AUDIT OF KEY FINANCIAL PROCESSES AT EASTERN ONTARIO FIELD UNIT

Transcription

1 AUDIT OF KEY FINANCIAL PROCESSES AT EASTERN ONTARIO FIELD UNIT FINAL REPORT Prepared by: PARAGON Review and Consulting Inc. March 2006 Report tabled and approved by the A&E Committee

2 Her Majesty the Queen in Right of Canada, represented by the Chief Executive Officer of Parks Canada, 2007 Cagalogue No. : R60-3/ ISBN : PEAG 2

3 TABLE OF CONTENTS EXECUTIVE SUMMARY BACKGROUND OBJECTIVES AND SCOPE METHODOLOGY ASSURANCE STATEMENT CONCLUSION OBSERVATIONS AND RECOMMENDATIONS Management Control Framework (MCF) Revenues Contracting Use of Acquisition Cards Expenditures for Travel Payments to Suppliers Safeguarding of High Risk Valuable Small Items Financial Coding Report tabled and approved at the A&E Committee meeting on March 26, 2007 PEAG 3

4 EXECUTIVE SUMMARY Parks Canada Agency (PCA) is conducting a series of cyclical audits of field units, service centers and the national office to review key financial, administrative and management practices. The audits focus on compliance with Treasury Board Secretariat (TBS) and PCA policies and practices. The audit of the (EOFU) was conducted as part of this cyclical audit program. The objectives of this audit were to confirm whether due diligence is being exercised in key management processes and to provide assurance to senior management that processes and controls in place at the EOFU are adequate to ensure compliance to TBS and PCA policies and practices. The scope of this engagement included the review of the management control framework (MCF) over financial management and the following key financial process areas: Revenues; Contracting; Use of Acquisition Cards; Expenditures for Travel; Payments to Suppliers; and, High Risk Valuable Small Items and Financial coding. The period from April 1, 2005 to January 31, 2006 was covered in this audit. The audit methodology included a review of relevant background documentation, interviews with EOFU personnel and transaction testing in key financial process areas. The EOFU was visited during the period February 14 to February 28, In our opinion, sufficient audit work has been performed and the necessary evidence has been gathered to support the conclusions contained in this report. Overall, we found that due diligence is being exercised in the management processes at the EOFU over Revenue and Financial Coding and that processes and controls in place for these areas are adequate to mitigate the risk of non-compliance to TBS and PCA policies. For Contracting, Use of Acquisition Cards, Expenditures for Travel, Payments to Suppliers and Safeguarding of High Risk Valuable Small Items, we found that the due diligence exercised in management processes over these areas should be strengthened and that processes and controls in place for these areas are weak in mitigating the risk of non-compliance to TBS and PCA policies. PEAG 4

5 Audit Reporting Rating Summary: Ref Management Process Rating 6.1 Management Control Framework GREEN Controlled 6.2 Revenue 6.3 Contracting 6.4 Acquisition Cards 6.5 Travel Expenditures GREEN Controlled YELLOW Moderate Improvements Needed YELLOW Moderate Improvements Needed YELLOW Moderate Improvements Needed 6.6 Payments to Suppliers 6.7 Safeguarding of High Risk Valuable Small Items 6.8 Financial Coding YELLOW Moderate Improvements Needed ORANGE Significant Improvements Needed GREEN Controlled We have identified opportunities to strengthen processes and controls in the key financial process areas examined to increase the level of compliance to TBS and PCA policies. We have outlined below our recommendations for consideration by the EOFU Superintendent and Manager, Finance and Administration: 1. The Field Unit Superintendent should ensure that combinations for all safes in use at the EOFU should be on a periodic basis. 2. The Field Unit Superintendent should perform monitoring on contracting activities to strengthen compliance, reduce related budgetary risks, and enhance value for money on the funds spent. PEAG 5

6 3. The Field Unit Superintendent should require authorized EOFU staff to initiate contracts with a value of $5000 or less using Local Purchase Order Authorization Forms (LPOA) for goods and Professional Service Contracts 00 (PS1) for services. 4. The Field Unit Superintendent should require EOFU staff to set up commitments in the SAP (STAR) on the initiation of the contract with a value of $5000 or less when using a LPOA or PS1. 5. The Field Unit Superintendent should consider creating an Acquisition Card Co-ordinator role in the EOFU to strengthen monitoring and control over the use of Acquisition Cards. 6. The Field Unit Superintendent should ensure that upon the issuance of an acquisition card to a staff member an acknowledgement form is signed by both the staff member and the Responsibility Centre Manager. 7. The Field Unit Superintendent should develop acquisition card procedures and perform monitoring activities to minimize the risk of: I. cardholders signing their own statements; II. cardholders not providing supporting invoice documentation with Acquisition Card purchase registers; III. Vessel Cards not being signed by supervisor/department manager and, IV. Purchases which exceed the $5,000 expenditure limit. 8. The Field Unit Superintendent should ensure that Travel Authority Forms are completed in advance of travel. 9. The Field Unit Superintendent should ensure that EOFU managers document contract terms using appropriate contract documents at initiation of the contract. 10. The Field Unit Superintendent should ensure that formalized procedures related to monitoring of High Risk Valuable Small are established. PEAG 6

7 1. BACKGROUND Parks Canada Agency (PCA) is conducting a series of cyclical audits of key financial, administrative and management practices for all field units, service centres and the national office. There are 32 field units and four service centres in the PCA. Field units are groupings of national parks, national historic sites and national marine conservation areas that are usually in proximity to one another. Their proximity allows them to share management and administrative resources. The service centres support the organization in a variety of professional and technical disciplines. The (EOFU) comprises: St. Lawrence Islands National Park and the following twelve National Historic Sites: Battle of the Windmill, Bellevue House, Fort Henry, Fort Wellington, Glengarry Cairn, Inverarden House, Laurier House, Merrickville Blockhouse, Murney Tower, Rideau Canal, Shoal Tower, Sir John Johnson House. The EOFU operates with a budget of approximately $14 million. The Ontario Service Centre (OSC) in Cornwall provides contracting and procurement services and transaction processing services including payment of supplier accounts on behalf of the EOFU. In addition, the OSC provides the EOFU with administrative support in the issuance of Acquisition Cards to EOFU personnel and the dissemination of Acquisition Card policies and directives. The audit of the EOFU was conducted by Paragon Review and Consulting Inc. on behalf of the Performance, Evaluation and Audit Group of PCA as part of this cyclical audit program. 2. OBJECTIVES AND SCOPE The objectives of this audit were to confirm whether due diligence is being exercised in key management processes at the EOFU and to provide assurance that systems and controls in place are adequate to ensure compliance to TBS and PCA policies and practices. The scope of the audit included the review of the management control framework (MCF) over financial management and the following key financial process areas: Revenues; Contracting; Use of Acquisition Cards (excluding ARI cards); Expenditures for Travel; Payments to Suppliers; High Risk Valuable Small Items; and, Financial Coding. Transactions incurred during the period from April 1, 2005 to January 31, 2006 were covered in this audit. PEAG 7

8 3. METHODOLOGY The audit methodology included site visits to St. Lawrence National Park; Rideau Canal, Bellevue House, and Fort Wellington National Historic Sites and the Ontario Service Centre (OSC) and included the following activities: Interviews with EOFU management and personnel responsible for the key financial process areas; Interviews with the OSC personnel responsible for providing contracting and procurement services on behalf of EOFU mangers; Interviews with OSC staff responsible for the processing of transactions Review of relevant documentation including the OEFU Sustainable Business Plan for 2006/2007 to 2010/2011, organization charts, work descriptions, PCA delegated Signing Authorities Chart, policies that deal with the key financial process areas, management meeting minutes, samples of budgets and financial reports prepared by the Manager, Finance and Administration; and, Examination of a sample of transactions for each of the key financial process areas, where applicable. After the field work was complete, a debriefing of our preliminary observations was provided to the OEFU Superintendent and Manager of Finance and Administration. Our observations and recommendations have been made in accordance with the Audit Reporting Rating System described below: RED ORANGE Unsatisfactory Significant Improvements Needed YELLOW Moderate Improvements Needed BLUE Minor Improvements Needed Audit Reporting Rating System Controls are not functioning or are nonexistent. Immediate management actions need to be taken to correct the situation. Controls in place are weak. Several major issues were noted that could jeopardize the accomplishment of program/operational objectives. Immediate management actions need to be taken to address the control deficiencies noted. Some controls are in place and functioning. However, major issues were noted and need to be addressed. These issues could impact on the achievement or not of program/operational objectives. Many of the controls are functioning as intended. However, some minor changes are necessary to make the control environment more effective and efficient. GREEN Controlled Controls are functioning as intended and no additional actions are necessary at this time. PEAG 8

9 4. ASSURANCE STATEMENT In our opinion, sufficient audit work has been performed and the necessary evidence has been gathered to support the conclusions contained in this report 5. CONCLUSION In general, we found that due diligence is being exercised in the management processes at the EOFU over Revenue, and Financial Coding and that processes and controls in place for these areas are adequate to mitigate the risk of non-compliance to TBS and PCA policies. For Contracting, Use of Acquisition Cards, Expenditures for Travel, Payments to Suppliers and Safeguarding of High Risk Valuable Small Items, we found that the due diligence exercised in management processes over these areas should be strengthened and that processes and controls in place for these areas are weak in mitigating the risk of noncompliance to TBS and PCA policies. We have outlined our observations and our recommendations, where applicable, for the MCF over financial management and for each key financial process area examined in Section 6 of the report. 6. OBSERVATIONS AND RECOMMENDATIONS 6.1 Management Control Framework (MCF) Green Controlled Controls are functioning as intended and no additional actions are necessary at this time. Observations Our work at the EOFU included review of relevant documentation and interviews with the Manager, Finance and Administration, Site Superintendents, and Operations and Administration staff at each site visited. We found that the MCF over financial management includes policies and procedures related to finance and administration activities that have been established and communicated to staff. These include direction and guidance with respect to financial coding, delegated financial authorities, and contracting and procurement. Roles and responsibilities of finance staff are clearly defined and documented. An annual business planning and budgetary process exits where Field Unit priorities are identified and established by the management team and resources are allocated. Monitoring of financial performance against plans and budgets is ongoing. Site Superintendents provide a challenge role to the financial results of operating managers at their respective locations and the Field Unit Finance and Administration Manager and the Field Unit Superintendent, in turn, provide a challenge role on the financial results of the PEAG 9

10 individual sites. The Field Unit Management Committee meets monthly and is chaired by the Field Unit Superintendent. Budgets are discussed at these meetings and minutes of the management committee meetings are maintained. Training on financial policies, procedures, and practices is provided to managers and staff through on the job training, ongoing advice/communication from the Manager Finance and Administration, Site Finance and Administration Officers, and through formal training sessions such as training on contracting provided by contracting specialists from the OSC and the mandatory on-line financial authorities training course FA101. The EOFU Finance and Administration manager is monitoring to ensure that all staff with signing authority have taken the FA101 course. The audit team observed that finance and administration staff at EOFU headquarters, EOFU sites visited, and the OSC provide communication and support to managers and staff in regards to financial management and policy compliance. Back up of data is performed daily and safeguarded. The EOFU server is located in secure location at the EOFU headquarters. Back up of data is performed daily and safeguarded. 6.2 Revenues Green Controlled Controls are functioning as intended and no additional actions are necessary at this time. Observations A number of different types of revenues are received at the EOFU including: Park Day Use Fees, Lockage Fees, Mooring and Docking Fees, Camping Fees, Staff Housing, Permits and Licences, Land Rental, and Historic Site Entrance Fees. For the period April 1, 2005 to February 13, 2006, revenues from operations amounted to approximately $1,240,000. The majority (87%) of these revenues were earned through the Rideau Canal ($797K) and St. Lawrence Island National Park ($281K). Mooring and Docking Fees of $359K and Lockage Fees of $268k account for approximately 51% of total revenues. Park Entry Fees $112K and Camping Fees $18K represent approximately 10 %. Detailed descriptions of the revenues processes and verification procedures followed at each location were provided to the audit team. The audit team found that training on revenues handling and reporting procedures is provided to new staff. Permits are controlled and safeguarded. Reconciliation of revenues and analytic review of revenues data is performed by EOFU HQ Finance and at individual sites. PEAG 10

11 A sample of 70 transactions were tested and the audit team found that overall, processes and controls including segregation of duties related to revenues collection and recording were adequate and that personnel conducted their work with diligence. Safes are used to safeguard permits and funds. Safes are located at sites where access to the safe is restricted to authorized EOFU personnel. At three of the six locations visited the audit team found that the combination to the safe on site had not been changed on a periodic basis as required. This practice increases the risk of unauthorized access and could result to loss of funds or valuable items such as permits. Recommendation 1. The Field Unit Superintendent should ensure that combinations for all safes in use at the EOFU are changed on a periodic basis. Agree A memo has been sent to all locations with safes advising staff of the requirement to have the combinations changed immediately and a minimum once per year hereafter and at any time there is a staff change. This action will complete by end of June 2006 and monitored on an annual basis. 6.3 Contracting Yellow Moderate Improvements Needed Some controls are in place and functioning. However, major issues were noted and need to be addressed. These issues could impact on the achievement or not of program/operational objectives. Observations The EOFU enters into contracts for the procurement of goods and services using a variety of instruments including Services Contracts, Call Ups Against Standing Offers, Purchase Orders, and Acquisition Cards (discussed in Section 6.4). The audit team found that EOFU personnel are provided with contracting advise and assistance through the OSC and the EOFU Headquarters. In addition, the audit team found that training and contracting tools, such as contract templates and procurement guides, are made available to managers to assist them with contracting activities. The OSC enters all contracts with a value of $1000 or greater into the SAP materiel management system on behalf of the EOFU. For contracts greater than $5000 this occurs at the initiation phase of the contract when the OSC is preparing the contract documents on behalf of the EOFU manager. For contracts less than $5000, entry into the materiel PEAG 11

12 management system generally occurs at the time the invoice is submitted to the OSC for payment. The audit team found through interviews with EOFU finance personnel and the OSC contracting specialist that in the majority of cases no contract document exists for these items. EOFU personnel have not been using the Local Purchase Order Authorization Forms (LPOA) and Professional Service Contracts (PS1) for services contracts < $5,000 in initiating contracts. Therefore, when the invoice arrives at the OSC for payment an after the fact contract number is created to allow the payment to be processed. This practise increases the risk of disputes with suppliers. Furthermore, not inputting the commitment into the SAP at time of the initiation of the contract also increases budgetary control risk. No management reports are prepared on contracting activities by OSC or EOFU Finance for use by EOFU management on periodic basis to monitor contracting activities and compliance. The OSC does not perform a monitoring role. The OSC as a service provider could prepare contract reports for EOFU management to be used in monitoring contracting risks. (ie. Number of sole source contracts, identification of contract amendments, identification of repeat sole source contracts to same supplier(s), number of contracts where OSC had to create an after the fact commitment number) No monitoring of contracting activities increases the risk of non-compliance to contracting policies that could result in a perception of unfairness and reduced value for money on funds spent. A sample of 12 contracts with individual values of greater than $5,000 was examined and the audit team found compliance to contracting policies. No exceptions were noted. Recommendation 2. The Field Unit Superintendent should perform monitoring on contracting activities to strengthen compliance, reduce related budgetary risks, and enhance value for money on the funds spent. Agree - A detailed report is available on line in STAR. The report was reviewed by managers at the December 2006 management meeting and in the future will be reviewed at a minimum once per quarter. 3. The Field Unit Superintendent should require authorized EOFU staff to initiate contracts with a value of $5000 or less using Local Purchase Order Authorization Forms (LPOA) for goods and Professional Service Contracts (PS1) for services. Agree Immediately prior to the audit the field unit recommenced using LPOAs. The Ontario Service Centre has agreed to begin preparing a monthly report indicating where PEAG 12

13 this is not occurring or where a different type of purchase document would have been more appropriate. 4. The Field Unit Superintendent should require EOFU staff to set up commitments in the SAP (STAR) on the initiation of contract with a value of $5,000 or less using a LPOA or PS1. Agree Training will be arranged for several clerks in the Field Unit and minor contract/ LPOA data will be input to MM module of STAR at the initiation stage rather than payment stage. Training was provided in November 2006 and January Use of Acquisition Cards Yellow Moderate Improvements Needed Some controls are in place and functioning. However, major issues were noted and need to be addressed. These issues could impact on the achievement or not of program/operational objectives. Observations Acquisition cards are the preferred mechanism for the procurement of goods and services for transactions less than $5,000. There are 77 acquisition cards including 5 site specific Vessel Cards in the EOFU. Vessel Cards are departmental cards. Vessel cards in place include: Rideau Canal Engineering (2), Bellevue House (1), Laurier House (1), St. Lawrence Island National Park (1). Vessel cards can be used by different individuals and are controlled by the department or site manager. Credit limits on cards are determined based on expected usage. Credit limits range from $22,000 to $1,000. The majority (69%) of the acquisition cards have a credit limit of $5,000 or less. The EOFU Finance Office does not perform any monitoring activities on the use of Acquisition Cards by personnel. Acquisition Card Purchase Registers and MasterCard Statements are forwarded monthly to the OSC for payment processing by EOFU personnel directly from site offices. The Acquisition Card Co-ordinator for the EOFU is located in the OSC. The Acquisition Card coordinator at the OSC performs this role on behalf of all field units in Ontario. The Acquisition Card Co-ordinator is the primary contact for the EOFU with the Bank of Montreal and the PCA National Office Acquisition Card Co-ordinator. The Acquisition Card Co-ordinator disseminates information that is obtained from the bank and PCA headquarters to the EOFU through the Finance and Administration Office. Limited monitoring activities are performed by the Acquisition Card Co-ordinator in the OSC on the use of cards by EOFU staff. No challenge role is performed by the OSC Co-ordinator. The role also encompasses facilitating applications for new cards on behalf of EOFU and PEAG 13

14 maintaining a file of completed Acknowledgement and Application Forms. TB policy requires that cardholders and their Responsibility Manager sign a written acknowledgement of responsibilities and obligations before receiving an acquisition card. The audit team examined five acknowledgement of responsibilities and obligations forms and found that they were not signed by the PCA Responsibility Centre Manager. Role of the Acquisition Card Co-ordinator could be strengthened in the EOFU. Consideration should be given to moving the role to the EOFU and other Ontario FU s. The use of Master Card Reports which would be available online to the Acquisition Card Coordinator at the field unit level would enhance the monitoring of the use of the cards. Mastercard files were examined for 13 employees. The audit team found that monthly statements are reconciled to the MasterCard Purchase Register prepared by the cardholder. We did however find the following instances of non-compliance to PCA and TB policy: S. 34 was not signed by the cardholders supervisor (4); Receipts were missing with statement and register (2); Vessel Card Purchase register not signed by supervisor/department manager (1); and, Transaction exceeded $5,000 expenditure limit (1). This resulted because of the application of US exchange rate to a sale made from a US supplier. EOFU Finance and OSC Acquisition Card Co-ordinator have taken measures to increase awareness of the policy and to enhance compliance. Correspondence was examined which supported this finding. In addition, our review of Acquisition Card files showed that this increased awareness and compliance monitoring has resulted in enhanced compliance during the last six months of the fiscal year. Recommendation 5. The Field Unit Superintendent should consider creating an Acquisition Card Coordinator role in the EOFU to strengthen monitoring and control over the use of Acquisition Cards. Agree with need to continue strengthening acquisition card practises. We will continue to rely on the acquisition co-ordinator in the Ontario Service center. Beginning April 2006 we will request monthly reports from OSC until such time we feel required improvements have been achieved. PEAG 14

15 6. The Superintendent should ensure that upon the issuance of an acquisition card to a staff member an acknowledgement form is signed by both the staff member and the Responsibility Centre Manager. Agree with reserve. The Manager approves all requests for new acquisition cards prior to the application being processed. The acknowledgement form is signed by the employee only and meets the requirement of TB policy 5.h. We see no additional benefit to the Manager also signing acknowledgement form. 7. The Field Unit Superintendent should develop acquisition card procedures and perform monitoring activities to minimize the risk of: V. cardholders signing their own statements; VI. cardholders not providing supporting invoice documentation with Acquisition Card purchase registers; VII. Vessel Cards not being signed by supervisor/department manager and, VIII. Purchases which exceeded the $5,000 expenditure limit Agree Procedures were strengthened prior to the audit and the FU believes these observations are no longer a problem. Ongoing monitoring will continue. 6.5 Expenditures for Travel Yellow Moderate Improvements Needed Some controls are in place and functioning. However, major issues were noted and need to be addressed. These issues could impact on the achievement or not of program/operational objectives. Observations The audit team reviewed the processes for the authorization and processing of travel claims and selected a sample of 14 travel claims for examination. All 14 travel claims examined did not have a completed TAA form or blanket authority authorizing the travel. The audit team was told that the practise in the EOFU is not to have a TAA form completed and approved prior to travel unless a travel advance is requested. This practise increases the risk of unauthorized travel and in the event of an accident it may also result in disputes over the eligibility of the travelling staff member for insurance coverage. Amex Government Travel Cards are used in the EOFU. Staff members are given the Abridged Travel Card Policy upon receipt of the card. The Travel Card Co-ordinator is PEAG 15

16 located in the OSC. The Travel Card Co-ordinator authorizes, issues, and monitors card usage. Overall the audit team found that, with the exception of not having a completed Travel Authority Form prepared in advance of travel where no advance is required, travel claims examined complied with the TBS Travel Directive and that expenditures are being verified for accuracy and eligibility and are properly certified. Recommendation 8. The Field Unit Superintendent should ensure that Travel Authority Forms are completed in advance of travel. Agree Blanket authorities for staff who travel regularly have been approved for 2006/07 as required. In future years forms will be prepared by April 1st. All other staff will be required to complete the Travel Authority prior to their trip or for trips outside the area of their blanket authority. Monitoring will be done by the OSC at time of payment of claim. 6.6 Payments to Suppliers Yellow Moderate Improvements Needed Some controls are in place and functioning. However, major issues were noted and need to be addressed. These issues could impact on the achievement or not of program/operational objectives. Observations We conducted interviews with OSC staff and EOFU finance and administration personnel and tested a sample of payment files. For contracts valued at less than $5,000 commitments are generally entered and committed in the financial accounting system after the invoice is received rather than at time of initiation of the contract. At initiation of the contract a contract document such as an LPOA or PO is not created. The audit team found 6 items out of 19 where no LPOA or PO was prepared at contract initiation. This finding is consistent with the finding in the section on contracting above. This practise weakens financial management control and increases the risk of reduced value for money on funds spent. Our testing of payment files also found that S34 payment authorization is performed by authorized EOFU personnel. The audit team found that the OSC when executing s 33 PEAG 16

17 does not agree the invoice details to contract documents. Reliance is placed on the s34 of the EOFU Manager. Audit team was advised that EOFU management is taking action to improve compliance in this area by training, increased monitoring by Finance Group, and support of the FUS. Recommendation 9. The Field Unit Superintendent should ensure that EOFU managers document contract terms using appropriate contract documents at initiation of the contract. Agree- Training on contracting and procurement has been provided in January and February 2006 to Managers within the Field Unit. A detailed report is available through National Office. A report will be requested and reviewed at the end of each quarter by Superintendent and Management committee as required. This report is now available in STAR under List of purchasing. 6.7 Safeguarding of High Risk Valuable Small Items Orange Significant Improvements Needed Controls in place are weak. Several major issues were noted that could jeopardize the accomplishment of program/operational objectives. Immediate management actions need to be taken to address the control deficiencies noted. Observations Through interviews with EOFU finance staff and site personnel and review of documentation provided, the audit team found that: High Risk Valuable (attractive) items such as digital cameras, GPS equipment and tools are generally entrusted to the managers who purchase them; No formalized procedures have been established for staff dealing with the identification, recording and periodic monitoring of assets of this nature; Monthly acquisition card registers completed by cardholders do not specifically provide for the identification of assets purchased; Computer equipment including laptops when purchased by the Field Unit Information Technology Support Officer is given a Materiel In Use (MIU) number. No identification sticker is put on the asset. No formal inventory of these assets in use at the EOFU has been taken in the past year. The audit team was told that a detailed inventory by location is to be conducted in the first quarter of fiscal 2006/07 by the Information Technology Support Officer. PEAG 17

18 The management and safeguarding of attractive items could be strengthened by establishing formalized procedures related to the identification, recording and monitoring of these assets. This may include a requirement to conduct periodic physical inventory counts of these assets and the requirement to identify assets purchased on Acquisition Card register logs. Upon completion of our fieldwork, we were informed that the National Finance Office is in the process of developing and implementing a user-friendly national system for High Risk Low Dollar Value Items using the STAR (SAP) integrated finance and material system. It is anticipated that the inventory system will be operational by April 1, Field Units will be required to populate the database with only new acquisitions purchased after April 1, Recommendation 10. The Field Unit Superintendent should ensure that formalized procedures related to monitoring of High Risk Valuable Small Items are established. As best practice, the Field Unit should consider doing a physical count to update its inventory lists in order to have accurate information to input in the system when implemented. 6.8 Financial Coding Green Controlled Controls are functioning as intended and no additional actions are necessary at this time. Observations The audit team found that financial coding reference information is available to managers on the PCA intranet and that financial coding instruction and tools have been provided to managers to be used as a resource in coding transactions. EOFU headquarters finance office performs financial coding on transactions for responsibility centre managers at EOFU headquarters. At other sites visited in EOFU responsibility centre managers perform coding on their own transactions. The practice of performing the financial coding on behalf of managers is not consistent with the spirit of the financial coding policy and increases the risk of errors in coding and timeliness of processing. EOFU finance personnel provide a high level review of financial coding through the performance of periodic review of cost center financial reports. The audit team found that PEAG 18

19 coding of transactions performed by EOFU is not subject to a challenge role or review as part of account verification procedures by OSC finance staff. The audit team examined the financial coding on a sample of 37 transactions and found one coding error. The transaction was charged to the wrong general ledger account. The audit team concludes that due diligence is exercised in the management of financial coding at the EOFU. Recommendation None PEAG 19