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Foreign Affairs, Trade and Development Canada

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Priority Payments Print Site Inspection

October 2008

(PDF Version, 90 KB) *

  1. Introduction
  2. Observations
  3. Conclusion
  4. Appendix A: About the Audit

1. Introduction

In 1995 Public Works and Government Services Canada redesigned the Receiver General payment processes with the implementation of the Standard Payment System (SPS). In order for Departments to provide over-the-counter service in specified circumstances, the SPS priority payment system allows Departments the option of printing priority Receiver General cheques in their own offices1. As a result, DFAIT operates a priority payment print site in national headquarters.

The Receiver General, through Public Works and Government Services Canada, has requested that the Chief Financial Officer sign-off that the print site is operated in compliance with their directive. The directive calls for a print-site compliance inspection every two years. As a result, this area was included in the Internal Audit (ZBD) Transitional Audit Plan for 2008-2009.

The majority of payments are settled centrally by the Receiver General, either through direct deposit or by a cheque sent via regular mail. Priority Payment cheques may be printed by DFAIT to release funds outside the regular payment process to make2:

  • payments to employees in urgent circumstances such as salary or travel advances;
  • payments involving legal transactions such as contract or damage claim releases;
  • payments that involve special banking transactions such as emergency replacements for lost cheques, contribution payments for rapid deposit or where an interruption in service occurred due to a client's file being transferred to a different region;
  • payments to other governments or Crown Corporations such as net wages garnished under the Family Orders and Agreements Enforcement Assistance Act;
  • payments requiring formal presentation such as grants to be presented personally by the Minister or Members of Parliament;
  • recurring payments requiring special administrative action such as administered pensions;
  • loan payments in exchange for promissory notes;
  • payments to be transmitted by diplomatic courier;
  • payments that require classified security handling; and,
  • to provide cash for immediate service such as customs clearance or sheriff's fees.

The administration of Priority Payments is governed by:

  • The Financial Administration Act (FAA)
  • Cheque Issue Regulations, 1997
  • Electronic Payments Regulations, 1998
  • Treasury Board Policy on Control of Receiver General Cheques (Chapter 2-13)
  • Receiver General Directives 1999-8R1 and 1999-6R1
  • RCMP Security Equipment Guide

The objective of this audit was to determine whether the print site for priority payments was operated in compliance with the Receiver General Directives. The inspection took place on October 21, 2008. Detailed audit criteria, scope, methodology and reporting guidelines are contained in Appendix A.

2. Observations

The detailed audit criteria covered three main areas.

2.1 Separation of Duties

The print site operated with appropriate separation of duties. The cheque custodian, the stamp custodian and the print site manager were well versed on their roles and responsibilities and understood the need for clearly delineated functions.

2.2 Control of Cheque Stock and Signature Stamp

The cheque stock and signature stamp were appropriately controlled. Inventory was properly ordered, received, stored, monitored, and destroyed.

2.3 Cheque Preparation and Distribution

Cheque preparation and distribution were appropriately controlled. The cheque custodian ensured that payments were properly approved before printing; the stamp custodian reviewed all relevant documentation to ensure that cheques were properly prepared before signing. Printing and signing of cheques was restricted and occurred in a secure area.

Audit Criteria were fully met. Detailed results are provided below in the Print Site Compliance Checklist. In cases where the response is "n/a", it indicates that the print site has not experienced this situation (i.e. receipt of damaged cheque stock). Staff members were fully aware of the appropriate action to take, however, should this situation arise. There are no recommendations for this audit.

(Related Section of the Receiver General Directives)
Compliance IssueYesNoN/A
Cheque Custodian and Alternate
1.Cheque Custodian and Alternate are different individuals than Stamp Custodian and Alternate. (9.2)100
2.The Cheque Custodian and Alternate have possession of keys or combinations to the cheque form container. (9.3.4)100
3.Cheque Custodian and Alternate do not exercise payment authority under Section 33 of Financial Administration Act. (9.2)100
 (Need to obtain listing of all people in office with Section 33)
4.Cheque Custodian and Alternate do not exercise spending authority under Section 34 of the Financial Administration Act. (9.2)100
 (Need to obtain listing of all people in office with Section 34)
5.Cheque Custodian and Alternate do not have direct involvement in other aspects of the cheque requisitioning process. (9.2)100
6.The Cheque Custodian (9.3.1)   
 6.1 Orders all further stock from Payment Standards Division100
 6.2 Orders enough cheque stock for a six-month supply100
 6.3 Places orders three (3) months in advance100
 6.4 Ensures that all orders are approved by the officer in charge of the print site, and sent by e-mail, fax or letter to Payment Standards Division100
7.The Cheque Custodian counts all cheque stock immediately on receipt of a shipment and records any damaged or missing stock on the enclosed PWGSC 1405 "Transfer/Receipt" form for blank cheques. (9.3.3)100
8.Upon receipt of the cheque stock, the Cheque Custodian advises the production centre by telephone. (9.3.3)001
9.Cheque Custodian signs, dates and returns copy of form PWGSC 1405 to the production center. (9.3.3)100
10.Cheque Custodian enters the transaction reference number assigned to the shipment into the SPS inventory process. ( 9.3.3)100
11.Damaged cheque form: Custodian draws a line across the face of each damaged cheque form and stamps each of them "VOID" across the face. (9.3.3)100
12.Damaged cheque form: Custodian acknowledges receipt of the stock in SPS. (9.3.3)001
13.Damaged cheque form: Custodian makes arrangements for the destruction of the damaged blank cheque forms. (9.3.3)001
14.Damaged cheque form: Two individuals witness the destruction of the blank cheque forms. (9.3.3)001
15.Damaged cheque form: Custodian sends a copy of the annotated PWGSC 1405 form to the production centre. (9.3.3)001
16.Damaged cheque form: Custodian updates SPS after the cheque forms are destroyed. (9.3.3)001
17.Damaged cheque form: Two individuals complete a Record of Destruction, Form PWGSC 7389 and keep it on file for a minimum of six (6) years. (9.3.3 and 9.6.2)001
18.The Record of Destruction shows the following: (9.3.3)   
 18.1 The cheque print site facility number001
 18.2 The cheque series001
 18.3 The cheque numbers or the range of cheques001
 18.4 The total number of cheques destroyed001
 18.5 The reason for the destruction001
 18.6 The date of the destruction001
 18.7 The names of the witnesses001
 18.8 The original signatures of the witnesses001
 18.9 Any other detail to support the destruction001
19.The Cheque Custodian reports an apparent shortage in a shipment of blank cheque forms to Security/Investigation Unit. (9.3.3)001
20.Cheque Custodian maintains a record that shows the number of cheque forms distributed each day. (9.5.1)001
21.Cheque Custodian maintains a record that shows that these cheque forms are used in the SPS process or returned to storage.(9.5.1)001
22.The record has spaces for signatures acknowledging the issue and return of cheque forms.(9.5.1)001
23.The Cheque Custodian ensures that all unused Receiver General Cheques forms are returned to storage, each day.(9.5.1)100
24.The Cheque Custodian does a stock count and verification at least once a month to ensure that physical and recorded inventories agree. (9.5.2)100
25.The Cheque Custodian reports the status of the stock count in writing to the officer in charge of the cheque print site. (9.5.2)100
26.Any discrepancies in stock count are immediately reported to Security/Investigation Unit.(9.5.2)100
27.Any loss, shortage, theft or unauthorized destruction of cheque or stamp stock is reported to the Security/Investigation Unit. (9.6.1)100
28.The cheque custodian never has access to the signature stamp. (9.3.4)100
Print Site Manager
29.Cheque forms are stored in containers listed in the RCMP Security Equipment Guide. (9.3.4)100
30.Cheque forms are stored in individual separate containers. (9.3.4)100
31.The containers for the cheque forms are not used for the storage of any other assets or information. (9.3.4)100
32.The combinations to container locks are changed immediately when any of the following events occur: (9.3.4)   
 32.1 The container is first installed in the office001
 32.2 Any person who knows the combination is transferred, released or no longer requires access to the container100
 32.3 The combination has been or might have been compromised001
 32.4 The combination has not been changed in twelve (12) months001
33.All cheque requisitions, certified under Section 33 of the FAA, for cheques to be printed at a cheque print site, are authorized by the SPS EAA function. (9.4.1)100
34.The employees who have access to the blank cheque stock do not have access to the signature stamps at any time. (9.3.4)100
35.The print site carries out an official stocktaking and verification of the inventory records every three months. (9.5.3)100
36.The print site carries out an official stocktaking and verification of the inventory each time there is a change of Cheque Custodian or alternate.(9.5.3)100
37.Two employees, other than the Cheque Custodian, alternate Cheque Custodian, Signature Stamp Custodian or alternate Signature Stamp Custodian complete the physical count and verification of records. (9.5.3)100
38.The officer in charge of cheque print site confirms the count of quarterly official stocktaking in writing to Payment Standards Division. (9.5.3)100
39.The counters verify both quantities and cheque form numbers.(9.5.3)100
40.A detailed examination is made of any open boxes.(9.5.3)100
41.Full boxes that are open are resealed and signed across the new seal.(9.5.3)001
42.A record is kept that shows the date of the stocktaking, the verified balance, the first and last serial numbers of cheque form stock on hand and the signatures of the Cheque Custodian and the employees involved in the stocktaking.(9.5.3)100
43.Any discrepancies are reported to the officer in charge of the cheque print site.(9.5.3)001
44.The officer in charge of the cheque print site investigates the discrepancy and reports it to Security/Investigation unit. (9.5.3)001
45.The cheque print site does not use the Receiver General cheque forms under any of the following conditions(9.6.2):   
 45.1 When the cheque forms received from PWGSC are damaged during shipment001
 45.2 When cheque form is spoiled during printing100
 45.3 When a new cheque is introduced by PWGSC, thereby making the previous form obsolete.001
 Note: In the case of 45.1 and 45.2 above, the cheques can be destroyed without prior authorization from Payment Standards Division. In the case of obsolete cheque forms referred to in 45.3 the Manager of Payment Standards Division authorizes their destruction   
 Note: In the case of cheques spoiled during the printing process, SPS automatically updates the inventory to show the cheque status as "Void previously used."   
 Note: A replacement cheque is issued to replace   
 a) A returned cheque to PWGSC which has been recorded in SPS as "returned";   
 b) An electronic instruction for payment, for example a direct deposit transaction, which has not been accepted by a financial institution and has been recorded in SPS as "returned".   
 Note: The print site is not notified when a replacement cheque is issued, unless specified in the SPS profile. The replacement cheque normally bears the original payment number followed by a single digit suffix indicating the subsequent payment attempt number.   
46.The print site provides the payee with the proper form to complete if a replacement cheque is required immediately. (i.e., PWGSC 535, 536, 540 and 546-3) (9.11)001
47.The cheque print site (9.11):   
 47.1 Ensures that the payee has completed the appropriate form001
 47.2 Verifies that the form has been properly completed001
 47.3 Records the receipt of the completed form and prints the replacement cheque in accordance with the procedures specified in the SPS User Guide001
 47.4 Signs the PWGSC 535, 536, 540 or 546-3 form or written request to show that the replacement cheque was issued, date issued and identifies which cheque print site issued the replacement.001
48.Blank cheque stock or signature stamps are not transferred to another print site upon closing of a cheque print site. (9.13)001
 Note: PSD will advise the cheque print site to either transfer all unused cheque forms to the applicable production centre or to destroy them and retain the record of destruction on file for a minimum of six (6) years. The method of shipping is outlined n/an/an/a
49.The closing cheque print site updates SPS and ensures there is a zero balance in the inventory module if the cheque forms are transferred or destroyed.(9.13)n/an/an/a
Cheque Printers
50.A cheque must never be placed in the hands of a person who has participated in either spending or payment authority with respect to that payment. (RG 9.4.4 and TB Policy on Control of Receiver General Cheques, Chapter 2-13, section 4 (a))100
51.Sufficient information must accompany each cheque so that the person distributing cheques can correctly identify each payee. (RG 9.4.4 and TB Policy on Control of Receiver General Cheques, Chapter 2-13, section 5)Outside of Scope
52.When the payee for the cheque is an individual, the cheque requisition must contain the surname of the payee and at least one given name and one initial. (RG 9.4.4 and TB Policy on Control of Receiver General Cheques, Chapter 2-13, section 6)Outside of Scope
53.Computer and communication system access control must be achieved via passwords, which are unique to each individual user.100
54.Access control to files, databases, computers, and other system resources via shared passwords (also called lockwords) is prohibited.100
55.Cheque printers do not have access to signature stamps.100
Stamp Custodian or Alternate
56.Signature Stamp Custodian and Alternate are different individuals than cheque custodian and alternate. (9.2)100
57.Signature Stamp Custodian and Alternate do not exercise payment authority under Section 33 of Financial Administration Act.(9.2) (Need to obtain listing of all people in office with Section 33)100
58.Signature Stamp Custodian and Alternate do not exercise spending authority under Section 34 of Financial Administration Act.(9.2) (Need to obtain listing of all people in office with Section 34)100
59.Signature Stamp Custodian and Alternate do not have direct involvement in other aspects of the cheque requisitioning process.(9.2)100
60.There are only two (2) signature stamps at a print site. (9.3.1)100
61.If more than two signature stamps are required, the request must be in writing to the Manager, Payment Standards Division. (9.3.1)001
62.The Signature Stamp Custodian acknowledges receipt of the stamps. A copy of the signed memorandum is returned to Payment Standards Division. (9.3.2)001
63.The Signature Stamp Custodian of the cheque print site immediately advises Payment Standards Division if stamps are not received on the specified date. (9.3.2)001
64.Signature stamps are stored in containers listed in the RCMP Security Equipment Guide. (9.3.4)100
65.Signature stamps are stored in individual separate containers. (9.3.4)100
66.The containers for signature stamps are not used for the storage of any other assets or information. (9.3.4)100
67.The Signature Stamp Custodian and Alternate have access to the signature stamp container. (9.3.4)100
68.No other person has access to the signature stamp container. (9.3.4)100
69.The combinations to container locks are changed immediately when any of the following events occur: (9.3.4)   
 69.1 The container is first installed in the office001
 69.2 Any person who knows the combination is transferred, released or no longer requires access to the container100
 69.3 The combination has been or might have been compromised001
 69.4 The combination has not been changed in twelve (12) months001
70.The employees who have access to the signature stamps do not have access to the blank cheque stock at any time. (9.3.4)100
71.Cheque signing is carried out in an area restricted to authorized personnel. (9.4.3)100
72.The Signature Stamp Custodian is responsible for signing the cheque after ensuring that it has been properly prepared. The Signature Stamp Custodian verifies the details to ensure that: (9.4.3)   
 72.1 The cheque details agree with the original payment requisition100
 72.2 The cheque form number input into SPS agrees with the actual cheque form used100
 72.3 In the case of a replacement cheque, compares the cheque details with the SPS advice notice provided by PWGSC and confirms that the replacement has been approved by the appropriate departmental officer100
 72.4 When applicable, the appropriate legal form(s) PWGSC 535, 536, 540 or 546-3 or written request has been completed100
73.Legal forms and written requests are kept for a period of six (6) years. (9.4.3)100
74.Signature Stamp Custodian destroys the signature stamps by cutting them up by making two horizontal cuts through the signature and four vertical cuts through each signature stamp.(9.6.4)100
75.An independent employee other than the Signature Stamp Custodian or the Alternate Signature Stamp Custodian, the Cheque Custodian or the Alternate Cheque Custodian witnesses the actual destruction.(9.6.4)100
76.A record of destruction is completed when the signature stamps are destroyed.(9.6.4)100
77.The record is completed and signed by the Signature Stamp Custodian and the witness.(9.6.4)100
78.The record of destruction is sent to Payment Standards Division.(9.6.4)100
79.The Signature Stamp Custodian reports any loss, shortage, theft or unauthorized destruction of signature stamps to Security/Investigation Unit. (9.6.1)001
80.Signature stamps are not transferred to another print site upon closure of a cheque print site.(9.13)001
81.The closing cheque print site destroys all used signature stamps.(9.13)001
82.A record of destruction is sent to Payment Standards Division upon closure of a site.(9.13)001
83.All new signature stamps are returned to Payment Standards Division upon closure of a site.(9.13)001
84.Every cheque issued bears: [3 (1)]Outside Scope
 84.1 the signature of the Receiver General or a signing officer   
 84.2 the signature of the Deputy Receiver General or a signing officer   
 84.3 the name of the payee   
 84.4 a specified amount   
 84.5 no alteration in its amount or in the name of the payee   
85.Every cheque issued bears the date of: [3 (2)]   
 85.1 The day on which it is issued   
 85.2 The day on which the payment in respect of which it is issued is due, or   
 85.3 The day on which that payment is to be made   
86.Where the Receiver General authorizes the signing of cheques by the use of equipment capable of reproducing the signatures of the persons referred to in paragraph [3 (1)], such cheques are signed in that manner. [4]   
Security Personnel
87.All personnel with access to blank cheque forms and to signature stamps have (at least) enhanced reliability. (9.2.1)100
88.The Security/Investigation Unit directs the investigation to the police or RCMP in the following cases related to cheque stock:   
 88.1 An apparent shortage in receipt of blank cheque forms (9.3.3)001
 88.2 Any discrepancies in monthly stock counts (9.5.2)001
 88.3 Any discrepancies in official stocktaking (9.5.3)001
 88.4 Any loss, shortage, theft or unauthorized destruction (9.6.1)001
89.The Security/Investigation Unit reports the details of the case to the Manager of Payment Standards Division, PWGSC in the following cases related to cheque stock:   
 89.1 An apparent shortage in receipt of blank cheque forms (9.3.3)001
 89.2 Any discrepancies in monthly stock counts (9.5.2)001
 89.3 Any discrepancies in official stocktaking (9.5.3)001
 89.4 Any loss, shortage, theft or unauthorized destruction (9.6.1)001
90.The Security/Investigation Unit advises the Director, Fraud Awareness and Investigation Directorate (FAID) PWGSC in the following cases related to cheque stock:   
 90.1 Any apparent shortage in receipt of blank cheque forms (9.3.3)001
 90.2 Any discrepancies in monthly stock counts (9.5.2)001
 90.3 Any discrepancies in official stocktaking (9.5.3)001
 90.4 Any loss, shortage, theft or unauthorized destruction (9.6.1)001
91.The Security/Investigation Unit keeps the Manager, Payment Standards Division and the Director, Fraud Awareness and Investigation Directorate briefed on the ongoing status of the investigation, as well as its resolution, in the following cases:   
 91.1 Any discrepancies in monthly stock counts (9.5.2)001
 91.2 Any discrepancies in official stocktaking (9.5.3)001
 91.3 Any loss, shortage, theft or unauthorized destruction (9.6.1)001
92.The Security/Investigation Unit directs the investigation of loss, theft or unauthorized destruction of stamps to the local police or RCMP.(9.6.1)001
93.The Security/Investigation Unit reports the details of any loss, shortage, theft or unauthorized destruction of signature stamps to the Manager, Payment Standards Division and the Director, Fraud Awareness and Investigation Directorate. (9.6.1)001
94.Security/Investigation Unit keeps the Manager, Payment Standards Division and the Director, Fraud Awareness and Investigation Directorate informed of the ongoing investigation, as well as its resolution, related to loss of signature stamp.(9.6.1001
Audit Criteria Total: 12461063

*Areas shaded in grey were outside the scope of the audit - while they relate to priority payments they are not part of a print site inspection.

3. Conclusion

The print-site for Priority Payments is operated in full compliance with the Receiver General Directives and the Chief Financial Officer can now provide the required attestation to Public Works and Government Services Canada.

Appendix A: About the Audit

Audit Objectives And Criteria

Print-Site Compliance Objective

To determine whether the print-site was operated in compliance with the Receiver General Directive.

Criteria

The Print Site should adhere to all aspects of the Receiver General Directive. A complete listing of the elements covered in the print site inspection is included with the results in the Observations section of the report.

Scope

The audit was limited to an on-site inspection of the print site in DFAIT. It did not include a transactional review of priority payments issued by DFAIT and it did not include testing of controls not directly related to the print site.

Methodology

  • On-site inspection
  • Documentation review and analysis
  • Interviews with management and staff

Timeframes

Planning: June 2-6, 2008
Field work: July 2-4, 2008
Draft report July 11, 2008
Final report July 18, 2008

*The time frames for conducting the inspection were delayed at the request of management due to holiday schedules. The inspection was conducted on October 21, 2008.

Reporting

The print-site manager was apprised of any issues of non-compliance at the completion of the inspection. A draft internal audit report was prepared and discussed with the print-site manager as well as the Chief Financial Officer. Management response and management action plans were not included in the final report because no audit recommendations were made.


1Receiver General Directive 1999-8R1, "Printing Priority Receiver General Cheques at Departmental Sites"- Procedures for Financial Information Strategy (FIS) Compliant Departments", Section 5.0

2Treasury Board Secretariat, Policy on Control of Receiver General Cheques, Chapter 2-13, Appendix A

Office of the Chief Audit Executive


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Date Modified:
2013-01-03