Internal Audit Report
Internal Audit of Travel, Hospitality and Acquisition Cards: A Summary
Objectives and Scope of the Audit
The purpose of this audit was to provide INFC's senior management with reasonable assurance about the:
- Effectiveness of internal controls applied to manage risks relating to the administration of departmental funds for travel, hospitality and the use of acquisition cards;
- Compliance with standards about the eligibility of travel and hospitality expenses and acquisition card transactions;
- Accuracy of financial data found on both INFC's financial system and Industry Canada's records; and
- Correctness of travel and hospitality expenses proactively disclosed on the INFC Web site.
The audit covered the 19-month period from April 1, 2003 (date upon which INFC was no longer part of Treasury Board Secretariat) to October 31, 2004. The audit, conducted by Consulting and Audit Canada (CAC) between January 12 and March 31, 2005 was based on a systematically-selected sample of transactions.
|Audit Findings||Management Response|
| Internal controls
Internal control mechanisms designed to offset the risks associated with travel, hospitality and acquisition card transactions were, on the whole, adequate as far as the authorization and approval of the expenses were concerned, despite the fact that they were not always strictly applied (a few irregularities were noted with respect to the pre-authorization and approval of these transactions). Payment controls used by Industry Canada were also found to be adequate and usually correctly applied throughout the audit period, although certain irregularities (mistakes or insufficient explanations) were noted. INFC, however, has no way of cross-checking the manner in which Industry Canada applies the controls while remaining ultimately accountable for the proper use of funds allocated by Parliament, and hence for the payment transactions. For purposes of good governance, additional proof is necessary for INFC to place its trust in the procedures in place at Industry Canada.
In response to the audit, INFC Finance has developed detailed procedures to clarify the requirement for the proper authorization and approval of expenses, and has provided further training to financial officers and also to managers and their staff with financial management responsibilities.
As for the payment procedure, INFC Finance considers that the formal agreement between INFC and Industry Canada clearly defines the role of Industry Canada as having been delegated payment authority and therefore equally responsible to ensure compliance of expenses with accounts verification legislative and regulatory requirements. Nevertheless, INFC will continue the ongoing dialogue with Industry Canada and will start maintaining a formal record of any compliance issues arising from this dialogue to make sure issues are addressed promptly.
Despite some irregularities regarding pre-authorization, and in certain cases approval, the expense amounts of $783,669 in travel, $47,504 in hospitality, and $598,548 in acquisition card transactions, were nonetheless, in all significant respects, a reasonable reflection of eligible expenses based on government policies in effect (a relatively high number of pre-authorization irregularities were identified for acquisition card expenses).
|INFC Finance will maintain the current practices that led to a compliant audit opinion. In the case of acquisition cards, where pre-authorization irregularities were found (basically not well documented on file, although obtained in reality), INFC Finance has resolved the situation by implementing a new process in October 2005 by which only the cardholders will use their own cards.|
| Data Matching
Data on travel and hospitality expenses and acquisition card transactions were accurately reflected in the INFC financial system, and matched Industry Canada's records.
|INFC will maintain the current practices.|
| Proactive disclosure
In general, the INFC Web site accurately reflected travel and hospitality expense transactions.
|INFC will maintain the current practices.|
The audit recommended that INFC Finance:
- Ensure appropriate training with respect to financial responsibilities and the application of policies and legislation for employees and managers with signing and approval authority (Section 32 and 34 FAA) and for Finance employees with payment responsibility (Section 33 FAA);
- Refuse, or require that Industry Canada refuse, payment of expenses incurred without the pre-authorization normally required and the relevant supporting documentation;
- Conduct a pre-payment audit based on sampling in accordance with Section 33 of the FAA before sending the documents to Industry Canada for payment (this would allow INFC to ensure that all authorizations and relevant documents are attached to the account statements);
- Obtain from Industry Canada, in the interest of good governance, periodic compliance statements (appropriate processing of payments according to current government and record retention policies) for the fiscal year for all transactions presented for payment to Industry Canada that are chargeable to INFC. In addition, INFC financial management should read these statements and act immediately when problems are identified.
(Refer to the complete audit report for more detail.)
Toll Free Number: 1-877-250-7154
- Date modified: