the Inspector General this fiscal year.

2. It is recommended that the use of acquisition cards and commercial accounts for personal expenditures cease immediately at the Consulate General of Canada, *****. At the time of the audit, the ***** assured auditors that the use of acquisition cards and commercial accounts for personal expenditures would cease immediately. Confirmation should be obtained from Mission Management that:

  1. This practice has ceased; and
  2. All personal expenditures made in this manner have been reimbursed.

3. It is recommended that the Consulate General of Canada, *****'s inventory of assets be updated, taking care to ensure that all purchases for government business be appropriately recorded.

4. It is recommended that it be clearly communicated to administrative personnel and management in *****, particularly the Head of Mission, that authority under section 33 of the Financial Administration Act (FAA) (authority to approve for payment) should be exercised by a financial officer except in exceptional circumstances. Further, management and administrative personnel and the Head of Mission in ***** should also be reminded that no one, including Heads of Mission should authorize their own claims for payment under any circumstances. The purpose of this recommendation is to ensure unacceptable practices in the past are identified, communicated as such, and not perpetuated.

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2.2 Reporting Relationships between Headquarter Branches and the Mission

The events leading to the Mission's request for accounting assistance and subsequent request for audit help evolved over more than two years. Headquarter groups that provided assistance to the Mission include the International Platform Branch, Corporate Finance & Operations and the Office of the Inspector General. The chronology in the Background Section of this report details the support provided.

However, it is not until March 2010 that the ***** Branch of the Geographic Group was informed of the difficulties at the ***** Mission. Because Heads of Mission report to the Geographic Group, that group was surprised that it had not been informed sooner. The Head of Mission is accountable to the appropriate Assistant Deputy Minister in the Geographic Group, in this case, of the ***** Branch *****. Generally, the expectation is that the Head of Mission would have informed the ***** Branch of the situation.

As a result of the above, auditors were asked to examine the question of reporting relationships between headquarter Branches and the Mission.

When interviewed, the Head of Mission indicated that the issues remained in flux and that the ***** and/or ***** were expected back to work. Further, the Head of Mission also indicated that there was some confusion over roles and responsibilities given that the International Platform Branch had taken over responsibility for some administration, including the provision of HR support for the management of Locally Engaged Staff (LES). The Head of Mission also acknowledged a clear reporting relationship between himself and the Assistant Deputy Minister of the ***** Branch.

As can happen in large organizations, the horizontal management of issues can be challenging. In this case, members of three branches (Human Resources-HCM, International Platform-ACM, and Corporate Finance & Operations-SCM) and one bureau (the Office of the Inspector General-ZID) were aware of some issues at ***** for some time, as a result of each fulfilling its required mandate.

Based on interviews conducted, auditors identified two factors that caused this break down in communications at headquarters. First, given the reporting relationship, members of other branches expected that the Head of Mission would inform the Geographic Group-***** of the situation. Further, auditors were also informed that Management and Consular Officers (MCO)/Mission Administration Officers (MAO) are generally uncomfortable exercising oversight of Heads of Mission's transactions because of the hierarchical reporting relationship. This organizational culture of not informing on Heads of Missions seemed to have carried over into headquarter branches because of the rotational nature of the Management and Consular Officer position.

During the auditors' review of travel claims, it became evident that the ***** and the ***** had played an important oversight role over the years, ensuring that claims were corrected, that entitlements were checked and confirmed and that appropriate amounts were approved for payment. Most travel claims had corrections to them. Auditors were told that this responsibility, correcting the claims of hierarchical superiors in the office, coupled with the already high tension from the internal conflict had a negative impact on the effectiveness of this control function.

Auditors observed that these two aspects of the reporting relationship; the expectation that the Heads of Mission will inform the Headquarter Superior, and, the role of the Management and Consular Officers (MCO)/Mission Administration Officers (MAO) in ensuring that the rules are respected including with superiors, resulted in a significant control weakness that went beyond the audit of the ***** Mission. The audit concluded that there is little incentive or support for the Management and Consular Officers /Mission Administration Officers to exercise oversight or control over the Heads of Mission or other senior representatives at the Mission as there is a risk of repercussion. After all, the Head of Mission is the hierarchical superior that assesses the Management and Consular Officers' /Mission Administration Officers' performance.

The audit team then examined the Mission Board's mandate and extracted the following section:

"An Operational Committee of the Missions Board at the Director General level has been established to make operational decisions affecting a specific mission(s) which go beyond the mandate of any given Branch. The Board encourages cross-team communication and cooperation"

However, auditors were informed that the focus of discussions in this group was issues relevant to the community of Missions rather than case-specific issues.

Recommendations

5. It is recommended that the Geographic Group and the International Platform Branch examine existing structures, including those within the existing Governance Structure, and propose horizontal communication processes to ensure that appropriate headquarter branches are informed in a timely manner as issues are identified at Missions.

6. It is recommended that the Geographic Group and the International Platform Branch examine ways of strengthening the functional authority between the International Platform Branch and Management Consular Officers(MCO)/Mission Administration Officers(MAO) with a view to promoting a culture of "doing the right things the right way". Measures should consider neutralizing the risk of repercussion and incorporating positive outcomes for example, via the performance assessment process.

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2.3 Documentation of the Process for Future Transfer of Responsibilities from Missions to Regional Service Centres

This section addresses the third audit objective. A smooth transition of financial transaction processing from Missions to Regional Service Centres will be founded upon:

  • Effective strategic and operational implementation planning;
  • Communication between the International Platform (ACM), Financial Operations -International (SMFF) and the applicable Regional Service Centre and Mission.
  • Documentation of new procedures; and,
  • Clear understanding and acceptance of new roles and responsibilities.

There were strategic plans related to the Regional Service Centres developed and discussed by the International Platform Branch (ACM) for several years. Management of the International Platform Branch explained that the Regional Service Centre model has been delayed about six months. An implementation plan is currently being developed; however, the urgency of the ***** Mission moving to the Regional Service Centre model resulted in a transfer before this plan was ready. The lack of guidance for the Head of Mission, implicated staff and the Regional Service Centre was an outcome of the timing for this rapidly executed pilot project.

Auditors would expect to find documentation of the process for the transfer of responsibilities from Missions to Regional Service Centers and an implementation guide addressing fundamental steps such as:

  • The preparation of financial records;
  • Employee positions affected at the Mission;
  • Transition activities;
  • Risk assessment of new processes and the necessary controls to be implemented;
  • Training plans; and,
  • The implementation of a standardized service agreement between the Regional Service Centre and the Missions.

Accomplishing these tasks effectively will require the Chief Financial Officer Branch and the International Platform Branch working collaboratively to ensure that roles and responsibilities are clearly delineated to support accountability. Specifically, the Head of Mission's accountability for financial management within the Regional Service Centre model will be an important consideration. As well, the overall mandate and accountability for the Chief Financial Officer Branch with respect to Mission financial operations, procurement, budgeting and forecasting should be clearly defined. This would provide the foundation for appropriate roles and responsibilities going forward. The overarching accountability structure should be communicated, understood by all parties and used as the basis for developing implementation plans.

An implementation plan should include the level of detail required to ensure that Regional Service Centres and Missions have the necessary resources, tools and procedures in place to operate effectively under the new model. The following four key steps would be included in such a plan and be documented in a guide for use at Missions and Regional Service Centres.

Key Steps in Transfering Financial Responsibilities from a Mission to a Regional Service Centre (RSC)

1. Launching the Initiative

Headquarters - International Platform Branch (ACM)

  • Develop key messages to assist Regional Service Centre and Mission management in their communication to stakeholders and to ensure clarity and consistency.
  • Identify Missions to be transferred to the Regional Service Centre model
  • Develop a timetable for the deployment of the model at each Mission.
  • Inform appropriate Headquarter branches, Regional Service Centres and Missions of the timeframe for movement to the new model with enough advance notice to undertake effective planning.
2. Laying the Foundation

Headquarters - Financial Operations International (SMFF) in collaboration with the International Platform Branch (ACM)

  • Document new procedures for financial transactions.
  • Confirm appropriate delegation of authorities.
  • Establish procedures for the transfer of financial records.
  • Establish procedures for emergency payments.
  • Complete a risk assessment of the new processes and determine the necessary controls to be implemented specifically addressing risks and controls related to local banking conditions and duplicate processing of transactions where scanned documents are used.
3. Operational Planning for Implementation

Regional Service Centers (RSC) and the Mission

  • The Regional Service Centre and the Missions each identify a key representative whose combined responsibility is to manage the transition for that Mission.
  • The Mission and Regional Service Centre identify Mission specific requirements to enact new processes effectively:
    • Identify current Human Resources and determine appropriate resource levels under the new model (i.e. determine affected positions);
    • Identify required changes to IT infrastructure and equipment;
    • Identify changes to accommodations;
    • Identify changes to the delegation of authorities
    • Determine outstanding financial tasks that need to be completed prior to turning over to the Regional Service Centre (i.e. reconciliations, deposits, reports)
  • The Mission communicates to all stakeholders at the Mission informing them of the upcoming change in operations and provide formal opportunities to receive their feedback on potential issues specific to their Mission
  • The Mission and the Regional Service Centre prepare a Mission specific operational plan based on information gathered in previous steps. The plan should include actions, timeframes and assigned responsibility.
  • The Mission communicates the detailed mission specific operational plan to all stakeholders and provides formal opportunities to receive feedback and adjust the plan appropriately.
  • Receive approval of the plan.
4. Implementing, Monitoring Progress & Reporting

Regional Service Centeres (RSC) and the Mission

  • Implement the plan.
  • Monitor progress against the plan and take remedial action as required.
  • Report progress to Headquarters.
  • Communicate lessons learned to HQ.
  • If required, change the process and reflect it in updated guidance.

Recommendations

7. The International Platform Branch in conjunction with Corporate Finance and other appropriate Headquarters Branches should ensure that roles, responsibilities and accountabilities are clearly delineated. This overall accountability regime would then form the basis for the development of a comprehensive implementation plan/guide to guide Regional Service Centres and Missions through the transition. This would also serve to confirm that Missions are not only informed but prepared to support the Departmental Initiative.

8. In advance of the transition to the Regional Service Centre model, Regional Service Centres and Missions should develop Mission-specific operational plans for implementation.

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2.4 Risk and Controls Analysis of Key Financial Functions Following the Transfer of Responsibilities from Missions to Regional Service Centres

As noted above, a risk assessment of the new processes and determination of necessary controls to be implemented is an important part of laying the foundation for the implementation of Regional service Centres. Conducting the audit work at the ***** Mission provided the opportunity for auditors to document the current processes in place and assess key risks and controls that would be required when transitioning from end-to-end processing at Missions to a process that transfers some responsibilities to Regional Service Centres.

While the delivery model changes with the implementation of the Regional Service Centres, the policy objectives as outlined in the Mission Accounting Manual remain to ensure that:

  • Expenses, accounts payable and accrued liabilities in the department are accurately accounted for, and properly and consistently reported in the department=s financial statements on an accrual basis of accounting.
  • The receipt of payments and the deposit of monies at a financial institution are accurately and properly accounted for in the departmental financial system.

With the transfer of specific financial duties to the Regional Service Centre, there will be changes at the Missions related to the key processes of: receipt, deposit and recording of revenue; and, payment processing. Defining and communicating the accountability of the Head of Mission for financial management within this new model is critical.

These two processes and the required changes illustrated in the corresponding control tables, Appendix C, will undoubtedly have the following impacts:

  • Payments authorized from a remote location will require increased lead time and scheduling for processing whether they are distributed from the Mission or the Regional Service Centre;
  • Standardization and enforcement of requirements for supporting documentation; and,
  • Consistent interpretation of policy.

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3.0 Conclusion

The audit confirmed that concerns raised by Corporate Finance at the ***** Mission in FY 2009-2010 were founded. There was clear evidence that the administrative staff exercised their oversight role with diligence resulting in numerous and continual travel and hospitality claim corrections and inappropriately charged personal expenses being recorded and reimbursed. Performing this oversight role under these circumstances, and given the hierarchical reporting relationship to the Head of Mission, eroded the ability of administrative staff to function effectively.

The intervention by many Headquarters groups at the ***** Mission demonstrated the complexity of roles and responsibilities with respect to Mission operations. Ensuring that the appropriate Geographic Branch is informed of potential issues immediately, however, is critical to support appropriate accountability. Effective horizontal communication, in this case, did not occur and may have resulted in escalation of unresolved human resource and financial issues over a two-year period.

The ***** Mission moved to the Regional Service Centre Model in April 2010. Although a strategic plan was in place, there was insufficient communication and operational planning for implementation. Regional Service Centres represent an important aspect of the New Business Model for DFAIT. Appropriate planning to ensure smooth transitioning to this model takes on heightened importance within this context.

Statement of Assurance

In my professional judgment as Chief Audit Executive, sufficient and appropriate audit procedures have been conducted and evidence gathered to support the accuracy of the information contained in this report. This is based upon a comparison of the conditions, as they existed at the time, against pre-established audit criteria that were agreed with management. The evidence was gathered in compliance with Treasury Board Policy, Directives, and Standards on internal audit for the Government of Canada.

Original signed by:

Yves Vaillancourt, Chief Audit Executive, October 1, 2010

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Appendix A: About The Audit

1.0 Audit Objectives and Criteria

The audit objective was to examine areas of concern identified by Financial Operations, Domestic and International (SMF), examine the reporting relationships between Branches and the Missions and to develop and document processes for future transfers from Missions to Regional Service Centres.

  • Objective 1:- To determine compliance with the Treasury Board Policy on the use of acquisition cards and store accounts which does not allow the cards to be used for personal purchases.
    • Criterion 1.1 - Acquisition cards were not used for personal purchases.
    • Criterion 1.2 - Canadian Consulate retail store accounts were used during FY 2009-2010 for personal purchases.
  • Objective 2:- To determine if recoverables related to personal expenses are recorded in the records at the ***** Mission.
    • Criterion 2.1 - There is a system which is used to record recoverables and their payment in the financial records at the ***** Mission.
  • Objective 3:- To determine if personal recoverables are repaid to the department following DFAIT policy.
    • Criterion 3.1 - Recovery of personal expenditures are made by cheque to the Receiver General of Canada and not through other means such as offsetting travel claims.
  • Objective 4:- Examine the reporting relationships between the Branches and the Mission and determine whether and the extent to which the responsible executives were informed of the situation in a timely manner.
    • Criterion 4.1 - The sequence of reporting of issues in the administration area of the ***** Mission have been documented.
    • Criterion 4.2 - The senior managers of the International Platform Branch-ACM, Corporate Finance- SMF and the Geographic Group (*****)-***** were informed of issues at the ***** Mission-DTROT in a timely manner.
  • Objective 5:- Develop and document the process for future transfers from Missions to Regional Service Centres.
    • Criterion 5.1 There is a process for future transfers from Missions to Regional Service Centres.

The following summary links the audit objectives to the applicable Core Management Controls. These are described in detail in the audit program document.

Core Management Control Summary

  • Objective 1: Public Service Values; Stewardship;
  • Objective 2: Risk Management; Stewardship; Accountability; and People;
  • Objective 3: Stewardship; and People;
  • Objective 4: Accountability; People; and Citizen-focused Service.
  • Objective 5: Governance; and Learning, Innovation and Change Management;

2.0 Methodology

The Consulate General of Canada, ***** was visited April 26-29, 2010. The following audit techniques were used in order to conclude on the audit criteria:

  • Data mining and analysis of records in IMS
  • Walkthrough of the payment and deposit processes.
  • Process control mapping and analysis of the payment process and the deposit of Citizen and Immigration Canada's (CIC) revenues.
  • On-site inspection of accounting files
  • Examination of a judgmental sample of files drawn from FY 2008-2009 and FY 2009-2010.
  • Interviews with management and staff at both headquarters and Missions; and
  • Document review (e.g. policies, procedures, directives, reports etc).

3.0 Scope

The scope of this audit included an examination of the processes and controls in place at the Consulate General of Canada, ***** during FY 2009-2010 including comparisons when appropriate with transactions from previous fiscal years prior to the current Head of Mission's appointment in 2006.

On site audit work was necessary to examine files and conduct interviews. This audit work took place as quickly as possible and was scheduled to coincide with a Mission visit of the Manager, ***** and ***** from Financial Operations, International-SMFF. The dates for the on site work were April 26-29, 2010.

The audit also included interviews and email requests to management and staff in the International Platform Branch-ACM, Corporate Finance- SMF and the Geographic Group ***** to determine the chronology of events which resulted in the requests for Financial Operations, International - SMFF to perform financial transactions on an emergency basis at the ***** Mission.

Applicable Policies related to this audit work included:

  1. Department of Foreign Affairs Account Verification Policy Effective Sept 24, 2004
  2. Financial Administration Act (R.S., 1985, c.F-11) (FAA)
  3. Rescinded Treasury Board Policy on Account Verification (May 11, 1998)
  4. Treasury Board Policy on Financial Management Governance
  5. Treasury Board Directive on Account Verification October 1, 2009
  6. Treasury Board Policy on Internal Control April 1, 2009
  7. Accounting Handbook Missions

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Appendix B - Management Action Plan

Management Action Plan
Audit RecommendationManagement ActionArea ResponsibleExpected Completion Date
1. It is recommended that the Consulate General of Canada, ***** be the subject of a full inspection by the Office of the Inspector General this fiscal year.A Mission inspection is scheduled for December 2010. The Office of the Inspector General (ZIV) will inform the Director, Assurance in the Office of the Chief Audit Executive if there is any change to this schedule.Inspection Division-ZIVDecember 2010
Mission Client Services (ASM) and ***** will prepare pre-inspection briefings for the inspection team and will attend post-inspection debriefing meeting.ASM
*****
FY 2010/11 (dependent of date of visit)

2. It is recommended that the use of acquisition cards and commercial accounts for personal expenditures cease immediately at the Consulate General of Canada, *****. At the time of the audit, the ***** assured auditors that the use of acquisition cards and commercial accounts for personal expenditures would cease immediately. Confirmation should be obtained from Mission Management that:

a. This practice has ceased; and
b. All personal expenditures made in this manner have been reimbursed.

Financial Operations, International (SMFF) will scrutinize the use of acquisition cards and commercial accounts at the ***** Mission for a period of 6 months from April to September 2010 to ensure that personal use has ceased.SMFFOctober 31, 2010
SMFF will meet with ZIV before an inspection of the mission to provide any relevant information.SMFFFY 2010/11 (dependent of date of visit)
Financial Policy, Control & Community Development (SMO) will review the Acquisition Cards at Missions policy to ensure that the Fraud, Abuse and Misuse section supports prompt corrective action.SMOOctober 31, 2010
The ***** Programs and Operations Bureau ***** received confirmation from the Head of Mission that this practice of acquisition card and commercial account usage ceased at the time of the Audit. Personal expenditure records show that all amounts due have been repaid.*****/GNDApril 2010 (reconfirmed in writing 17/08/10)
3. It is recommended that the Consulate General of Canada, *****'s inventory of assets be updated, taking care to ensure that all purchases for government business be appropriately recorded.The Head of Mission confirmed in writing to ***** on 25/08/10 that this inventory is currently being updated and that the exercise will be completed shortly.***** 
Mission Client Services and Innovation (ASD) the Corporate Finance, Planning and Systems Bureau (SMD) are working together to facilitate the inventory and management of assets through automation and integration with IMS. The Materiel Management project will provide a corporate solution by the end of the next fiscal year.ASD/SMDMarch 31, 2012
The Mission's progress will be reviewed by the Office of the Inspector General as a part of a mission inspection, scheduled to occur in December 2010.ZIVMarch 31, 2010
4. It is recommended that it be clearly communicated to administrative personnel and management in *****, particularly the Head of Mission, that authority under section 33 of the Financial Administration Act (FAA) (authority to approve for payment) should be exercised by a financial officer except in exceptional circumstances. Further, management and administrative personnel and the Head of Mission in ***** should also be reminded that no one, including Heads of Mission should authorize their own claims for payment under any circumstances. The purpose of this recommendation is to ensure unacceptable practices in the past are identified, communicated as such, and not perpetuated.Under the Delegation of Financial Signing Authorities Chart, the Head of Mission has been delegated the authority to sign section 33.  
The Chief Financial Officer Branch will review the Head of Mission financial delegations and ensure that they reflect appropriate financial controls. In the context of Regional Service Centres, the CFO will clarify accountability of the Head of Mission for sound financial management to ensure that their role is not watered down.SMDApril 2011
The Director General, Corporate Accounting, Finance, Policy and Financial Systems will send a reminder to the administrative personnel and the Head of Mission in ***** that that no one, including Heads of Mission should authorize their own claims for payment under any circumstances.SMDSeptember 30, 2010
5. It is recommended that the Geographic Group and the International Platform Branch examine existing structures, including those within the existing Governance Structure, and propose horizontal communication processes to ensure that appropriate headquarter branches are informed in a timely manner as issues are identified at Missions.The ***** and the International Platform Branch (ACM) have initiated a formal horizontal communications process to ensure this recommendation is fully implemented.*****, ACM & reporting Bureaux; also GLDCommenced 05/10 and ongoing, approx on a monthly basis
The Geographic Group (GLD) has similarly invited Platform Branch Director Generals (DG) to present at regular weekly meetings of Geographic DGs to raise awareness and understanding of Mission issues. Ongoing
ACM also meets with all GeoGroup ADMs on a monthly basis (by invitation) to discuss horizontal issues. At the DG level, ASD has a standing invitation to weekly GeoGroup DGs meeting.GLD
ASD
Ongoing/next meeting in Sept 2010
Director of ASM meets bi-weekly with the Geographic Area Management Advisor (GLA) to raise concerns and issues at missions with respect to MCO/MAO/HOM performance affecting the delivery of Common Services.ASM/GLAJuly 2010
6. It is recommended that the Geographic Group and the International Platform Branch examine ways of strengthening the functional authority between the Platform Branch and Management/Consular Officers(MCO)/Mission Administration Officers(MAO) with a view to promoting a culture of “doing the right things the right way”. Measures should consider neutralizing the risk of repercussion and incorporating positive outcomes for example, via the performance assessment process.See 5. above. Inter Branch/ GeoGroup consultations will consider this particular recommendation at an early opportunity*****/GLD & ACMFall 2010
To promote best practices, they are disseminated to missions via MCOs through quarterly conference calls, workshops, and broadcast messages. ASD and Wiki sites are updated to provide repository for policy and procedure reference points.ASD/ASMOngoing since 2008
ASD will discuss options for incorporating performance measures into PMP/PMAs though consultations with GLD and Human Resource units as an opportunity to implement formal feedback to HOM/ MCO/MAOs when performance issues arise.ASDSeptember 2010
7. The International Platform Branch in conjunction with Corporate Finance and other appropriate Headquarters Branches should ensure that a comprehensive implementation plan/guide is developed that will guide Regional Service Centres and Missions through the transition. This would also serve to confirm with the Branch that Missions are not only informed but prepared to support the Departmental Initiative.The Chief Financial Officer Branch and the International Platform Branch will work collaboratively to ensure that roles and responsibilities are clearly delineated to support accountability. Specifically, the Head of Mission's accountability for financial management within the Regional Service Centre model will be addressed. The overall mandate and accountability for the Chief Financial Officer Branch with respect to Mission financial operations, procurement, budgeting and forecasting will be clearly defined. The accountability structure will be communicated, understood by all parties and used as the basis for developing implementation plans.ASD/*****/SMDApril 2011
ASD is working with the Regional Service Centre ***** to transition select services from missions over the coming fiscal year. Service standards will be developed and an implementation plan instituted, in conjunction with SMD.  
This is an ongoing project which will be phased in. In the current circumstance, the provision of financial services to *****via ***** is being done on a pilot basis pending full implementation of the RSC model in the *****..  
8. In advance of the transition to the Regional Service Centre model, Regional Service Centres and Missions should develop Mission-specific operational plans for implementation.ASD is working with the ***** to transition select services from missions over the coming fiscal year. Service standards will be developed and an implementation plan instituted. This is an ongoing project which will be phased in.ASD/*****TBD

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Appendix C - Process Control and Risk Analysis

Table 1: Risk and Control Assessment of the Receipt, Deposit and Recording of Revenue

Risk and Control Assessment of the Receipt, Deposit and Recording of Revenue
NoRisk AreaControl pointControl
1.

Risk: The non-cash CAD receipts will go missing. The reconciled deposit information and information about CAD financial instruments will not be transmitted by the Mission and received accurately and completely at the Regional Service Centre (RSC)

Assertion: Completeness and Accuracy

The DFAIT Mission clerk who is responsible for scanning the revenue package (reconciliation document and the stamped bank deposit slips).

Segregation of duties: The individual who reconciled the receipts is not the same person scanning the documentation to the RSC.

Automatic email delivery and read receipt: The complete reconciliation package for each deposit should be scanned and recorded as an electronic file at the Mission. It should then be attached to an email and sent to the Regional Service Centre (RSC) electronically with an automatic email Delivery Receipt and Read Receipt notification.

Electronic Document Management: The use of scanned documents creates administrative efficiencies. It also however creates a higher risk of document altering. Therefore, it is important that the Mission and RSC store the information electronically in a manner that allows easy retrieval for management monitoring and audit purposes.

2.

Risk: Loss of non cash revenue.

Assertion: Completeness. The challenge is the safe custody of assets.

The receipt and transfer of non-cash CAD revenue at DFAIT by the MCO/MAO or designate who prepares the Diplomatic Courier bag (Dip Bag) to be sent to Ottawa.

A multipart official receipt EXT 25 is prepared and provided whenever money changes hands The CAD financial instruments (Money orders and certified cheques) are given to the Management/Consular Officers/Mission Administration Officers (MCO/MAO) or designated staff member. Official receipts are prepared whenever money, including non Cash CAD receipts is transferred from one custodian to another.

Secure Storage in RCMP approved safes. Money is kept in an RCMP approved safe until the transport date.

Secure transport of Funds: Money is delivered to Corporate Finance at HQ in the next Diplomatic Courier (DIP bag) to Ottawa.

3.

Integrated Management System(IMS) input at the Regional Service Centre.

Risk: There is a risk that the data input into IMS will not be complete, accurate or sufficiently timely for managements' purposes.

Assertions: Completeness and Accuracy

Regional Service Centre IMS input.

IMS controls: Restrict input access to authorized users.

IMS Edit and System controls: Imbedded controls in the software to reduce input errors.
Segregation of duties: Access to IMS modules is controlled to prevent incompatible functions by the same individual.

Service standards and Management Monitoring: Standards especially related to accuracy and timeliness are developed and used effectively. Management monitoring reports are generated and reviewed frequently enough to be an effective control to ensure revenue information is keyed into IMS in a timely manner.

4.

Risk that the data input into IMS at the RSC does not reconcile with the revenue reconciliation package at the Mission.

Assertions: Completeness and Accuracy

Mission Program Officer or MCO who initiated the revenue deposit.Reconciliation The RSC sends an electronic confirmation of the entry of the daily receipts into IMS to the Mission to reconcile with previous day's scanned revenue package.
5.

Risk that the deposits to the bank do not correspond to the amounts entered in IMS.

Assertions: Completeness and Accuracy

The bank reconciliation module in IMS performed by an officer at the RSC with correct segregation from the input activities.

Bank Statement are delivered (mailed) by the bank directly to the RSC. The bank statement is delivered directly (by mail or other appropriate means) from the bank to the RSC;
Management initials on each page of the bank statement. A CBS officer should open the bank statement and initial each page when it is received - before it is used for account reconciliation.

The same bank should be used at Missions as at the corresponding RSC. This facilitates fund transfers with less risk of error. As well it provides for On-line account access to monitor and reconcile daily transactions between accounts.

6.

Risk that the Mission accounts do not reflect accurately the receipts received.

Assertions: Accuracy and Completeness

Corporate Financial Operations - International - SMFF.Monitoring A monthly accounting package is received by SMFF from the RSC for the Mission. The timely receipt of the package and the contents are monitored effectively by HQ.

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Table 2: Risk and Control Assessment of Payment Processing

Risk and Control Assessment of the Receipt, Deposit and Recording of Revenue
NoRisk AreaControl pointControl
1.Risk that the payment is not a DFAIT related expense, that the payee is not eligible for or entitled to the payment or that the work has not been performed, the goods supplied or the service rendered, as the case may be, and/or the price charged is not according to the contract, or if not specified by the contract, is not reasonable.The program officer exercising S34 authorityS34 authority - exercised by a competent officer on the approved delegation of signing authority chart with a current signature specimen card on file.
2.Risk that a payment will be processed twice.The program officer.Date stamping All invoices and supporting documents are date stamped as well as having S34 signature as required in order to deface the document in such a way that it is apparent that it has already gone through the payment processed
3.Risk that a payment has not received proper S34 authorization or that sufficient documentation is not attached to support the payment.MCO/MAO at the Mission or his/her designateReview of the payment package by a second reviewer to ensure that it is complete. This person does not have to have delegated authority but must be aware of what is needed in a payment package.
4.Risk that an error in a travel claim or hospitality claim will cause reputational harm to the department. Risk that travel and hospitality policies are not followed uniformly in the Missions feeding an RSC.MCO/MAO at the Mission or his/her designateOriginal receipts and invoices are sent to the officer exercising S33 authority at the RSC. The original receipts are examined at the RSC prior to making a decision on reimbursing the claim.
5.Risk that electronic data will not be stored in a secure and logically accessible manner.The DFAIT Mission clerk who is responsible for scanning the payment packages.

Segregation of duties: The individual who reconciled the receipts is not the same person scanning the documentation to the RSC.

Electronic Document Management: The use of scanned documents creates administrative efficiencies. It also however creates a higher risk of document altering. Therefore, it is important that the Mission and RSC store the information electronically in a manner that allows easy retrieval for management monitoring and audit purposes.

6.Risk that there is a transmission error and the payment information was not received at the RSC and this was not detected at the Mission level.The DFAIT Mission clerk who is responsible for scanning the payment packages.Automatic email delivery and read receipt: The complete reconciliation package from CIC should be scanned and recorded as an electronic file at the Mission. It should then be attached to an email and sent to the Regional Service Centre (RSC) electronically with an automatic email Delivery Receipt and Read Receipt notification.
7.IMS input at the Regional Service Centre.
Risk: There is a risk that the date input into IMS will not be complete, accurate or sufficiently timely for managements' purposes.
Assertions: Completeness and Accuracy
Regional Service Centre IMS input.

IMS controls: Restrict input access to authorized users.

IMS Edit and System controls: Imbedded controls in the software to reduce input errors.

Segregation of duties: Access to IMS modules is controlled to prevent incompatible functions by the same individual.

Service standards and Management Monitoring: Standards especially related to accuracy and timeliness are developed and used effectively. Management monitoring reports are generated and reviewed frequently enough to be an effective control to ensure revenue information is keyed into IMS in a timely manner.

8.

Risk that the data input into IMS at the RSC does not reconcile with the payment requests from the program manager.

Assertions: Completeness and Accuracy

Program ManagerReconciliation The RSC sends an electronic confirmation of the entry of the payments into IMS to the Mission to reconcile with the payment requests.
9.

Risk that the Mission accounts do not reflect accurately the payments requested.

Assertion: Accuracy and Completeness

Corporate Financial Operations - International - SMFFMonitoring A monthly accounting package is received by SMFF from the RSC for the Mission. The timely receipt of the package and the contents are monitored effectively by HQ.

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Date Modified:
2013-08-06