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Foreign Affairs, Trade and Development Canada

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Internal Audit of Resource Allocation

November 2009

(PDF Version, 1.68 MB)*

Table of Contents


Executive Summary

An Audit of Resource Allocation was performed in fiscal year 2009-2010 by the Department of Foreign Affairs and International Trade's (DFAIT) Office of the Chief Audit Executive. The main objective of the audit was to assess the effectiveness of the governance, processes and controls in place for the initial allocation and subsequent re-allocation of funds within DFAIT. The following three sub-objectives were used to assess the extent to which the objective was achieved:

  • To determine the extent to which resources are aligned with government and corporate priorities;

  • To determine whether there is an appropriate degree of flexibility to respond to emerging/changing priorities; and

  • To determine the availability and use of relevant, timely and accurate information for sound decision-making.

During the planning phase of the audit, the firm Deloitte was engaged to conduct a Financial Resource Management Risk Assessment. As a result of this assessment, the Department took immediate steps to mitigate some of the risks identified. In other areas, the Department required further audit work before it could take action. Therefore, this internal audit focused on those areas identified as requiring further study.

Alignment of Resources with Government and Departmental Priorities

Our overall assessment revealed that the resource allocation process presently in place at DFAIT is aligned with and meets the requirements of Treasury Board's planning and budgeting cycle. However, significant improvements are required in the following areas:

  • Corporate oversight and control to monitor the implementation of strategic budget reduction decisions;

  • Integration of reference levels (budgeting) with departmental priorities (planning); and

  • Availability of relevant and accurate human resource and financial information.

The following is a summary of the recommendations pertaining to this sub-objective:

  • Rec: 1. Corporate oversight should be exercised by Corporate Finance to effectively monitor the implementation of Senior Management decisions for all strategic cost reductions. Tracking tools, with deliverables and timelines should be developed and be used for regular reporting to the Resource Management Committee (RMC).

  • Rec: 2. A branch/Assistant Deputy Minister should be identified and held accountable to report on the implementation of critical decisions such as those taken to reduce the number of employees at Headquarters (HQ). In addition, as per Recommendation 1 above, regular oversight and monitoring are essential to track progress against targets set.

  • Rec: 3. The Department should improve the integration of the planning and budgeting processes and strengthen the corporate challenge function to ensure that budgets are better aligned with corporate priorities and that reductions impact directly on departmental lowest priorities.

  • Rec: 4. The Department should implement a full A-base review process (on a three to five year cycle) to ensure alignment of priorities with resources remains current. This could be integrated with strategic reviews. In addition, this process would confirm proposed activities' level of priority.

Degree of Flexibility to Respond to Emerging/Changing Priorities

Aligning DFAIT's work to the government's priorities requires shifting people and resources and restructuring the way DFAIT delivers its programs internally and with partners.

Our overall assessment is that DFAIT presently does not have sufficient flexibility to respond to emerging or shifting priorities. The following elements reduce the flexibility the department needs:

  • In the present structure, Corporate Finance does not have the authority required to perform the challenge role at the operational level;

  • Structural adjustments are needed to the roles of Area Management Advisors (AMAs) and Financial Management Advisors (FMAs) in the area of budgeting and forecasting.

  • There are weaknesses in the area of departmental policies and guidelines in support of transparency and reallocation; and

  • The Department does not have a formal mid-year expenditure review process in place integrating financial and non-financial information.

The following is a summary of the recommendations pertaining to this sub-objective:

  • Rec: 5. Prioritize the implementation of the Chief Financial Officer (CFO) model across the Department, including the integration of FMAs. This will require clarification of respective roles and responsibilities of FMAs and AMAs.

  • Rec: 6. An appropriate policy framework, that includes policies, procedures and guidelines as required, should be developed to clearly provide the authority required to enforce its application, including standardized processes, clarifying roles and responsibilities of all parties involved in the budgeting/forecasting process, including AMA and FMA roles, and clarifying the definitions of soft and hard commitments.

  • Rec: 7. The challenge role of the Chief Financial Officer (CFO) and the RMC needs to be carried out in a more formal and rigorous manner to enhance a regular budget review process starting at mid-year.

  • Rec: 8. Financial management accountability objectives should be included in Performance Management Agreements (PMAs) for all EXs who are responsible for managing Fund Center budgets.

Availability and Use of Relevant, Timely and Accurate Information for Sound Decision-Making

Overall, the Department has a process in place to produce monthly financial reports. This process should provide a formal framework to communicate results to support managerial decision-making and to identify resources that could be reallocated to other departmental priorities. This process, however, is not effective because:

  • The Human Resource Management System (HRMS) is presently not able to provide timely and accurate human resource data for decision-making;

  • Financial information contained in the Salary Management System (SMS) is not accurate;

  • Forecasts are prepared inconsistently at the branch level without adequate corporate challenge. As a result, Corporate Finance cannot provide a level of assurance of the accuracy of the financial information received; and

  • The competency profiles of positions in the Area Management Offices and the required training in financial management are not established by the CFO. This prevents the standardization of a challenge process across the branches of FINSTAT reports.

The following is a summary of the recommendations pertaining to this sub-objective:

  • Rec: 9. Human Resources (HR), in collaboration with Corporate Finance, should ensure that managers have reliable information for decision-making on all positions in their organization, including positions staffed, positions with more than one incumbent, positions budgeted and non-budgeted and positions that are vacant.

  • Rec: 10. The Department must address the accuracy of salary forecasts by proceeding quickly with the implementation of the Salary Forecasting Tool (SFT) or by updating the existing system.

  • Rec: 11. To strengthen the reliability and accuracy of the monthly FINSTAT reporting process, Corporate Finance needs to:

    • Review the need for the 'planned expenditure' column on the FINSTAT report;

    • Ensure that appropriate challenge is performed on forecasted expenditures;

    • Modify the report to allow Fund Centre managers to identify, in order of priority, the activities against which the expenditures are made or forecasted; and

    • Provide training to all staff involved.

In conclusion, the audit found that there are significant weaknesses in the financial resource allocation process at DFAIT. More specifically, improvements are required to strengthen the effectiveness of the governance, processes and controls in place for the initial allocation and subsequent reallocation of funds within DFAIT.

It is important to note as well that since the beginning of this project, the Department has already taken major steps to address the weaknesses identified.

1. Introduction

The Department of Foreign Affairs and International Trade Canada's (DFAIT) Internal Audit Risk-Based Audit Plan for the fiscal years 2009-2012 called for an internal audit of Resource Allocation to be conducted in 2009-2010.

DFAIT has been faced with several budget reduction exercises that have challenged its ability to address the wide-range of issues facing the Department while at the same time trying to fund both on-going program activity shortfalls and new emerging priorities. Financial resource management processes are critical to ensure that secured funding is consistent with DFAIT's financial requirements to deliver on its mandate/priorities. In relation to this issue, the Resource Management Committee (RMC) is responsible for providing advice and guidance to the Executive Council and other departmental committees/boards.

At the beginning of the current fiscal-year, the Department realized that it was facing financial challenges that threaten the sustainability of current operations and its ability to meet its evolving priorities. To address the adverse financial situation, the Department engaged an independent firm, Deloitte, to conduct a Financial Resource Management Risk Assessment to identify and assess the causes of the budgetary situation and associated financial risks related to the current year forecasted shortfall. Deloitte's work was structured around the following budget/forecasting processes: funding, planning and budgeting, reporting and analysis, forecasting, budget reallocation, people and structure and technology.

Deloitte's risk assessment identified specific areas of focus for the internal audit, and more specifically, the strengthening of financial resource management processes. Their work was performed over a six week period in August and September 2009 and was integrated into the planning and examination phases of the audit which took place from July to October 2009.

2. Observations and Recommendations

2.1 To determine the extent to which resources are aligned with government and corporate priorities

DFAIT is funded by Parliamentary appropriations which receive Parliamentary approval via the Main Estimates in March and through Supplementary Estimates (Supps A in June, Supps B in December and Supps C in March). The Annual Reference Level Updates (ARLU) is the formal process to update the cost of previously approved operations/programs in order to provide a base for the development of the Main Estimates which is submitted to Parliament to receive new-year funding. It starts with the prior year's reference level and makes adjustments for Treasury Board (TB) approved items such as re-profiling, vote transfers, etc. DFAIT's appropriations are divided into three Votes: Vote 1 – Operating, Vote 5 – Capital, and Vote 10 - Grants and Contributions. Subsequent transfers between Votes are not allowed unless approved by TB through ARLU and Main Estimates or Supplementary Estimates.

Our overall assessment revealed that the resource allocation process presently in place in DFAIT is aligned with and meets the requirements of Treasury Board's planning and budgeting cycle. However, significant improvements are required in the following areas:

  • Corporate oversight and control is needed to monitor the implementation of strategic cost reduction exercises;

  • The integration of reference levels (budgeting) with departmental priorities (planning); and

  • The availability of relevant and accurate human resource and financial information.

Several areas were examined to determine if resources are aligned with government and corporate priorities. Our assessment of resource allocation included the departmental Reference Levels, the ARLU, the mission costing formula, control over frozen/fenced funds, and the control over departmental headcount.

The audit also examined the planning and budgeting process. Its purpose is to develop departmental plans and priorities and align the Department's budget with these plans taking into consideration funding constraints.

2.1.1 Lack of appropriate oversight and control increases the risk of failure in the implementation of strategic cost reduction decisions

The annual funding process starts in the summer, when the ARLU is revised and agreed upon by DFAIT and the Treasury Board Secretariat (TBS). The Department uses the Reference Level document internally, in which there is an item-by-item listing per bureau of every adjustment. The revised Reference Levels are then used in the Main Estimates submission to Parliament to receive new-year funding.

The following graph outlines the funding cycle.

DFAIT Resource Allocation Process

Through this process, a call letter containing the reference levels by branch is sent in July to the branches requiring them to provide technical adjustments to their reference levels. The branches return to Corporate Finance their new-year budget and their pressures list which consist of activities that are not funded. Corporate Finance then compiles the data from the branches and submits the Department's new-year budget and pressures list to the RMC for approval. The RMC then makes recommendations to the Executive Council for approval and communicates results to the branches.

Historically, DFAIT has lapsed significant funds at year end, which are carried forward into new-year. This amount has been treated as a corporate reserve to fund items on the pressures list which include among other things, on-going operations. In 2008-2009, additional expenditures were incurred which limited funds available for carry-forward. As a result, the corporate reserve for 2009-2010 was virtually eliminated.

At the outset of the business planning and budgetary process for 2009-2010, a funding pressures list was established totalling over $150M. Decisions were made and approved by Senior Management to address this budgetary shortfall. The Department initiated two cost cutting exercises. The first exercise, referred-to as the “3% exercise,” identified approximately $30M. A further “8% exercise” was then undertaken. This second cost-cutting effort did not yield sufficient resources. Therefore, a forecasted deficit remains.

Strategic Review decisions from 2007-2008 and 2008-2009 aimed at reducing the number of positions at HQ and re-aligning with government and departmental priorities have not yet been fully implemented. This compounded the financial pressure placed on the Department.

There was no evidence that a plan to address the previous strategic cost reduction decisions had been prepared by the affected branches and that adequate corporate monitoring/control was performed. Senior Management decisions regarding the cost reduction exercises described above have not been implemented successfully, mainly because they were not supported by the development of adequate plans by the branches, and because of inadequate oversight and control.

Recommendation 1:

Corporate oversight should be exercised by Corporate Finance to effectively monitor the implementation of Senior Management decisions for all strategic cost reductions. Tracking tools, with deliverables and timelines should be developed and be used for regular reporting to the Resource Management Committee.

2.1.2 Lack of adequate control over Departmental headcount puts an additional pressure on salary budgets

Two major strategic studies highlighted Senior Management's decision to reduce the number of positions in the Department and the related salary expenditures at HQ. The first study was the 2007 Strategic Review which identified 145 Canada Based Staff positions to be cut immediately. The second was the 2008 Rebalancing Exercise to reduce 400 positions at HQ within the next five years and transfer these positions to Missions.

As of September 2009, 122 of the 145 positions had been abolished as per the Strategic Review decision and 23 remained outstanding due to delays caused by staff on assignment, sick leave etc. With respect to the Rebalancing Exercise, a total of 400 HQ positions are to be abolished within five years starting in fiscal-year 2008-2009 and ending by 2012-2013. To date, 157 of the 400 positions have been identified by the branches. Position reductions for 2010-2011 and beyond have not yet been identified.

Of the 157 positions identified only 55 have been abolished to date and 102 are outstanding. This issue is significant because funding of $9.7M, for the 125 outstanding positions, has been reduced from DFAIT's reference levels. Furthermore, HR estimated that approximately 20% of the 55 abolished positions were encumbered resulting in a net headcount reduction of only 11. Abolishing vacant positions, although a good long term measure does not generate anticipated savings.

 Number of PositionsPercentageHeadcount
Estimated overall Headcount growth at HQ 86 + 392)  478
Planned reductions as per:2007 Strategic Review (145 less 23 positions remaining to process)145 -122
2008-10 Rebalancing Exercise (157 positions identified less 102 remaining to process), including 43 positions transferred to field operations.157 -55
As per HR, the majority of positions that were reduced were vacant and only a small percentage represented actual employees. 20% is estimated by HR. 20%-11
Number of authorized growth as per TB submissions in 2008-2009-47 +47
Estimated number of headcount that should have reduced255 -86
Growth from 2006-2007 to 2008-2009 (3,273-2,881)  +392

Taking into consideration the 47 positions that were approved to be created using new funding received; our assessment of the actual headcount reveals that these two exercises should have reduced the amount of positions and incumbents in the Department by approximately 255 funded positions (145+157-47). However, figures provided by HR demonstrated that the headcount at HQ has increased by 392, thereby resulting in a headcount variance of 478 (or higher if we consider that the 125 positions are still in the process of being abolished).

This situation results in additional pressures to the budget since managers are moving funds from operations to salary in order to pay for additional staff. Based on an estimated cost of $77,500 per employee (as per costing used in the Reference Levels) the estimated headcount increase of 478 puts an additional pressure of approximately $37M on the salary budgets. This could have an even greater impact if we were to consider the 125 positions that are still in process of being abolished, adding another $9.7M to the salary pressure.

We must caution, however, that the audit was not able to validate the headcount as figures from the HRMS are not accurate and not easily available. This issue is fully addressed in Section 2.3.1 in this report.

The Department imposed an external hiring freeze on July 8, 2009. This action aimed to stop staff growth and to reduce salary cost. However, managers' authority to convert salary to operation funds was not removed. Consequently they were able to increase temporary help, casual assignments and the use of contractors. Managers also retained the authority to create new positions as required. Given these factors, it was determined that this measure was effective in the short-term in curtailing employee growth at HQ but was not effective at generating any savings.

In summary, strategic decisions taken did not achieve the targets set. This is mainly due to inadequate oversight, monitoring and controls.

To rectify this situation, a Resource Alignment Task Force was created on October 9, 2009 to review the alignment of people, positions, salary dollars, and office space within each bureau at HQ, and to ensure that all resources are accurately captured in the business management systems. The following control measures have been introduced as short term solutions to control growth at HQ:

  • No further transfers of funding from operations to salary budgets unless approved by Budgeting, Planning and Resource Management (SWD);

  • No double banking of people against positions, except on temporary basis for specific reasons (e.g. parental leave), to be approved by Human Resources Operations (HMO);

  • No creation of new positions unless funded equivalent positions are being deleted, to be submitted by a Director General (DG) and approved by HMO;

  • No creation of new positions unless additional external funding has been approved and is forthcoming from TBS, to be submitted by a DG, validated by SWD and approved by HMO; and

  • No transfers of office space or workstations between bureaus, unless approved by National Accommodation and Domestic Security (HAD).

The Resource Alignment Task Force control measures are necessary and sufficient given the Department's current level of risk. However, these controls should remain in force over the short term only because they remove authorities and accountabilities that normally should rest with managers. The Department needs to develop and implement sufficient processes and controls that will allow it to re-instate normal levels of authorities and accountabilities.

Recommendation 2:

A branch/Assistant Deputy Minister should be identified and held accountable to report on the implementation of critical decisions such as those taken to reduce the number of employees at Headquarters. In addition, as per recommendation 1 above, regular oversight and monitoring are essential to track progress against targets set.

2.1.3 The ARLU exercise and the preparation of the business plans are not integrated to ensure that reference levels are aligned with departmental priorities

The purpose of planning and budgeting is to develop departmental priorities, strategies and plans, and align the departmental budget with plans and funding constraints. Strategic Policy and Planning (PFM) is responsible for business planning and the Integrated Business Plan. In October of each year, a call letter is sent to all branches requesting the preparation of business plans for the following year. Attached to the call letter is an integrated business planning template which includes the branch reference levels by vote. The integrated business planning template was introduced for the first time in fiscal year 2009-2010. In addition, branches had to identify lower priority areas in relation to the 3% overall budget reduction. The intent of this initiative was to realign funding based on strategic priorities. This was not an effective exercise since managers were not challenged on the lowest priorities identified. Consequently, there is no assurance that reference levels are aligned with departmental priorities.

Branches' business plans and budgetary requirements were presented to the relevant Board and to the RMC for approval. The RMC, and in some cases the Boards, played a challenge role before making final recommendations to Executive Council. Upon receipt and approval of the integrated business plans from the branches, Strategic Planning and Resources (PDR) prepared the Departmental Integrated Business Plan and extracted relevant information for the preparation of the Report on Plans and Priorities. The Departmental Integrated Business Plan was then sent to corporate branches to extract information for their specific purposes i.e. HR to develop the HR Plan, Corporate Finance to identify reallocations, IT for investment planning, etc.

We also noted the absence of a departmental A-base review process to ensure continued alignment of priorities with reference level funding. Consequently, the reference levels for the department are not always aligned with the priorities since they are based on historical figures. Since no further analysis is done to determine whether the business plan and the reference levels are compatible, there is no assurance that the budget is aligned with corporate priorities.

Recommendation 3:

The Department should improve the integration of the planning and budgeting processes and strengthen the corporate challenge function to ensure that budgets are better aligned with corporate priorities and that reductions impact directly on departmental lowest priorities.

Recommendation 4:

The Department should implement a full A-base review process (on a three to five year cycle) to ensure alignment of priorities with resources remains current. This could be integrated with strategic reviews. In addition, this process would confirm proposed activities' level of priority.

2.2 To determine whether there is an appropriate degree of flexibility to respond to emerging/changing priorities

Aligning DFAIT's work to the government's priorities requires shifting people and resources and restructuring the way DFAIT delivers its programs internally and with partners. Government priorities change – or at least shift – with every speech from the throne. Hence, to be aligned with government priorities, DFAIT needs to be able to quickly respond and deliver on the international dimensions of priorities of the government of the day.

The degree of flexibility to respond to emerging/changing priorities in DFAIT was determined by assessing:

  • Budget re-allocation based on departmental priorities (i.e. carry-forward, reserve); and

  • Adequacy of the Policy and Governance Framework for Resource Allocation.

Overall, DFAIT is not well positioned to respond to emerging/changing priorities. Flexibility is limited due to:

  • In the present structure, Corporate Finance does not have the authority required to perform the challenge role at the operational level;

  • Structural adjustments are needed to the roles of Area Management Advisors (AMAs) and Financial Management Advisors (FMAs) in the area of budgeting and forecasting;

  • There are weaknesses in the area of departmental policies and guidelines in support of transparency and re-allocation; and

  • The Department does not have a formal mid-year expenditure review process in place integrating financial and non-financial information.

2.2.1 Corporate Finance does not have the authority required to perform the challenge role at the operational level in a rigorous and standardized manner

DFAIT Governance Structure for Integrated Business Planning, Budgeting and Resource Allocation is described in the following graph:

DFAIT Governance Structure

The Executive Council is the senior decision-making committee in DFAIT; it provides strategic direction and oversight to support the achievement of the Department's three strategic outcomes.

The Resource Management Committee provides advice and guidance to the Executive Council and other departmental committees on such matters as initial resource allocations each financial year, in-year resource pressures, and re-allocations among resources centres.

The Boards (composed of Assistant Deputy Ministers (ADM) and other senior managers), support the Executive Council in its strategic decision-making process and ensure integration of program and management objectives across the Department to achieve strategic outcomes.

The Transformation Management Committee was created to guide the Transformation Agenda and is responsible for ensuring that DFAIT has the right people and structures in place to achieve the goals set for the Department.

In addition to these governance bodies, Corporate Finance is responsible for the ARLU; Main and Supplementary Estimates; departmental budgeting; analysing and coordinating all TB submissions, including review, advice and quality control; in-year reporting, including FINSTAT reports; Financial Management Advisory Services to branches and secretarial support to RMC. Area Management Offices are responsible for monitoring branch budgets, payment of invoices, transfer of funds and the monitoring of ARLU.

There is a lack of formal corporate challenge for resource allocation and forecasting. The challenge process is performed in varying degrees between branches. For example, the challenge role of AMAs varies from providing only technical and procedural advice regarding the monthly FINSTAT process to challenging amounts forecasted in terms of likelihood of occurrence. The varying degrees of challenge, to which branch FINSTAT reports are subjected, lowers the level of confidence placed on the accuracy and reliability at the departmental level.

This issue is partly explained by the fact that the new governance structure is still maturing and that the CFO model is in its early stage of implementation. To date there has not been adequate support for continued implementation of the CFO model. We also noted that the mandate of the AMA Council is unclear and presently not integrated with the CFO's mandate.

Since the AMAs do not report to Corporate Finance, clear and consistent direction, oversight and competency profiles of staff to coordinate the monthly FINSTAT reports cannot be assured. Consequently, Corporate Finance cannot provide a level of assurance on the accuracy of the financial information received and does not have the authority required to perform the challenge role at the operational level. Consistently presented and reliable financial information, attested by Corporate Finance, is the foundation required for the Department to have the ability to re-allocate funds during the fiscal year.

At the time of the audit, Corporate Finance was reviewing the roles and responsibilities of AMAs versus those of the anticipated FMA positions. Continued implementation of the CFO model should strengthen resource and financial management, reporting and improve internal controls.

Recommendation 5:

Prioritize the implementation of the Chief Financial Officer model across the Department, including the integration of Financial Management Advisors. This will require clarification of respective roles and responsibilities of Financial Management Advisors and Area Management Advisors.

2.2.2 Lack of an appropriate policy framework to clearly provide the authority required to ensure the standardization of processes and clarification of roles and responsibilities to support transparency and resource reallocation

Policies and procedures are the strategic link between an organization's vision and its day-to-day operations. Well formulated policies and procedures are necessary to allow employees to understand their roles and responsibilities within predefined limits.

A policy and governance framework review was conducted to gain an understanding of the legislative and policy documents and environment relevant to the allocation of resources in DFAIT.

DFAIT's Guide on Budget Management consists of:

  • Policy on Financial Reporting;

  • Carry-Forward Policy;

  • Entering Commitments and Planned Expenditures in IMS Policy;

  • Resource Management Over-Programming Policy; and

  • Budgetary Transfers between Partner Departments and DFAIT.

The Guide provides the objectives of each policy and outlines step-by-step procedures. Policies and guidelines, however, need to be updated to reflect current, appropriate practices. In addition, the roles and responsibilities included at the end of each policy are repetitive and do not reflect changing AMA and FMA roles with respect to the budget and forecasting processes.

More specifically, we noted certain issues with some of the policies:

  • The Policy on Financial Reporting outlines monthly FINSTAT reporting requirements for salary and non-salary funds. While still relevant, the policy is not clear, consistent, comprehensive nor easy to understand. More specifically, roles and responsibilities were neither well defined nor comprehensive. For example, manager's roles and responsibilities do not include forecasts, variance analysis and explanations. There is no attestation required from managers who are accountable for confirming the accuracy of the numbers contained in the report and explaining the reasons why forecasts are different from previous months as well as taking corrective measures.

  • The Carry-Forward Policy addresses the five percent (5%) operating budget carry-forward entitlement i.e. to carry forward to the following year eligible lapsing funds of up to 5% of the Department's Budget. This policy, while still relevant, is not clear, consistent, comprehensive nor easy to understand. For example, Policy objectives are inconsistent with those described in the TB Policy on Carry-Forward of Capital Funds and the Manager's Guide to Operating Budgets. ARLU re-profiling of resources is also addressed in this policy. This subject is quite different from carry-forward and it is unclear as to why this has been included in the Carry-Forward Policy. We noted that a free balance declaration table indicating the proportion of a branch's carry-forward that will be allocated to the branches' and the Department's carry-forward reserve has been put on hold until further notice. This table should be deleted if it is not being followed.

  • The Policy on Entering Commitments and Planned Expenditures addresses the recording of financial commitments in the Department's financial system, IMS Enterprise (hereafter referred to as IMS). The policy needs to clearly define 'soft' and 'hard' commitments. As well, the roles and responsibilities outlined go beyond the scope of this policy and are repeated in other policies.

  • The Resource Management Over-Programming Policy is not complete. Cash management, due to the time lag between the use of funds and the receipt of funds, is the only example of 'over-programming' referred to even though it is common knowledge that other types of over-programming are practiced.

Overall, we noted the lack of an adequate policy framework. An updated and revamped document that is developed under an appropriate structure will serve as the authority to perform the correct procedures and processes as well as a training manual for existing and new employees. In its present state, however, the Guide creates confusion and lacks clarity in many areas. A guide usually acts as an advisory document whereas a policy must be adhered to; however, since in this case policies have been placed under the umbrella of a guide, the authority of this document is not clear.

Recommendation 6:

An appropriate policy framework, that includes policies, procedures and guidelines as required, should be developed to clearly provide the authority required to enforce its application, including standardized processes, clarifying roles and responsibilities of all parties involved in the budgeting/forecasting process, including AMA and FMA roles, and clarifying the definitions of soft and hard commitments.

2.2.3 Inadequate expenditure review and challenge function to provide budget flexibility earlier in the year

The re-allocation process is the exercise at different levels of the organization to re-allocate budgets based on forecasted expenditures and departmental priorities and pressures. This needs to be a continuous process for decision makers to adjust their strategies over the year based on updated actual expenditures, budget allocations and changing priorities. A successful re-allocation process depends on a good governance structure and reliable information for decision-making reporting system.

DFAIT has a formal structure of governance in place to address resource allocation which includes budget re-allocation as well. The RMC is the oversight body that has this responsibility. The mandate of this committee is to provide strategic direction and oversight and make decisions or recommendations on the alignment of financial resources with policy and program priorities. Among other things, this committee is responsible for: providing feedback on major initiatives being proposed by boards and ratifying key resource allocation decisions; exercising a challenge function for various boards' proposals; determining the appropriate reserve level; reviewing multi-year budget plans and annual budgets; directing and coordinating measures to meet in-year resource pressures; and leading and managing the re-allocations among the fund centers.

When fund centre managers elevate financial issues to the branch, the funds are reallocated within branch budget and the financial issue is not necessarily elevated to Corporate Finance or RMC. Furthermore, this internal process does not permit an adequate challenge function to ensure the Departmental priorities are taken in consideration. Hence, these adjustments may or may not provide for re-allocation of funds to the departmental priorities.

As noted in section 2.1.1 decisions have been made and approved to address the budgetary shortfall. We noted, however, that there is no formal review of expenditures supported by an adequate challenge function which would focus on priorities and provide incentive for the identification of budget flexibility earlier in the year to fund emerging pressures and have a better appreciation of the year-end results, including the potential carry-forward amount.

We also noted that Performance Measurement Agreements (PMAs) for executives include a target for expenditures within budget. There is no reference however to other measures such as timely and accurate forecasts and effective implementation of strategic cost reduction decisions. Importantly, there is no incentive for executives to identify surplus funds or lower priorities early in the year. This coupled with a weak challenge role results in insufficient transparency limiting RMC and Executive Council's ability to adjust budget allocations to meet new and emerging priorities.

Recommendation 7:

The challenge role of the Chief Financial Officer and the Resource Management Committee needs to be carried out in a more formal and rigorous manner to enhance a regular budget review process starting at mid-year.

Recommendation 8:

Financial management accountability objectives should be included in Performance Management Agreements for all EXs who are responsible for managing Fund Center budgets.

2.3 To determine the availability and use of relevant, timely and accurate information for sound decision-making

Good management of resource allocation requires that financial and non-financial data be collected and processed completely and accurately on a timely basis. The objective is to be able to report on actual expenditures and commitments relative to plans and budgets and draw insights. One objective of effective reporting and analysis is to ensure availability and use of relevant, timely and accurate information for sound decision-making.

The Department has a process in place to produce monthly financial reports referred-to as FINSTAT. A FINSTAT template is prepared for each branch. This report constitutes the official reporting format that must be used by all managers and includes the following information: 'Budget', 'Expenditures', 'Commitments', 'Salary Forecast' and 'Planned Expenditures'. This process is documented in the Guide on Budget Management and Guide to Salary Management. In Fall 2008, Corporate Finance introduced a formal call letter signed by the CFO to initiate the monthly financial reporting process for 2009/10. This process should provide a formal framework to communicate results to support managerial decision-making and to identify resources that could be reallocated to other departmental priorities.

Our assessment revealed the following issues with FINSTAT:

  • HRMS is presently not able to provide timely and accurate human resource data for decision-making;

  • The financial information contained in the Salary Management System is not accurate;

  • Corporate Finance cannot provide a level of assurance of the accuracy of the financial information received due to inconsistencies at the branch level without adequate corporate challenge; and

  • Non-financial information is not reported in FINSTAT to allow decision makers to assess relative priorities associated with planned expenditures.

2.3.1 Human resource information is not readily available for forecasting salary expenditures

Relevant, timely and accurate human resource information is a critical element for budgeting and forecasting.

As noted in section 2.1.3 of this report, we were not able to validate headcount figures with the pay-lists from the Public Works and Government Services Canada (PWGSC) On-line Pay System. Pay-lists are maintained by classification of employees and not by organization; therefore, we were unable to extract information for HQ only. Based on a HRMS Bulletin dated July 16, 2009, managers should be able to extract from HRMS, employee and position reports of all employees in the organization, by classification code, by stream and provide information of positions in the organization. This information was requested many times from HR and many reports were produced with different figures. It seems to be very difficult to produce information for HQ only, by branch and by organization. Therefore, crucial information for decision-making is not readily available for managers.

2.3.2 Financial information contained in the Salary Management System is not accurate

The salary information contained in the FINSTAT templates comes from the Salary Management System. The financial information used from this system is not accurate. The assignment data in SMS is often out-of-date due to time delays between staffing actions and input into HRMS by Human Resources staff. Consequently, data integrity has been a significant problem for managers when trying to prepare accurate salary forecasts and expenditures incurred to date in a timely manner, especially for FINSTAT reporting. Consequently, some bureaus have taken action by implementing compensating controls (black books systems). However, there is a lack of adequate and timely action to correct the situation at the departmental level. The creation of these parallel systems and the manual reconciliation between the two systems is inefficient.

Since 2001, a software product called SMS is used to manage salary budgets across the Department. SMS receives assignment data from the HRMS as well as payroll data from the On-Line Pay System. The data in SMS is stored for historical and analytical purposes and summarized according to financial coding for export into IMS.

Numerous technical problems are encountered due to an outdated version of the software and hardware. One option is to continue the use of SMS by upgrading it and contracting Free Balance consultants to meet any future service requirements. Another option is to use the Salary Forecasting Tool which has already been developed and integrated to SAP (IMS) in eight other departments. A business case and a project charter for the SFT have been prepared by Corporate Finance recommending that the Salary Management System be replaced by the Salary Forecasting Tool effective April 2010.

The implementation of SFT should greatly improve the timeliness and accuracy of salary forecasts and expenditures which represent approximately 35% of DFAIT's budget. The manual reconciliation processes developed in the branches are not standardized, reducing the level of assurance for accuracy.

As a result, a great amount of time is spent to reconcile data from SMS to reflect actual salary expenditures. Due to the many adjustments required, the salary expenditures and the salary forecast amounts presented on monthly FINSTAT reports are not well supported. Furthermore, there are no corporate policies or guidelines describing how to reconcile salary information. Consequently, there is no consistency in the reconciliation process in the branches.

Recommendation 9:

Human Resources, in collaboration with Corporate Finance, should ensure that managers have reliable information for decision-making on all positions in their organization, including positions staffed, positions with more than one incumbent, positions budgeted and non-budgeted and positions that are vacant.

Recommendation 10:

The Department must address the accuracy of salary forecasts by proceeding quickly with the implementation of the Salary Forecasting Tool or by updating the existing system.

2.3.3 Lack of formal challenge process to provide an adequate level of confidence in forecasting of expenditures

DFAIT has a forecasting process which is linked to the FINSTAT monthly reporting. The branches update planned expenditures based on actual expenditures provided in the FINSTAT monthly templates. Upon receipt of the FINSTAT monthly templates and call letter from the CFO, the branch managers are required to provide an annual forecast, highlighting the salary and operational components for the fund centers for which they are responsible; an explanation of all variances (positive or negative), resulting from the difference between their current budget and forecast; a plan that demonstrates the measures they have implemented or will be implemented in order to control expenditures and eliminate anticipated shortfalls; an explanation of variances from previous month's forecast; and details of intradepartmental transfers, if applicable. However, non-financial information is not reported in FINSTAT to allow decision makers to assess relative priorities associated with planned expenditures.

The forecasting information is consolidated at the branch level and the results of the FINSTAT monthly reports for the branch are reviewed with the ADM to address any internal pressures. All decisions on fund transfers between Fund Centers within a branch are not visible to Corporate Finance. The FINSTAT monthly reports are summarized and presented to the RMC. The departmental summary of FINSTAT results presents the financial position of DFAIT and aims to highlight the areas of risk, variances against plans, and identify re-allocation opportunities to help meet the Department's priorities and address pressures.

We noted that, in the Guide on Budget Management, soft and hard commitments are defined and supported by a table providing examples of the treatment and classification of common expenditures in IMS. The treatment of expenditures, as hard commitments appears to be well understood. Our analysis of transactions classified as Fund Reservations for five major branches revealed that the type of expenditures included in this column was inconsistent. For example, we noted items that should have been recorded under Fund Commitment (Hard) rather than Fund Reservation (Soft).

One of the key items on the FINSTAT report 'planned expenditures', is not applied as described in the Guide on Budget Management. This column is expected to be populated with planned expenditures which should normally be included under the Soft Commitment column, therefore leading to confusion and misclassification of expenditures. We also noted that the FINSTAT report does not include an assessment of the expenditures to date versus status of planned activities.

The forecast for a branch is made up of several components as per the FINSTAT report: the year-to-date expenditures, the hard commitments, the soft commitments, the salary forecast and the planned expenditures. Since the expenditures are not consistently categorized as soft commitments and planned expenditures are not recorded in IMS, the resulting forecast figure is unreliable and lacks transparency.

As noted earlier in this report, Corporate Finance does not have the authority to exercise a challenge role at the operational level. Consequently, it is not in a position to provide assurance as to the reliability of the financial information at the departmental level.

Recommendation 11:

To strengthen the reliability and accuracy of the monthly FINSTAT reporting process, Corporate Finance needs to:

  1. Review the need for the 'planned expenditure' column on the FINSTAT report;

  2. Ensure that appropriate challenge is performed on forecasted expenditures;

  3. Modify the report to allow Fund Centre managers to identify, in order of priority, the activities against which the expenditures are made or forecasted; and

  4. Provide training to all staff involved.

3. Conclusion

Audit Opinion

In my opinion, there are significant weaknesses in the financial resource allocation process at DFAIT. More specifically, improvements are required to strengthen the effectiveness of the governance, processes and controls in place for the initial allocation and subsequent reallocation of funds within DFAIT.

It is important to note as well that since the beginning of this project, the Department has already taken major steps to address the weaknesses identified. Its governance over resource management has been significantly strengthened by mandating the RMC to address all recommendations flowing from this initiative, including a review of the current alignment of resources to priorities.

While an appropriate governance body is in place, accountability must be strengthened. This requires significant improvements in:

  • The Department's Financial Policy Framework;

  • The authority of Corporate Finance;

  • Human Resource Systems Data;

  • Application of consistent processes for reporting financial information across the department;

  • A robust challenge function based on credible information for decision-making; and

  • Oversight mechanisms to ensure executive decisions are implemented.

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 opinion provided and contained in this report. The opinion is based on a comparison of the conditions, as they existed at the time, against pre-established audit criteria that were agreed with management. The opinion is applicable only to the processes examined. The evidence was gathered in compliance with Treasury Board Policy, Directives, and Standards on internal audit for the Government of Canada. The evidence has been gathered to be sufficient to provide senior management with the proof of the opinion derived from the internal audit.

Yves Vaillancourt CAE
November 10, 2009

Appendix A – About the Audit

Objective

The main objective of the audit was to assess the effectiveness of the governance, processes and controls in place for the initial allocation and subsequent re-allocation of funds within DFAIT. In order to assess this main objective, we have broken it down into more specific sub-objectives:

  1. To determine the extent to which resources are aligned with government and corporate priorities;

  2. To determine whether there is an appropriate degree of flexibility to respond to emerging/changing priorities; and

  3. To determine the availability and use of relevant, timely and accurate information for sound decision-making.

Criteria

To align the audit work to the risk assessment performed by Deloitte, we followed the same structure used by Deloitte i.e. various stages of the budgeting/forecasting process. We outlined the criteria used to make assessments under each process and aligned these processes to the sub-objective to which it is most related. The processes have been mapped to the related Management Accountability Framework and the Core Management Control elements, as shown below.

Sub-objective 1: To determine the extent to which resources are aligned with government and corporate priorities

Funding
MAF ElementRelated Management Controls
GovernanceG-1: Effective oversight bodies should be established.G-4: The organization should have in place operational plans and objectives aimed at achieving its strategic objectives.
Risk ManagementRM-2: Management should identify the risks that may preclude the achievement of its objectives.
StewardshipST-1: The activities, schedules and resources needed to achieve objectives should be integrated into the budget.
Planning & Budgeting
MAF ElementRelated Management Controls
GovernanceG-4: The organization should have in place operational plans and objectives aimed at achieving its strategic objectives.
Risk ManagementRM-7: Planning and resource allocations should consider risk information.
StewardshipST-1: The activities, schedules and resources needed to achieve objectives should be integrated into the budget.ST-2: A formal process should be in place to challenge the assumptions and related resource allocations within the budget.

Sub-objective 2: To determine whether there is an appropriate degree of flexibility to respond to emerging/changing priorities

Budget Re-allocation
MAF ElementRelated Management Controls
StewardshipST-2: A formal process should be in place to challenge the assumptions and related resource allocations within the budget.ST-4: Forecasts should be monitored on a regular basis.ST-15: Reviews should be conducted to analyze, compare and explain financial variances between actual and plan.ST-17: Management reallocates resources to facilitate the achievement of objectives/results.
AccountabilityAC-1: Authority, responsibility and accountability should be clear and communicated.
People and Structure (Governance)
MAF ElementRelated Management Controls
GovernanceG-1: Effective oversight bodies should be established.G-2: The oversight body/bodies have a clearly communicated mandate that includes roles with respect to governance, risk management and control.
StewardshipST-2: A formal process should be in place to challenge the assumptions and related resource allocations within the budget.

Sub-objective 3: To determine the availability and use of relevant, timely and accurate information for sound decision-making

Reporting & Analysis
MAF ElementRelated Management Controls
GovernanceG-6: The oversight body/bodies request and receive sufficient, complete, timely and accurate information.
StewardshipST-3: A timely budget should be developed at the appropriate level of detail.ST-20: Appropriate and timely financial and non-financial reporting should be communicated.
Forecasting
MAF ElementRelated Management Controls
StewardshipST-4: Forecasts should be monitored on a regular basis.ST-15: Reviews should be conducted to analyze, compare and explain financial variances between actual and planned.
Technology (Enabler)
MAF ElementRelated Management Controls
GovernanceG-6: The oversight body/bodies request and receive sufficient, complete, timely and accurate information.
StewardshipST-4: Forecasts should be monitored on a regular basis.ST-20: Appropriate and timely financial and non-financial reporting should be communicated.

Scope

The planning and examination phases of the audit were conducted from July to October 2009. The audit reviewed DFAIT's budgeting process with respect to the initial allocation and re-allocation of resources. Specifically, the audit included:

  • The policy and legislative framework related to the resource allocation process;

  • The initial allocation of the Main Estimates and Supplementary Estimates and the subsequent reallocation of funds throughout the year;

  • The allocation and reallocation of Salary and Operations & Maintenance (O&M) (Vote 1) funds at the Director General level at HQ and at the mission level;

  • Forecasting tools and techniques; and

  • Information available in departmental systems:

    • Information Management System (IMS);

    • Business Intelligence (BI); and

    • Salary Management System (SMS).

This audit did not include:

  • The re-allocation of capital (Vote 5) and grants and contribution (Vote 10) funds;

  • The re/allocation of human resources (FTEs); and

  • An in-depth review of strategic planning as the foundation for resource allocation, as this process is scheduled to be audited next fiscal year.

Methodology

The audit was conducted in accordance with the International Standards for the Profession of Internal Auditing and the Treasury Board Standards for Internal Audit.

The methodology consisted of:

  • Review of legislative policy and guide that were obtained from DFAIT and Treasury Board websites.

  • Review of notes prepared by Deloitte of interviews conducted with numerous stakeholders (mostly at the Assistant Deputy Minister level).

  • Review of information relating to the planning and budgeting process available on the DFAIT and Treasury Board websites.

  • Process control mapping of planning, budgeting and allocating funds.

  • Interviews with AMAs, FMAs, Corporate Finance, and other relevant personnel.

  • Review of August 2009 FINSTAT reports and supporting documentation for a sample of branches at DFAIT.

  • Review of AMA Council Minutes from September 2008 to April 2009.

  • Review of the Terms of Reference of the Resource Management Committee along with its meeting summaries from April 2008 to May 2009.

  • Review and analysis of a costing model for a sample mission opening and closure.

  • Review and analysis of headcount data from 2006/07 to 2008/09 along with documents relating to the Department's 2007 Strategic Review exercise and 2008/09 to 2012/13 Rebalancing Exercise.

  • Review of relevant documentation relating to the proposed implementation of salary forecasting software.

  • Preparation of graphs depicting budgets and actual expenditures of Vote 1 funds at the branch and bureau level for the years 2006/07 to 2008/09.

  • Review of other relevant documentation.

Appendix B - Management Action Plan

Level of SignificanceAudit RecommendationManagement Action

1Lack of compliance with laws, acts, regulations or significant weakness in core control with no appropriate compensating factors

2Lack of compliance with departmental policy or procedure or weakness in core control with some compensating factors

3Opportunity for improvement to make programs and processes more cost effective

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1. Corporate oversight should be exercised by Corporate Finance to effectively monitor the implementation of Senior Management decisions for all strategic cost reductions. Tracking tools, with deliverables and timelines should be developed and be used for regular reporting to the Resource Management Committee.

Expected Completion Date:
13/04/2010

Area Responsible:
ADM Human Resources

Early discussions have taken place at Resource Management Committee and a formal process is currently being developed under the leadership of the ADM, Strategic Policy and Planning Branch and the CFO with a target date for implementation of April 1st, 2010.

Area Responsible:
Chief Financial Officer

To ensure a coordinated approach to this process, the department has established the Committee on Head Quarter Operations (COHO). It is expected that the Terms of Reference of COHO will be finalized and approved on April 13th, 2010. It is also expected that the requirements expressed in this recommendation will be fully addressed.

11

2. A branch/Assistant Deputy Minister should be identified and held accountable to report on the implementation of critical decisions such as those taken to reduce the number of employees at Headquarters. In addition, as per Recommendation 1 above, regular oversight and monitoring are essential to track progress against targets set.

Expected Completion Date:
31/03/2010

Area Responsible:
ADM Strategic Policy & Planning

The ADM Strategic Policy and Planning has been identified to report and track progress against target as set in Strategic Review decisions.

The tracking and reporting on the implementation of the Strategic Review headquarters reductions will be done through an implementation working group created under the direction of the Office of Transformation and including representation from branches implementing reductions and from corporate branches (HR, Finance, Domestic Property, etc.). This group is a sub-committee of, and will report to, Resource Management Committee and Transformation Management Committee.

11

3. The Department should improve the integration of the planning and budgeting processes and strengthen the corporate challenge function to ensure that budgets are better aligned with corporate priorities and that reductions impact directly on departmental lowest priorities.

Expected Completion Date:
April 2010

Area Responsible:
ADM Strategic Policy & Planning

DFAIT's multi-year integrated business planning process is part of the transformation agenda. On November 10, 2009 Resource Management Committee has approved a new approach developed along the following goals:

Align Branch/Bureau Plans with financial allocation/reallocation processes as well as Business Model Renewal initiative.

Consolidate disparate planning processes into one corporate-level exercise, reducing the overall planning and reporting burden on the department.Convert departmental priorities and key ongoing commitments into concrete three year Branch/Bureau plans which can be monitored over the course of the next year with a linkage of Branch/Bureau plans to Performance Management Agreement and Management Accountability Framework processes.Customize mandatory documents that the department must deliver to the centre to enable better communication of departmental objectives both internally and externally.

To accomplish these goals, a new data collection template has been developed to collect the following information:

Branch Resources Information

Departmental priorities and Ongoing commitments linked to Branch/Bureau business commitments/resultsPerformance measurement and performance indicatorsReallocation / RemodellingRisk assessment (internal and external) and risk managementHuman Resource (HR) requirementsCommunications needsIM/IT needsProcurement requirementsValues and Ethics needsAccountability

Area Responsible:
Chief Financial Officer

The challenge function will rest with the Resource Management Committee with the responsibility to perform the necessary analysis assigned to the Strategic Policy and Planning Branch and the CFO.

The first iteration of this new process should be completed in April 2010. The department will then be in a good position to assess its effectiveness in order to improve where necessary.

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4. The Department should implement a full A-base review process (on a three to five year cycle) to ensure alignment of priorities with resources remains current. This could be integrated with strategic reviews. In addition, this process would confirm proposed activities' level of priority.

Expected Completion Date:
April 2010

Area Responsible:
Chief Financial Officer

This recommendation is being addressed by the implementation of the Integrated Planning Process described in recommendation 3.

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5. Prioritize the implementation of the Chief Financial Officer model across the Department, including the integration of Financial Management Advisors. This will require clarification of respective roles and responsibilities of Financial Management Advisors and Area Management Advisors.

Expected Completion Date:
30/04/2010

Area Responsible:
Chief Financial Officer

The CFO is currently developing the CFO Model Implementation Strategy which will be presented to the Resource Management Committee. The strategy is currently organized along the five financial disciplines outlined in the Treasury Board Financial Management Framework (Financial Management Governance, Internal Control, Financial Resource Management, Financial Information reporting and Stewardship of Financial Management Systems).

This model will be embedded into the DFAIT Financial Management Framework which will also include the definition of roles and responsibilities of the following key stakeholders: Deputy Ministers, Senior Managers and Departmental Managers and Financial officers. The strategy will also include a list of projects, along with the associated costs, that will be undertaken over the next three years to ensure that DFAIT will comply with the requirements listed in the policies issued by Treasury Board for sound financial management.

Expected Completion Date:
01/04/2010

On February 19, 2010 the Deputy Ministers sent a message to all executives and Area Management Advisors announcing that the Financial Management Advisor model will be implemented in the Department beginning April 1, 2010 and that the financial management functions currently performed by Area Management Advisors will be transferred to Financial Management Advisors.

22

6. An appropriate policy framework, that includes policies, procedures and guidelines as required, should be developed to clearly provide the authority required to enforce its application, including standardized processes, clarifying roles and responsibilities of all parties involved in the budgeting/forecasting process, including AMA and FMA roles, and clarifying the definitions of soft and hard commitments.

Expected Completion Date:
31/03/2011

Area Responsible:
Chief Financial Officer

The Guide on Budget Management is currently under revision taking into consideration all the elements contained in recommendation 6 and 7.

The revision of the Guide on Budget Management will be done in two phases. In 2010-11, a Policy Suite on Resource Management will replace the actual Guide.

During Phase1 we will:

Clarify the key definitions; andReview roles and responsibilities as they relate to the Policy on Entering Commitments and Planned Expenditures.

During Phase 2 we will:

continue to revise existing policies associated with Budget and Resource Management with an expected completion date of March 31/2011

Once the new policy suites and accompanying directives are written and approved, formal training will be provided to managers.

22

7. The challenge role of the Chief Financial Officer and the Resource Management Committee needs to be carried out in a more formal and rigorous manner to enhance a regular budget review process starting at mid-year.

Expected Completion Date:
31/08/2010

Area Responsible:
Chief Financial Officer

The monthly FINSTAT will be re-modeled for the new fiscal year to provide senior management with the additional financial data required for sound business decisions.

The FINSTAT reporting process will begin in July and monthly thereafter. The Financial Management Advisor will play an important role as it relates to performing the appropriate challenge function before the results are presented at Resource Management Committee by the CFO.

The standardization will only be completed once Financial Management Advisors are in place in all Branches.

33

8. Financial management accountability objectives should be included in Performance Management Agreements for all EXs who are responsible for managing Fund Center budgets.

Expected Completion Date:
01/06/2010

Area Responsible:
ADM Human Resources

In 2009-10, the Performance Management Agreements included an element where all ADMs were required to certify their financial position at the end of October. This element was also included for all other EXs in support of their ADMs.

Area Responsible:
Chief Financial Officer

Discussion will take place at Resource Management Committee to include, in the 2010-2011 Performance Management Agreement, new elements such as timely and accurate forecasts and effective implementation of strategic cost reduction decisions.

22

9. Human Resources, in collaboration with Corporate Finance, should ensure that managers have reliable information for decision-making on all positions in their organization, including positions staffed, positions with more than one incumbent, positions budgeted and non-budgeted and positions that are vacant.

Expected Completion Date:
01/04/2010

Area Responsible:
ADM Human Resources

The CFO with the collaboration of the CIO and the ADM HR has already begun the project towards the implementation of the Salary Forecasting Tool to significantly improve the reporting mechanism as well as the accuracy of the salary forecast for the preparation of the monthly FINSTAT.

11

10. The Department must address the accuracy of salary forecasts by proceeding quickly with the implementation of the Salary Forecasting Tool or by updating the existing system.

Expected Completion Date:
31/07/2010

Area Responsible:
Chief Financial Officer

The process around monthly forecasting will be streamlined, documented in the Directive on the use of the Salary Forecasting Tool, and implemented on April 1st, 2010.

The first salary forecasting reports will be made available to managers for the 1st quarter of 2010.

This should provide managers with reliable information for decision-making.

11

11. To strengthen the reliability and accuracy of the monthly FINSTAT reporting process, Corporate Finance needs to: Review the need for the 'planned expenditure' column on the FINSTAT report;

Ensure that appropriate challenge is performed on forecasted expenditures;Modify the report to allow Fund Centre managers to identify, in order of priority, the activities against which the expenditures are made or forecasted; andProvide training to all staff involved.

Expected Completion Date:
01/04/2010

Area Responsible:
Chief Financial Officer

The implementation of the Financial Management Advisor Model will contribute significantly to the reliability and accuracy of the monthly FINSTAT reporting process by ensuring an appropriate challenge function of forecasted expenditures and the provision of training to all staff involved in the process.

The implementation of the Salary Forecasting Tool and the automation of the FINSTAT process for missions should also contribute to the same objective.

The revamping of the overall FINSTAT process has begun with the objective of improving the reporting situation and producing better information for decision making.


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Date Modified:
2013-01-10