AUDIT OF KEY FINANCIAL PROCESSES AT THE SASKATCHEWAN SOUTH FIELD UNIT

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1 AUDIT OF KEY FINANCIAL PROCESSES AT THE SASKATCHEWAN SOUTH FIELD UNIT Prepared by: Samson & Associates FINAL REPORT 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 Catalogue No.: R60-3/ E-PDF ISBN: PEAG 2 OCTOBER 2007

3 TABLE OF CONTENTS EXECUTIVE SUMMARY BACKGROUND OBJECTIVES AND SCOPE METHODOLOGY ASSURANCE STATEMENT CONCLUSION OBSERVATIONS AND RECOMMENDATIONS Management Control Framework Revenues Contracting Acquisition Cards Travel Financial Coding Payments to Suppliers Stores Inventory and Safeguard of High Risk Valuable Small Items Rapport présenté et approuvé par le comité de vérification et évaluation lors de la réunion du 26 mars 2007 PEAG 3 OCTOBER 2007

4 EXECUTIVE SUMMARY Background Parks Canada Agency (PCA) conducts cyclical audits of field units, service centres and the national office to review key financial, administrative and management practices. The audits focus is on compliance with Treasury Board Secretariat (TBS) and PCA policies and practices. The audit of the (SSFU) was conducted as part of this cyclical audit program. The SSFU includes the Grasslands National Park, the historic sites of Motherwell, Fort Walsh, Batoche and Fort Battleford. There is also a small administrative office in Saskatoon. Administrative and financial management of the SSFU is partially located at the different sites, with the main finance function being in Val Marie, Saskatchewan where the Grasslands National Park is located. Objectives and Scope 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 SSFU are adequate to mitigate the risk of non-compliance to Treasury Board Secretariat (TBS) and PCA policies and practices. The scope of the audit covered the following areas: Revenues, Contracting, Use of Acquisition Cards, Expenditures for Travel, Financial Coding, Payments to Suppliers and Stores Inventory and Safeguarding of High Risk Valuable Small Items. The scope of the audit covered processes in place and transactions entered into between April 1, 2006 and July 31, 2006, except for contracting which included the latter months of fiscal year The audit included a visit to the SSFU during the period of August 21 to 28, 2006 and included the following activities: Interviews with the SSFU management and personnel, at all sites, who are responsible for all the areas being reviewed; Review of relevant documentation provided by Parks Canada National Office and the SSFU, including the SSFU Business Plan for fiscal year , the SSFU delegated signing authorities chart, policies and guidelines concerning the management control framework, revenues, contracting, payments to suppliers, acquisition cards, travel expenses and financial coding; and An on-site examination of a sample of transactions in each of the key areas covered by the assignment. PEAG 4

5 At the conclusion of the fieldwork, a debriefing of our preliminary observations was made to SSFU s Chief Financial Authority (CFA) and the Superintendent of the field unit. Statement of Assurance In our opinion, sufficient audit work has been performed and the necessary evidence has been gathered to support the conclusions contained in this report. Our observations and recommendations have been made in accordance with the Audit Reporting Rating System used by Parks Canada. Conclusion Overall, we found that due diligence is being exercised in the management processes and that systems and controls in place to monitor revenues, contracting, payments to suppliers, acquisition cards, travel expense, and financial coding are adequate. However, we have identified areas where improvements should be made. The following table illustrates the rating summary for the SSFU. FINANCIAL PROCESS RATING Management Control Framework BLUE Many of the controls are functioning as intended. However, some minor changes are necessary to make the control environment more effective and efficient. Revenues BLUE Many of the controls are functioning as intended. However, some minor changes are necessary to make the control environment more effective and efficient. Contracting YELLOW 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. Acquisition Cards BLUE Many of the controls are functioning as intended. However, some minor changes are necessary to make the control environment more effective and efficient. Travel BLUE Many of the controls are functioning as intended. However, some minor changes are necessary to make the control environment more effective and efficient. Financial Coding GREEN Many of the controls are functioning as intended. However, some minor changes are necessary to make the control environment more effective and efficient. PEAG 5

6 Payment to Suppliers YELLOW 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. Stores Inventory & Safeguard of High Risk Valuable Small Items YELLOW 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. We have made the following recommendations to the Field Unit Superintendent: Revenues Recommendation # 1: We recommend that the Motherwell site keep its safe locked at all times. In addition, in order to maintain better control over the items in the safe, we recommend that they consider reducing the number of persons who have access to the safe. Recommendation # 2: We recommend that all sites ensure that bank deposits are made at least once a week as per PCA Policy, unless the cash on hand is very small. Recommendation # 3: We recommend that Fort Walsh include a copy of the cash register tape with the cash report sent to Grasslands. Recommendation # 4: We recommend that the cash balancing sheet be signed by the person verifying its accuracy in Fort Walsh. Recommendation # 5: Any discrepancies between the cash tape and the sales or cash reports should be investigated and that an explanation be provided on the sales report. Contracting Recommendation # 6: We recommend that the SSFU consider providing concentrated training to one individual with respect to contracting and procurement. This person s job description would need to include the responsibility for these functions. Recommendation # 7: All contracts should be sent to Finance in a timely manner. This should be prior to the goods or services being delivered. This will ensure that Finance can properly enter the commitment in SAP and the material management system and also ensure that the contract respects PCA policy. PEAG 6

7 Recommendation # 8: All contracting files should include the documentation of any quotes received or requested or an adequate sole source justification. Acquisition Cards Recommendation # 9: We recommend that no vehicle operating costs be made with the acquisition cards. Closer supervision may be required in cases of non-compliance. Recommendation # 10: We recommend that the SSFU pay all acquisition cards in a timely manner. Finance should closely monitor the timeliness of supplier payments. Recommendation # 11: We recommend that Finance ensure that all support documents are included and attached to the credit card statements before payment. Travel Recommendation # 12: The SSFU should implement a control to ensure that the Government of Canada Travel Policies are being respected. This would include ensuring accommodation follows Treasury Boards approved suppliers and the government rate is obtained. In addition, Finance should ensure that the per diems are consistent with the times of departure and return. Recommendation # 13: No accommodation charges should be approved for employees for a stay in the community in which they are working. Payments to Suppliers Recommendation # 14: We recommend that the SSFU adopt procedures that require that purchase orders be prepared prior to the goods or services being received. Recommendation # 15: We recommend that the SSFU require invoices to be received for services obtained from all suppliers including First Nations. Recommendation # 16: We recommend that all invoices be date stamped upon receipt. Recommendation # 17: We recommend that the receiving reports in the purchase files be signed by the responsible manager. PEAG 7

8 Stores Inventory and Safeguard of High Risk Valuable Small Items Recommendation # 18: As best practice, the SSFU should consider doing a physical count to update its inventory lists in order to have accurate information to input in the system when implemented. PEAG 8

9 1. BACKGROUND Parks Canada Agency (PCA) conducts cyclical audits of key financial, administrative and management practices for all field units, service centres and the national office. 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 audit of the (SSFU) was conducted as part of these cyclical audits. The SSFU includes the Grasslands National Park, the historic sites of Motherwell, Fort Walsh, Batoche and Fort Battleford. There is also a small administrative office in Saskatoon. Administrative and financial management of the SSFU is partially located at the different sites, with the main finance function being in Val Marie, Saskatchewan where the Grasslands National Park is located. 2. OBJECTIVES AND SCOPE 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 SSFU are adequate to mitigate the risk of non-compliance to Treasury Board Secretariat (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; Expenditures for Travel; Financial Coding; Payments to Suppliers; and, Stores Inventory and Safeguarding of High Risk Valuable Small Items. The scope of the audit covered processes in place and transactions entered into between April 1, 2006 and July 31, 2006, except for contracting which included the latter months of fiscal year METHODOLOGY The audit included a visit to the SSFU during the period of August 21 to 28, 2006 and included the following activities: interviews with the SSFU management and personnel, at all sites, who are responsible for all the areas being reviewed; PEAG 9

10 review of relevant documentation provided by Parks Canada National Office and the SSFU, including the SSFU Business Plan for , the SSFU delegated signing authorities chart, policies and guidelines concerning the management control framework, revenues, contracting, payments to suppliers, acquisition cards, travel expenses and financial coding; and an on-site examination of a sample of transactions in each of the key areas covered by the assignment. At the conclusion of the fieldwork, a debriefing of our preliminary observations was made to SSFU s Chief Financial Authority (CFA) and the Superintendent of the field unit. Our observations and recommendations have been made in accordance with the Audit Reporting Rating System described below: Audit reporting rating system RED ORANGE YELLOW BLUE GREEN Unsatisfactory Significant Improvements Needed Moderate Improvements Needed Minor Improvements Needed Controlled 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. Controls are functioning as intended and no additional actions are necessary at this time. 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 Overall, we found that due diligence is being exercised with respect to the management processes and that systems and controls are in place to monitor revenues, contracting, payments to suppliers, acquisition cards, travel expense, and financial coding are adequate. However, we have identified areas where improvements should be made. These improvements are summarized below through our recommendations. PEAG 10

11 6. OBSERVATIONS AND RECOMMENDATIONS 6.1. Management Control Framework BLUE Minor Improvements Needed Many of the controls are functioning as intended. However, some minor changes are necessary to make the control environment more effective and efficient. Observations Planning and Budgeting The business plan is prepared beginning with input from the sites. The Superintendent and the CFA challenge each site Manager with respect to budget submissions. The managers meet to discuss the plan and then the plan is finalized around December. Managers are expected to monitor actual costs versus budgeted and forecast amounts and maintain a plus or minus 2% variance accuracy tolerance. Training The recently hired CFA puts more emphasis on training with the financial areas as a priority. The sites generally felt that there is adequate training. The CFA recently organized workshops on acquisition cards, travel, contracts and authorities. In November 2006, a course on writing terms of reference for contracts is planned. All staff with project authority is expected to attend. The CFA also sends s to the sites as issues of non-compliance with policies are observed. Finally, there is a course on budgeting and forecasting held not only to train the managers, but to ensure that accountability for budgets starts at the site level. Controlling and Monitoring Practices Having a decentralized field unit presents challenges in terms of monitoring and controlling transactions. The Superintendent and CFA reside in Grasslands. The other sites all have a Site Manager who report to the Superintendent. Most sites have accounting functions on-site. The exceptions are Fort Walsh, which is handled through Grasslands and the Saskatoon office which is covered by Motherwell. The management team has monthly phone conferences to discuss issues and regular business. In addition, they meet as a group two or three times a year. The sites have prepared forecasts in the past, but have tended to soft commit their entire operational budgets rather than report hard commitments. Soft committing is simply reporting all operational expenses in a budget as commitments throughout the year rather than analyzing the actual requirements for budgetary line items. The new CFA has stopped this practice; therefore no recommendation has been made with respect to this issue. The Superintendent holds the Site Managers responsible for their budgets. They currently prepare quarterly reports throughout the year. The Superintendents goal is to eventually start reporting monthly. One issue that the Site Managers outside of Grasslands have is the lack of ability to retrieve SAP reports at the sites. Management is presently aware of this system limitation and is working towards a solution, therefore no recommendation is made in this report. PEAG 11

12 Finally, it was noted during the audit that the speed of the internet in Grasslands is slow and unreliable. This causes frustration for employees as the routine operations are less efficient. Management is working with PCA personnel to find an appropriate solution. Risk Management The Superintendent is responsible for the overall management of risk. There is currently no formal disaster recovery plan for the SSFU. National Office is expected to provide directions to help develop such a plan. However, sites have their own specific safety plans. For example, Fort Walsh has an evacuation plan. Each site has a safe for valuable goods. Recommendation None deemed necessary Revenues BLUE Minor Improvements Needed Many of the controls are functioning as intended; however, some minor changes are necessary to make the control environment more effective and efficient. Observations The SSFU annual revenues are approximately $520K per annum. During the period covered by our audit, from April 1, 2006 to July 31, 2006 (5 months), the revenues accounted for were $95K. Here is a summary of the SSFU revenues for the fiscal year 2005/06 and the first 5 months of the fiscal year 2006/07: 2005/ /07(5 months) Grasslands National Park of Canada $55 K $11 K Fort Walsh National Historic Site 86 K 26 K Motherwell Homestead National Historic Site 26 K 16 K Fort Battleford National Historic Site 294 K N/A* Batoche National Historic Site 61 K 42 K $522 K $95 K * Fort Battleford revenues for the current year were not accounted for, at the time of our audit, since the site had not been provided an account code to record the revenue into SAP. The visitor s revenue is a small portion of the total revenue in Fort Battleford; in , the town of Battleford exceptionnally contributed $275K toward the new visitor center (approximately 94% of the revenue). Other than the grant received by the Fort Battleford site, the remaining revenue is mainly generated through entrance fees. The SSFU also has concession agreements with three Friends of not-for-profit organizations. Use of these types of organizations are PEAG 12

13 common within Parks Canada and usually provide services to clients of the Parks and Historic Sites that are outside the mission of Parks Canada and would also be too onerous to provide under Parks Canada s labour agreements. For the SSFU, minimal revenue is generated from these concessions with the Friends of Batoche, Friends of Battleford and Friends of Motherwell groups. This situation is necessary due to the low volume of visitors in these sites. The revenue processes are similar within each site, with the exception of the Fort Battleford site. All sites, except Fort Battleford, have a cash register to account for the entrance fees. Cash register receipts are given to customers upon payment of the required fare. The receipts are not pre-numbered; however, the cash register reports are reconciled with cash receipts before the information is entered into SAP. Cash register receipts are not always asked for at the entrance of the sites, but due to the low volume of visitors and the location of the greeting centers, individuals entering the sites without paying their entrance fees at the reception desk would generally be identified. We discussed and evaluated the risk of misappropriation with respect to lack of pre-numbered tickets and concluded the risk that employees keep the money and not issue any cash register receipts is minimal. Some sites have two employees working at the information counter where the fees are paid, thus would lower the risk for these sites. Other sites rely on the Site Managers to monitor revenues and investigate suspected fraud. One case was detected in Grasslands and management took appropriate action. However, we did observe that the safe where the cash is kept at the Motherwell Site was unlocked and open on several occasions when the auditor was on site. It was also noted that all employees have access to the safe at Motherwell. Fort Battleford entrance fees are collected by the Friends of Fort Battleford Group in exchange for a fee. It was decided that they would handle all fee transactions because the number of visitors is very low and they already have the concession for gifts, souvenirs and food. Revenue procedures have been created by site management and given to the Friends of Fort Battleford. The guides are made aware of visitors who have paid prior to a tour commencing. There are no visitors entering the Fort unless accompanied by a guide. Again, with the basic internal controls in place and due to the low volume of transactions, we concluded that the risk of visitors entering the Fort without paying or the risk of fraud by employees is minimal. In Grasslands, it was noted that the clearing of the revenue accounts had not occurred since the previous CFA had left. The new CFA was not aware of this issue until Parks Canada Headquarters called to enquire about the uncleared transactions. At the time of the audit the SSFU was clearing the backlog and will be clearing the revenue on a monthly basis in the future. PEAG 13

14 Although overall the SSFU has good procedures with respect to collection of revenue, we have the following site specific observations based on the 23 tests of transactions we performed: In several cases the cash was not deposited on a weekly basis. At Fort Walsh no cash register tape is attached to the cash report which is forwarded to Grasslands where the accounting function occurs for this site. At Fort Walsh, the person responsible for verifying the cash balancing sheet does not sign the sheet as evidence of the verification. There was one instance of a difference between the cash report and the cash tape at Motherwell. The sales sheet lacked an explanation as to what caused the difference. Recommendations 1. We recommend that the Motherwell site keep its safe locked at all times. In addition, in order to maintain better control over the items in the safe, we recommend that they consider reducing the number of persons who have access to the safe. Agree: Procedure established for Motherwell with access granted only to the Accounting Assistant, C/V/H Coordinator and one backup. 2. We recommend that all sites ensure that bank deposits are made at least once a week as per PCA Policy, unless the cash on hand is very small. Agree: Accounting Assistants and C/V/H Coordinators are now aware of the seven day deadline for deposits and will ensure deposits are done in a timely fashion. 3. We recommend that Fort Walsh include a copy of the cash register tape with the cash report sent to Grasslands. Agree: Accounting Assistants and C/V/H Coordinator now aware of requirement and will ensure compliance once the Site reopens. 4. We recommend that the cash balancing sheet be signed by the person verifying its accuracy in Fort Walsh. Agree: Accounting Assistants and C/V/H Coordinator now aware of requirement and will ensure compliance once the Site reopens. 5. Any discrepancies between the cash tape and the sales or cash reports should be investigated and an explanation provided on the sales report. Agree: Accounting Assistants and C/V/H Coordinator now aware of requirement and will ensure compliance once the Site reopens. PEAG 14

15 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 SSFU uses all of the following contract methods: Standing Offer, Competitive with invitation or through public tender, Sole Source and Requisition to PWGSC. 72 contracts were entered into during the first five months of 2006/07 (April 1, 2006 to July 31, 2006) and 146 contracts were entered into during the fiscal year 2005/06. In order to have a better indicator of the contracts entered into, our audit of contracting covered the last few months of the 2005/06 fiscal year and the first five months of 2006/07. This is a summary of the contracts entered into (per summary obtained): fiscal year 2005/06 fiscal year 2006/07 <25K >25K <25K >25K Call-up on Standing Offer 22 - $85, $26, $91, $29,128 Request to PWGSC 1 - $20, $88,530 Competitive 55 - $153, $287, $93, $35,594 Sole Source 62 - $277, $58, $35,396 - Total $536, $372, $220, $153,252 During our audit, we reviewed a sample of twenty-two contracts, half of which were entered into the later part of the 2005/06 fiscal year. The remainder of the contracts were selected in the first five months of 2006/07. The Superintendent of the SSFU has a contracting limit of $2 million for goods and services under a competitive bid. Given the field unit sites are in remote locations, the Managers have local knowledge with respect to sourcing materials required in day to day operations. Some local suppliers will not provide quotes any more, if they have a history of never winning the bid. In other cases, there is no local competition, thus sole source is required. There is no contract specialist at the SSFU. As such, the managers use a contract specialist in Calgary when making contracting decisions over $5K. For contracts $1K to $5K, the managers are to obtain quotes and have delegated Section 34 authority up to $5K. The CFA has been given the responsibility for contracts, but does not have adequate time to fulfill the role adequately. The SSFU relies on Calgary for contracting support. Therefore, the contracting responsibilities are disbursed amongst many individuals. The SSFU is putting emphasis on training with respect to contracting for the finance persons at the site level. However, we feel that in absence of a Contracting and Material Management Officer there should be concentrated training for one individual who could take the lead accountability in that role. PEAG 15

16 The contracting process requires improvement at the SSFU. Specifically, it is common for Finance to be provided a contract only after the work is completed or the goods are received. This occurs at the same time the invoice is forwarded to Finance for payment. In addition, it was noted in many cases that the receiving report was printed, but was not signed by the responsible manager. This occurs when the purchase orders are entered after the work is completed. The purchase orders are also not signed when they are prepared after the fact. In some cases, Finance is only aware of the contract after services are performed, thus the creation of the commitment and payment of the invoice may occur at the same time. Our sample also revealed the following issues: One competitive contract in Batoche had no documentation on file showing the quotes obtained and the specifications requested to each supplier when requesting quotes. The evidence of a true competitive process could not be substantiated. Four sole source contracts in Grasslands had no justification in the file. Recommendations 6. We recommend that the SSFU consider providing concentrated training to one individual with respect to contracting and procurement. This person s job description would need to include the responsibility for these functions. Agree: Key responsibilities within FU Finance and Administration are being reviewed with the objective to enhance responsibility in a variety of areas including contracting and procurement. An individual will be identified as the contract and procurement lead by March 31, Training will commence at that time and it is estimated that the certification will be completed by March 31, Manager, Finance and Administration has the lead with the realignment of responsibilities. 7. All contracts should be sent to Finance in a timely manner. This should be prior to the goods or services being delivered. This will ensure that Finance can properly enter the commitment in SAP and the material management system and also ensure that the contract respects PCA policy. Agree: Training will be delivered in February 2007 to ensure all managers are aware of the expenditure initiation and commitment processes. 8. All contracting files should include the documentation of any quotes received or requested or an adequate sole source justification. Agree: Training will be delivered in February 2007 to ensure all managers are aware of the expenditure initiation and commitment processes. PEAG 16

17 6.4. Acquisition Cards BLUE Minor Improvements Needed Many of the controls are functioning as intended. However, some minor changes are necessary to make the control environment more effective and efficient. Observations Acquisition cards are used at the SSFU. The level of usage depends on the site. Below is the number of card holders and usage level by site: # of cards Usage Grasslands National Park of Canada 15 Low Fort Walsh National Historic Site 4 Low Motherwell Homestead National Historic Site 7 Medium Fort Battleford National Historic Site 4 Low Batoche National Historic Site 4 Low 34 Some cards are used every month while others may only be used two to four times a year. All card statements are received directly by the finance department, reconciled with the invoices and approved by a supervisor before being paid. We performed a detailed review of acquisition card purchases for ten users in various locations and found that the acquisition cards were used in accordance with the policies and guidelines except for the following: In Fort Battleford, one vehicle maintenance purchase was made with an acquisition card instead of the vehicle ARI card as required by PCA Policy. Three payments of acquisition card statements were not made on timely basis. Two in Grasslands and one in Battleford. One transaction in Grasslands did not have sufficient support attached, as no invoice or proof of receipt was included with the statement. Recommendations 9. We recommend that no vehicle operating costs be made with the acquisition cards. Closer supervision may be required in cases of non-compliance. Agree: ARI cards with maintenance are now in place throughout the FU. Each cardholder will receive training by June 30, 2007 to ensure that they understand and comply with their responsibilities. This will be monitored over the next year and additional training on procedures will be provided to address any outstanding issues. PEAG 17

18 10. We recommend that the SSFU pay all acquisition cards in a timely manner. Finance should closely monitor the timeliness of supplier payments. Agree: Procedures and training will be developed and training will be offered by March 31, 2007 for Accounting Assistants and managers to facilitate processing in a timely manner including downloads of on line monthly statements, an acquisition card log and receipt folders. 11. We recommend that Finance ensure that all support documents are included and attached to the credit card statements before payment. Agree: Acquisition card log and receipt folders will be in place by March 31, 2007 to ensure all support documents are available for inclusion. Each cardholder will receive training by June 30, 2007 to ensure that they understand and comply with their responsibilities. This will be monitored over the next year and additional training on procedures will be provided to address any outstanding issues Travel BLUE Minor Improvements Needed Many of the controls are functioning as intended. However, some minor changes are necessary to make the control environment more effective and efficient. Observations Some of the Employees at the SSFU travel regularly, primarily within the Province as the sites are located throughout the region. Occasionally, they must travel outside the Province for training or meetings. The SSFU spends approximately $180,000 annually in travel expenses and incurred $74K for the period covered by our audit (first 5 months of fiscal year 2006/07). PCA Travel Policy requires advance authorization for travel. At the SSFU, 48 employees have Amex travel cards, which are used for their travel expenses. In addition, there is one corporate card for each office location. Some cardholders are required to travel regularly while most of them rarely travel. Only corporate Amex card statements are received by the local finance teams. We reviewed twenty-three travel expense claims incurred by various employees and found that most key controls were operating with respect to the travel claims with the following exceptions: One advance travel authorization was signed by the employee s spouse as that spouse was the acting Superintendent. At the SSFU, there are a few situations where both spouses work for Parks Canada. The travel was legitimate, but allowing spouses to exercise internal controls between each other creates a conflict of interest situation and should be avoided. PEAG 18

19 In Grasslands, there were two instances of hotel charges that were in excess of the hotel limits set by Treasury Board through their Accommodation Guide. In Fort Walsh, there was one instance where an employee was approved to stay in a hotel in the community where he works because he was too tired to drive home. In Grasslands, there was one payment of a breakfast per diem when the travel report stated that he departed at 10 AM. Recommendations 12. The SSFU should implement a control to ensure that the Government of Canada Travel Policies are respected. This would include ensuring accommodation follows Treasury Boards approved suppliers and the government rate is obtained. In addition, Finance should ensure that the per diems are consistent with the times of departure and return. Agree: Staff are now aware of TB approved suppliers, government rates and travel policies. Each employee will receive training by June 30, 2007 to ensure that they understand and comply with the travel directive. This will be monitored over the next year and additional training on procedures will be provided to address any outstanding issues. 13. No accommodation charges should be approved for employees for a stay in the community in which they are working. Agree: A communication was sent to all staff to inform them of travel policies within the headquarters area. Each employee will receive training by June 30, 2007 to ensure that they understand and comply with the travel within the headquarters area. This will be monitored the next year and corrective action when if necessary to ensure compliance Financial Coding GREEN Controlled Controls are functioning as intended and no additional actions are necessary at this time. Our audit of the financial coding procedures was conducted through the audit sample selected for audit of the revenues and payments to suppliers. We also conducted interviews with the SSFU finance personnel to obtain an adequate comprehension of the financial coding procedures implemented by the Finance department and the different site managers. Observations A total of 49 transactions related to payments to suppliers were reviewed. The financial coding was found to be reliable. PEAG 19

20 Recommendation None 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 finance personnel and tested a sample of fifty-three supplier payment files for expenditures made under $1K, using purchase orders, competitive and non-competitive types of contracts. The sample selected had a dollar value of $59,847. Out of the 49 files reviewed, 48 were low dollar value (less than $5,000) purchases with LPO (Local Purchase Order), small contracts or no contractual documents, representing $45,978 (77%). The sample was selected from all cost centers and all locations. Due to the multiple sites and their size, all sites incur a high volume of small transactions. The volume of large dollar transactions is low. We found that in SSFU all purchases under $1,000 are not required to be contracted using an LPO. The purchases can be made and paid as long as there is appropriate section 34 authority on the invoice. This policy reduces the bureaucracy with respect to purchasing small items, which is often the case at the various SSFU sites. We considered this practice reasonable. In general, we found that payments made are properly recorded in the financial accounting system and the files were well documented. The section 33 signing authority verification is performed according to PCA Policy. However, as previously noted in the contracting section, there are instances where the Purchase Orders were prepared after the transaction had occurred. Also when we enquired concerning the delegation of authority in Grasslands, the accounts payable personnel relied on the general delegation limits set by Parks Canada, according to an employees classification. However, the actual amounts delegated to employees in the field unit are usually below these levels. The field unit has already recognized the need for improvement with respect to documenting and communicating the delegated limits for its employees. As such, SSFU has implemented a process where each employees delegated authorities, by transaction type is recorded on a Specimen Signature Form, which the employees sign. This is an improvement for the field unit, however, we recommend that a summary of these delegations be created as a PEAG 20

21 quick reference guide for the accounts payable staff in order for them to ensure that the delegation limits have not been breached. In addition, we have noted the following exceptions in our testing of payments: The Batoche site hires First Nation Elders to perform some of their programming. In hiring the Elders, they do not get invoices from them but simply have them sign a Voluntary Form stating that they will perform the requested services for a specific fee. No invoices are obtained from them after the services are performed, to request payment. No purchase order was attached to the invoice for two transactions sampled in Grasslands. For eight instances in Grasslands, the invoices were not date stamped when received. In Grasslands, there was one instance where no section 34 authority existed on a hospitality claim. In four instances in Grasslands no receiving report or other proof that goods or services were received was found. One payment was not made in a timely manner in Grasslands. Recommendations 14. We recommend that the SSFU adopt procedures that require that purchase orders are prepared prior to the goods or services being received. Agree: We agree that purchase orders under $1k do not require purchase orders to be in place for MC. Staff are now aware that all purchases and contracts over $1k are to be entered into STAR prior to notifying the successful supplier. Each employee with spending authority will receive training by June 30, 2007 to ensure that they understand and comply with their responsibilities. This will be monitored over the next year and additional training on procedures will be provided to address any outstanding issues. 15. We recommend that the SSFU require invoices to be received for services obtained from all suppliers, including First Nations. Agree: In consultation with National Office and the PC Aboriginal Secretariate, the Field Unit is working with National Office to develop a guide for honorariums and procedures for these services in respect to all suppliers including First Nations. This guide is to be in place by May 1, This guide will provide direction on appropriate documentation required including travel claims and invoices. We will follow these directions once they are in place. 16. We recommend that all invoices be date stamped upon receipt. Agree: Staff is now aware and will action. PEAG 21

22 17. We recommend that the receiving reports in the purchase files be signed by the responsible manager. Agree: Staff is now aware and will comply Stores Inventory and Safeguard of High Risk Valuable Small Items 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 When a manager purchases a small valuable item, they are supposed to inform finance. When they do, Grasslands issues a number and a sticker and completes the Inventory Input Card. The yellow copy used to go to Winnipeg, but this is no longer sent. Some sites are maintaining asset listings informally, however, there is no formal process surrounding these inventory items. We were informed that the only spreadsheet containing details of these records was prepared in 1999 and there are no physical counts performed. There is a risk that these inventory items such as tools and cameras may go missing and not be detected or reported to management. At the end of the audit work, auditor were informed that National Office Finance is leading a working group set up to develop and implement a user friendly High Risk Low Dollar Value Items national system using the STAR (SAP) integrated finance and materiel system. This inventory system will be operating by April 1 st, Field Units will be required to populate the database with only new acquisitions purchased after April 1 st, Entering current inventory is not yet mandatory. Recommendation 18. As best practice, the SSFU should consider doing a physical count to update its inventory lists in order to have accurate information to input in the system when implemented. Agree: SSFU has a couple of sites that have maintained their inventory system, however throughout the rest of the field unit, it has been sporadic since SSFU, will however implement the new system after April 1, 2007 with all items being recorded and throughout the next year, we will try to align and input the prior year items. PEAG 22