Audit of the Financial Management Accountability Framework with regard to: Financial Coding, Monitoring of the Operating Budget, and Implementation of Action Plan for delegation of signing authority policy and procedures

PDF Version (Size: 193.83 KB) (270 Kb)

Help on accessing alternative formats, such as PDF, PPT and ZIP files, can be obtained in the alternate format help section.

Planning phase: November 2007

Execution phase (fieldwork): December 2007 to January 2008

Report Date: March 3, 2008

Management Response: April 16, 2008

Tabled and Approved by DAC: June 19, 2008

Executive Summary
1.0 Background
2.0 Audit Objectives, Scope and Approach
3.0 Findings and Recommendations
Appendix A: List of Recommendations and Management Response

Executive Summary

Within the context of the "Management Accountability Framework (MAF)", the following financial audits were selected this fiscal year (2007-2008) as part of the ongoing comprehensive audit plan. The key elements of the MAF (and specifically under "Stewardship" and "Accountability") provide the minimum but not exclusive "fundamental" list of controls and assertions that will enable the achievement of INFC's performance expectations and are also being externally reviewed by central agencies through the MAF assessments.

The broad objective of these combined audits was to provide assurance that the core management controls pertaining to "financial coding" and to the "monitoring of the operating budget", are adequate and functioning as intended. Further, it was to provide assurance that the core management controls of the delegation of authority instruments specific to the recommendations identified in the pilot audit conducted by the Office of the Controller General (Horizontal Audit of Delegation of Authority Phase 1 Audit Observations and Recommendations – Draft) are adequate and operating effectively. This report includes the findings, and recommendations for these three financial management components.

The assessment of the adequacy and effectiveness of the core management controls served to determine whether the audit objectives detailed below were met.

The "financial coding" activities ensure:
- the appropriate financial coding of the fund centre; authority code; and general ledger account;
- the appropriate timeframe of the financial coding of the transaction;
- the accuracy of the dollar amount coded; and,
- the completeness of all transactions coded.
The "monitoring of the operating budget" procedures and controls adhere to the following:
- the evidence that significant variances from budget are identified; explained and documented and there is sufficient review of the explanations.
- the evidence that individuals with budget authority and responsibility are involved with decisions to change budget allocations.
- the reporting of actual results compared to budgeted amounts is documented and available on a periodic basis to permit individuals with budget authority and responsibility to monitor their budget and forecast progress against organizational objectives and facilitate decision making such as reallocation of resources.
- the evidence of documented roles and responsibilities for explaining variances and evidence of appropriate application.
- the evidence of clarity of criteria with regard to usage and actions taken on results of variance analysis i.e. when or how does Management decide to reallocate resources to facilitate the achievement of objectives/results
The action plan in response to the OCG recommendations for the delegation of signing authorities policy and procedures has been implemented and encompasses the following:
- establish controls to ensure that when a new Minister is appointed, new Delegation of Financial Authorities documents are prepared as soon as possible for the Minister's approval.
- revise delegation instruments to ensure that all departmental financial authorities are addressed and delegated to specific positions.
- develop written procedures on Delegation of Financial Authorities in order to provide additional guidance and instructions to the staff and to reinforce the delegated authority controls.
- develop Specimen Signature Cards with the detailed authority type and level as well as authority limitations.
- develop written procedures for the annual review and revision of Delegation of Financial Authorities.
- re-assess monitoring controls over compliance with financial management laws, policies and authorities to ensure clear and documented reporting channels and ongoing monitoring by Finance is performed and documented.

Objective 1 – "Financial Coding":

Overall, the audit did not find any material errors within the specified criteria for financial coding. However, it highlighted three main areas of low to moderate risk. The first is with regard to the appropriate classification of capital assets (in particular SIMSI software and development costs) versus operating expenditures. Throughout the year, these capital transactions were reported as operating expenditures. While there was evidence of analyzing and correcting the classifications at yearend, the significance of the dollar amounts, the high degree of complexity of the transactions, and limited documented analysis resulted in incorrect adjustments being made. Further, subsequent to the 2007 fiscal yearend, this coding classification process has remained unchanged, which places INFC at risk of similar coding errors.

Secondly, the audit found insufficient documentation and control procedures surrounding the recording of Grants & Contributions actual expenditures. Given the significance of these transactions, effective control procedures are imperative. The process of recording actual expenditures is critical to support the re-profiling of G&C's funding to future years or the repayment of fund advances if not spent. Based on the evidence obtained, the audit could conclude that the transactional coding for those sampled that had informal FDP excel files, was adequately reflected in the financial system. However, the supporting documentation itself was of limited quality and had no evidence of official approval by the FDP's. This issue constitutes an insufficient control environment for the recognition of the actual expenditures in the financial system. Therefore, the overall risk of misstatement is considered moderate. No independent FDP confirmations were done at this time, as it was assumed that reliance could be placed on the established procedures of the Federal Delivery Partner organizations.

Finally, the audit found limited detailed procedures and guidelines around the appropriate use of financial codes and the communication processes surrounding the initial classification, the review and any necessary adjustments both within finance and with non-finance employees. The classification of expenditures affects the quality of budgets and the subsequent reconciliations so it is important that there is clear understanding for the relevant employees. While this limited procedural clarity has created some frustration and inefficiencies within INFC, the risk of material misstatements was considered low given the relatively small volume of transactions and informal "after-the-fact" review activities. However, by having efficient processes, INFC could focus their efforts on more value added analysis.

The overall "financial coding" has been assessed as moderate risk, given the significance of the G&C's and capital transactions within the INFC financial statements.

Objective 2 – "Monitoring of the Operating Budget":

The audit found evidence of overall accountability and effort in the task of monitoring of the operating budget. However, it found the quality and usefulness of the financial templates/tools were limited due to the need for improved accuracy and relevancy of the information, and a more "user friendly" report format. Inefficiencies were further compounded with the lack of direct access to the financial systems. Consequently, a significant amount of time was spent in the mechanical reconciliation process of verifying actual expenditures and forecasts, with little to no documentation of any detailed variance explanations. These processes create an environment of compensating manual reporting tools and off-system reconciliations, which leaves INFC exposed to a higher degree of risk of misstatement, overall inefficiencies and potential misinformed decisions.

The audit further found that at the Fund Centre Owner level, there were no formal communication processes with regard to financial reviews of actual expenditures and variance explanations between themselves and Executives. There was uncertainty as to the effectiveness or usefulness of the monthly variance details provided to Finance. These limitations were mitigated indirectly through the individual functional communication channels, as well as the specific Procurement and HR committees. However, given the evolving mandate and consequential impacts to the support functions, there is a need for more cross-functional reviews and integration.

At the Executive Committee level, consolidated financial information and key variance issues are communicated as deemed necessary. These reviews were not done regularly throughout the audit timeframe as it was considered not of value as the implementation of the year's mandate had just begun. The was no evidence of concern regarding any potential lack of financial communication at the Executive Level during this timeframe.

Given the limited six month scope of the Monitoring of the Operating Budget audit, we were informed that there is a significant increase in reporting throughout the December to March timeframe. However, it should be noted the impact of this limited finanical reporting and understanding of the process is diminished by the fact that INFC is relatively small and flat to allow for close "hands on" involvement at all levels. However, without having established processes for regular review of finanical information and an understanding of the reporting processes at all levels, there is a risk that decisions are made in isolation and may not have an integrated solution. As well, an Executive review reinforces the accountability framework through visibility and transparency of information and commitment to the reporting process.

The above issues are further compounded by the evolving structure of the organization, the newly recruited staff, and the high turnover, and in that context where there is a need for more rigorous core management controls the audit has concluded a moderate risk level in the fulfillment of the task of the monitoring of the operating budget.

Objective 3 – "Implementation of the Action Plan for the Delegation of Signing Authority Policy and Procedures":

The audit of the implementation of the action plan in response to the OCG recommendations, found that INFC had substantially fulfilled its commitments at a high-level. However, it concluded that the explicit details and value added identifiable control processes could benefit from further development and documentation. While the risk exposure is considered low for INFC, it is still important to continue to define core procedures in order to promote an efficient work environment and employee satisfaction.

Audit Opinion

In our opinion, INFC has moderate issues requiring management focus. Given the current environment of high staff turnover, an evolving mandate of the department, and limited clear documentation of procedures, roles and responsibilities, and communication channels, the organization is exposed to financial reporting and analysis risks. However, it is our assumption that the risk exposure is reduced to a moderate level through the informal adhoc compensating procedures and relatively flat organizational structure, which fosters active participation. Further, it is assumed that reliance can be placed (although no verification was done) on the Federal Delivery Partners (FDPs) who are mature government organizations, and therefore in general have adequate control frameworks in place.

Statement of Assurance/Reliance

In our opinion, based on our professional judgment as auditors, sufficient and appropriate audit procedures have been conducted to be in accordance with the Treasury Board (TB) Policy on Internal Audit and the evidence gathered supports the accuracy of the conclusions contained in this report. Criteria were developed to provide a framework in assessing the extent to which the MCF for "financial coding", "monitoring of the operating budget", and the "implementation of actions plan for Delegation of Signing Authority Policy and Procedures", were meeting the audit objectives. The criteria were based on the MAF "Stewardship" and "Accountability" components and were reviewed for appropriateness and approved by the Head of Internal Audit prior to executing the audit plan. Consequently, the evidence gathered provides senior management with reasonable assurance of the accuracy of the conclusions drawn from this audit.

Key Recommendations

In order to help INFC improve its MCF with respect to "financial coding", "monitoring of the operating budget", and the "implementation of actions plan for Delegation of Signing Authority Policy and Procedures", we are presenting the following key recommendations with respect to our major findings. All the recommendations made as a result of this audit, are presented throughout this report, immediately following each relevant section. They are also listed in Appendix A.

Financial Coding:

INFC Finance should review the processes surrounding the application and understanding by Finance of the TB "Policy on Classification and Coding of Financial Transactions" and TB "Accounting Standard 3.1 - Capital Assets".
INFC Finance should ensure there is an effective communication and monitoring process for the implementation of the TB "Policy on Classification and Coding of Financial Transactions" and TB "Accounting Standard 3.1 - Capital Assets" by Finance, Fund Centre Managers and Administrative staff. This process should encompass both training and control mechanisms to attest to its ongoing effective implementation.
In conjunction with Program Operations, INFC Finance should examine the current provisions of the MOU with the FDPs to ensure the provisions provide sufficient clarity on what constituents a valid, timely, complete and accurate financial submission.
INFC Finance and Administration should develop complete activity specific roles and responsibilities. In conjunction with this clarity, INFC Finance should ensure the documentation and implementation of formal procedures to monitor the compliance and understanding of these roles and responsibilities.

Monitoring of the Operating Budget:

In conjunction with Fund Centre Owners, INFC Finance should lead a review to understand the complete financial reporting requirements of the finance and non-finance users, and develop a report that will more effectively utilize the time of those involved in the daily management of financial activities.
INFC Finance should review the processes around the collection, analysis, and communication of the monthly variance explanations to both the Executive Committee and Fund Centre Managers to strengthen the visibility and commitment to these financial action plans.

Implementation of Action Plan for Delegation of Signing Authority:

INFC Finance should continue to strengthen its current Delegation of Signing Authority Policy and Procedure guidelines and provide further detail with regard to the controls/procedures, which would ensure compliance. By being explicit upfront, there will be a greater understanding amongst all users as well as a very specific path ensuring timely visibility to deviations thereby allowing corrective actions.

Head of Internal Audit's Signature

Yolande Andrews, Head of Internal Audit

1.0 Background

Three Year Internal Audit Plan:

The three year departmental internal audit plan that was approved by the departmental audit committee at its meeting of June 15, 2007, provides for an audit of several components of the INFC financial management and accountability framework to be conducted each year. As such, in the fiscal 2007 year, two audits addressing the "Stewardship" component were planned relating to "Financial Coding" and "Monitoring of the Operating Budget".

In conjunction with these audits, given the similar scope of processing activities, the field work for these two audits included the assessment of the "Implementation of the Action Plan for Delegation of Signing Authority Policy and Procedures." This action plan was developed in response to the recommendations of the pilot phase horizontal Delegation of Signing Authority audit conducted by the OCG in the fall 2006.

Financial Statements Details:

Infrastructure Canada as a relatively new Department, during the fiscal year ended March 31, 2007, was very reliant on the interdepartmental support specifically from Industry Canada, for a significant part of its financial transactional processing. This agreement between the two departments included upfront support for Procurement activities, invoice payment (Section 33), and the use of their financial reporting system and tools. Subsequent to the audit period for the year ended March 31, 2007, a new Memorandum of Understanding was signed whereby INFC took over the majority of financial responsibilities. The one major remaining reliance is with regard to the continued use of IC's financial management system.

The un-audited Financial Statements of INFC for the fiscal year ended March 31, 2007, reflect:

$1.46B in Net Cost of Operations including:
- $1.43B of Transfer Payments,
- $17.2M of Salaries and Benefits,
- $18.7M in O&M;
$56.3M in Total Assets; and,
($10.3M) in Equity in Canada.

Throughout the 2007 fiscal year, the Finance team of six full-time equivalents provided the financial guidance for all budgeting, reporting and processing activities. INFC does not have an approved A-Base funding level; therefore, each year a new funding request justifying the complete financial plan must be submitted for approval. The challenges of this task are compounded by the continued organizational changes.

2.0 Audit Objectives, Scope and Approach

2.1 Audit Objectives

The broad objective of these combined audits was to provide assurance that the core management controls pertaining to "financial coding" and to the "monitoring of the operating budget", are adequate and functioning as intended. Further, it was to provide assurance that the core management controls surrounding the "implementation of the action plan for the Delegation of Signing Authorities Policy and Procedures" specific to the recommendations identified in the pilot audit (Horizontal Audit of Delegation of Authority Phase 1 Audit Observations and Recommendations – Draft conducted by the OCG) are adequate and operating effectively. This report includes the findings, and recommendations for these three financial management components.

Core Management Controls:

The Treasury Board Core Management Control Framework, which is currently in draft status with the Office of Comptroller General, is one of the foundation documents intended to provide a holistic framework ensuring that relevant assurance audits of core management controls will be carried out. The scope of this framework attempts to identify the minimum but not exclusive "fundamental" list of controls and related audit criteria that will enable the achievement of the performance expectations (as outlined in the MAF). While this framework addresses the entire control environment, the particular core controls and audit criteria identified under the MAF "Stewardship" and "Accountability" indicators are being used as the key criteria and guidance for the purpose of the audit. More specifically:

Stewardship-10 – "Transactions are coded and recorded accurately and in a timely manner to support accurate and timely processing of information." And;
Stewardship-15 – "Reviews are conducted to analyze and compare and explain financial variances between actual and plan."
Accountability-1 – "Authority, responsibility and accountability are clear and communicated."

These core controls represent reasonable financial management practices and procedures and therefore are a good baseline against which to assess.

Financial Coding

Providing assurance on the reasonableness and fair presentation of financial coding is important because adequate financial coding relates directly to the integrity of all financial statements and reports, and confidence in overall financial management. Proper coding ensures effective operating analysis and timely decision making with respect to funding allocations. It is also important to ensuring fair representation of the financial position of the Department.

The main objective of the audit was to review, verify and provide an opinion on the adequacy and effectiveness of the core management controls with respect to financial coding.

The audit criteria and assertions were based on:

the appropriate financial coding of the fund centre; authority code; and general ledger account;
the appropriate timeframe of the financial coding of the transaction;
the accuracy of the dollar amount coded; and,
the completeness of all transactions coded.

Monitoring of the Operating Budget

Providing assurance on the adequacy and effectiveness of the defined internal controls and financial management activity with respect to the "Monitoring of the Operating budget" is important because this ensures management:

has a benchmark against which to analyse the progress of their operational expenditures,
gains better insight into variance explanations such as scope changes, planning issues etc. and allow for corrective action if necessary,
has the ability to re-align funding priorities and changes,
demonstrates effective overall cash management both within the Department and across the Government as a whole.

The main objective of the audit was to review, verify and provide an opinion on the adequacy and effectiveness of the Control Management Framework with regard to the "Monitoring of the Operating budget" (does not include Transfer Payments).

The audit criteria and assertions were based on the following:

the evidence that significant variances from budget are identified; explained and documented and there is sufficient review of the explanations.
the evidence that individuals with budget authority and responsibility are involved with decisions to change budget allocations.
the reporting of actual results compared to budgeted amounts is documented and available on a periodic basis to permit individuals with budget authority and responsibility to monitor their budget and forecast progress against organizational objectives and facilitate decision making such as reallocation of resources.
the evidence of documented roles and responsibilities for explaining variances and evidence of appropriate implementation.
the evidence of clarity of criteria with regard to usage and actions taken on results of variance analysis i.e. when or how does Management decide to reallocate resources to facilitate the achievement of objectives/results.

Implementation of Action Plan for Delegation of Signing Authority Policy and Procedures

The main objective of this follow-up audit was to review, verify and provide an opinion on the adequacy and effectiveness of the core management controls of the delegation of authority instruments specific to the observed deficiencies identified in the pilot OCG audit.

The audit criteria and assertions were based specifically on the recommendations put forward from the Horizontal Audit of Delegation of Authority Phase 1 – Draft Audit Observations and Recommendations. They are:

establish controls to ensure that when a new Minister is appointed, new Delegation of Financial Authorities documents are prepared as soon as possible for the Minister's approval.
revise delegation instruments to ensure that all departmental financial authorities are addressed and delegated to specific positions.
develop written procedures on Delegation of Financial Authorities in order to provide additional guidance and instructions to the staff and to reinforce the delegated authority controls.
develop Specimen Signature Cards with the detailed authority type and level as well as authority limitations.
develop written procedures for the annual review and revision of Delegation of Financial Authorities.
re-assess monitoring controls over compliance with financial management laws, policies and authorities to ensure clear and documented reporting channels and ongoing monitoring by Finance is performed and documented.

2.2 Audit Scope

2.2.1 Financial Coding:

The scope of the assessment of adequate and effective core management controls with regard to Financial Coding covered a review of financial transactions from all Transfer Payments (Grants & Contributions) and Operating & Maintenance activities related to the fiscal year of 2006-2007. Appropriate transactional reviews for the period of April 1, 2007 to May 31, 2007 was also included as part of the review for any relevant subsequent activities related to the fiscal year 2006-2007.

Exclusions:

The scope of this audit did not include providing an opinion of assurance with regard to Contracting; and Hiring Authorization Process; however as noted any material issues that came to light outside of this scope are mentioned as information only.
The audit scope also excluded any assessment of the financial system (Integrated Financial Management System – IFMS), and its controls and structure. Reliance was placed on the financial system data and automated reports.
Third parties' responsibilities such as the financial tracking and reporting by the Federal Delivery Partners were not included in the scope of this internal audit.

2.2.2 Monitoring of the Operating Budget:

The scope of the assessment of adequate and effective core management controls over "Monitoring of the Operating budget" included a review of key budget monitoring activities within all operations and functions, related to the partial fiscal year of 2007-2008 for the period of April 1, 2007 to October 31, 2007. There was limited value to auditing the core control framework before this timeframe, as management was aware of deficiencies and was in the process of revising it accordingly.

2.2.3 Implementation of Action Plan for Delegation of Signing Authority Policy and Procedures:

This follow-up audit was not a comprehensive opinion with regard to the adequacy and effectiveness of the core management controls of the delegation of Authority. It was specific to the adequacy and effectiveness of the core management controls which were implemented as per Management's Action Plan Response (Implementation timeframe May 2007 to October 2007). Given that there were limited changes to the specific Delegation of Signing Authority Policy introduced in the Management Action Plan, the audit scope also included an assessment with regard to Section 32 and Section 34 for the fiscal year ended March 31, 2007.

The scope of this audit also placed reliance on the OCG opinion and recommendations of Phase 1, and therefore reviewed the complete control management framework for Delegation of Authority only to ensure the appropriate context for the proposed action plan items.

Planning timeframe for all three audits:

The planning phase was conducted in November 2007, followed by the execution phase which occurred from December 2007 to January 2008. The draft report was completed February 20, 2008.

2.3 Audit Approach

2.3.1 Preliminary Audit Survey and Information Collection

General meetings were conducted with key stakeholders and process owners to gain an understanding of the key process activities and risk areas. The preliminary audit phase consisted of the conduct and completion of the following components:

Financial Statement and Trial Balance documentation review;
Policy & governance review;
Interviews;
Documentation of key process delivery activities; and,
Documentation of preliminary observations and risk areas.

2.3.2 Execution Phase

In the execution phase, a representative sample of Operating & Maintenance and Grants and Contributions transactions was tested. An audit questionnaire relating to Monitoring of the Operating Budget and Financial Coding was developed and conducted with thirteen interviewees across various levels within INFC. In addition, specific follow-up meetings and documentation review were undertaken to assess the areas identified as requiring further audit work during the preliminary of the audit. The cumulative results of the preliminary audit survey and the execution phase are detailed in the following section on Findings and Recommendations.

3.0 Findings and Recommendations

As indicated previously, the combined audit assessed the adequacy of the core management controls of the Stewardship and Accountability Component within the Management Accountability Framework based on the identified key criteria and assertions for Financial Coding, Monitoring of the Operating Budget, and Implementation of the Action Plan for Delegation of Signing Authority Policy and Procedures. The following observations have been made.

3.1 Financial Coding

The audit procedures applied and evidence collected for the year ended March 31, 2007 consisted of:

Selecting a sample of fifty O&M transactions from the Integrated Financial Management System (IFMS) which represented twenty-three percent of the total O&M dollar expenditures, and reviewing all respective relevant supporting documentation;
Selecting a sample of twenty-one Grants & Contributions transactions (advances and expenditures incurred) from IFMS which represented twenty-five percent of the total G&C dollar expenditures, and reviewing all respective relevant supporting documentation;
Reviewing the details of all Journal Vouchers within the audited fiscal year;
Reviewing the first two months of Journal Vouchers of the subsequent fiscal year;
Reviewing the Unaudited Financial Statements and Trial Balance for the year ended March 31, 2007;
Interviewing thirteen non-financial INFC employees across various levels;
Interviewing seven financial INFC employees across various levels

3.1.1 Appropriateness of Fund Centre, Authority Code, General Ledger Account, and Other

INFC was and is currently using the financial information and reporting system which is managed by Industry Canada (IC). They follow the coding structure defined under the Treasury Board Policy on "Classification and Coding of Financial Transactions." This policy consists of essentially six key coding elements which include:

Department/Agency or Organization Code (which identifies a distinct department accountable for the legitimacy, accuracy and completeness of its transactions).
Financial Reporting Account (which is used for accrual accounting and identifies relevant asset, liability, revenue, expense and equity general ledger account classification).
Authority Code (used for accountability and reporting of Public Accounts according to specific votes – expense, revenue and non-appropriated authorities)
Program Activity Level (which aligns overall government program objectives).
Object Code (which identifies the types of resources acquired i.e. Grants & Contributions).
Transaction Type Code (which identifies transactions which are either internal or external to Government of Canada accounting entity)

Based on discussions with INFC Finance and the IFMS support staff, there was an understanding that there is a defined mapping of several of the coding elements which do not require regular manual entry for each transaction nor can they be overridden without review by Industry Canada and INFC Finance. These mappings are generally reviewed annually and help to mitigate coding errors by reducing the number of manual classification choices and user input requirements. Given this reduced risk, the audit focused specifically on the coding elements for Organization Code; Financial Reporting Account, Program Activity Level, and Object Code which require a degree of user judgement when entering transactions and setting up mapping. The audit also focused on the appropriate use of the Internal Order assignments which were established specifically for INFC to provide greater visibility within several Grants & Contributions groupings.

Throughout the fiscal year of 2007, there were generally three tiers of financial coding input and review. Firstly, that being the Fund Centre Owner, who initiates the general Ledger, Fund Centre and Authority Code. This is followed by a review by INFC Finance upon receipt of the invoice. The third review is done by IC Finance or Procurement depending on the transaction stage (i.e. Request for Purchase Order or Payment of Invoice).

Findings for Section 3.1.1

Missing Supporting Audit Evidence (Invoices):

Firstly, out of the entire selected sample size, the team was unable to find either the original or the duplicate copy of nine out of the fifty transactions, which should have been maintained by IC supporting their Section 33 approval. As there were no formal procedural guidelines for document retention, neither INFC finance nor the Fund Centre Owner, kept a duplicate copy. This may in part be due to the timing of the audit, which took place during the transition of financial processing responsibility from IC to INFC. The records and filing structure previously maintained by IC had just been received and were in various stages of filing/document organization. However, this observation is important, not only for purposes of the potential lack of an audit trail, should there be an external audit, but because it highlights a need for more rigor in the documentation process. This transactional information provides evidence for Section 33 and 34, appropriateness of coding for the nature of work, timeliness of receipt, and cancellation for payment, and therefore is key evidence of INFC discharging their stewardship function.

Need to Continue to Strengthen the Process Regarding the Classification between O&M Expenditures versus Capital Assets:

The most material coding issue found was with regard to the appropriate classification of capital assets (in particular SIMSI software and development costs) versus operating expenditures. It was observed that all payments for IT hardware and software procurement were reflected as fund centre operating expenses versus capital asset acquisitions throughout the entire year 2007 and previous. At yearend, significant time was spent in re-classifying these transactions. However, despite limited documentation detail, a review of this yearend re-classification suggests that some of the transactions were incorrectly adjusted ($150K of under-expensed IT Consultants expenditures). As there is significant complexity both in the volume and the nature of this type of project activity (which involves internal labour, maintenance, licenses, and development work and tangible long-term asset purchases), leaving the re-classification until yearend causes some inherent risk of misstatement.

It should be noted that the audit did have a significant degree of difficulty in reconciling the total expenditures incurred within the 2007 fiscal year partially because the transactions appear to be based on accrual estimates for the year as opposed to actual expenditures and partially because of the unsubstantiated journal voucher details. While it is an acceptable accounting practice to reflect asset values based on an accrual estimate, it is important that there be a complete documentation of the estimate and a reconciliation to ensure year over year adjustments to actual expenses are done properly, which the audit did not find any significant evidence of.

As well, capital acquisitions although not impacting cash flow, affect the financial position of INFC. As per the TB "Project Approval" Policy, there is an upfront approval requirement on all projects > $1M including capital acquisitions, given their long-term nature and impact on INFC's financial position. Therefore, even if INFC has limited involvement in these types of activities, there is a need for clear, complete and upfront procedures to ensure early identification and financial analysis; otherwise, the delegation of signing authority may be circumvented when capital transactions are purchased initially through operating funding.

Use of Generic General Ledger Account Classifications for O&M:

A common coding issue found was with regard to the selection of the general ledger account classification. Often a generic account classification such as "Management Consultants" was chosen; however, in several cases a more descriptive classification existed. An example of this would be the classification of network support versus consultative ad hoc requests, which is distinguishable from an operations management perspective as a very specific activity and therefore value added to track separately. The perspective of the sample of employees surveyed is that there is a general lack of understanding as to definition of the codes, consistency in their usage and interpretation across finance and fund centre managers. Of the sample selected almost none of the Fund Centre managers or administrators have had training; however short of taking a financial course, there is little specific training available. Yet all responded positively to taking full accountability to the appropriateness of financial coding, and believing it is a fundamental requirement in understanding business activity.

Lack of Procedural Guidelines and Clarity of Roles and Responsibilities:

This audit observation, based on the review of journal vouchers, is related to the number of correcting entries for coding issues. Through audit interviews and review of the supporting detail, the explanation for this number of entries was largely because of a continued learning of the interpretation of the general ledger classifications and the nature of the work. Many finance and non-finance voiced concern regarding the inconsistency of interpretation and the lack of guidelines around coding specific transactions. As a result, often "after-the-fact" adjustments were necessary. While these correcting entries which were found through reviews done by Fund Centre Owners and INFC Finance appear to be acting as an adequate compensating control, this may only be effective while INFC is relatively small and while detailed manual review of the volumes of transactions is still manageable and efficient.

Generally, there is a lack of procedural details specific to each finance activity (such as Travel Expense claim input, or G&Cs re-allocation of Suspense Accounts), limited training and transitional guidance, and a significant workforce turnover, which has left the financial function somewhat vulnerable throughout the fiscal period audited. The audit request for any documentation of procedures resulted in limited complete or clear information. There were many individual reference lists (an example being a list of Fund Centre Owners or definitions of Company Codes) or self-documented procedures but no central master document or owner.

Further based on interviews, it was apparent that between the Finance and Procurement teams there was uncertainty of roles and responsibilities. There was to some degree a duplication of effort, with both Procurement and Finance reviewing the financial code at different points in the processing cycle. This sometimes resulted in different coding classifications and confusion for the clients. Similarly, there were gaps in the control process whereby Finance perceived Procurement to have validated the Fund Centre information but had in fact not consistently done so or believed this to be their role.

Need for More Communication between Finance and Non-Finance Employees:

Prevalent amongst all the discussions with the non-financial employees, was the need for more regular and clear communication with regard to both the financial transactions and general financial activities. One frustration is the number of changes made to the coding classification from the initiation of the Fund Centre Owner to the entry into the financial system, without first consultation with the accountable manager. Both for future learning and clarity, there is a need for upfront and regular dialogue between Finance and Fund Centre Owners as some activities are not straightforward and require business knowledge. This will eliminate unnecessary reconciliation time and after-the-fact discussions. This will be further expanded in the findings under Monitoring of the Operating Budget.

Recommendations for Section 3.1.1

In order to demonstrate the appropriate financial stewardship, and maintain an historical database for future analysis, INFC Finance should establish guidelines for all transactional processing activities including the applicable documentation processes.
INFC Finance and Administration should develop activity specific roles and responsibilities. In conjunction with this clarity, INFC Finance should ensure the documentation and implementation of formal procedures to monitor the compliance and understanding of these roles and responsibilities.
INFC Finance should review the processes surrounding the application and understanding by Finance of the TB "Policy on Classification and Coding of Financial Transactions" and TB "Accounting Standard 3.1 - Capital Assets."
INFC Finance should ensure there is an effective communication and monitoring process for the implementation of the TB "Policy on Classification and Coding of Financial Transactions" and TB "Accounting Standard 3.1 - Capital Assets" by Finance, Fund Centre Managers and Administrative staff. This process should encompass both training and control mechanisms to attest to its ongoing effective implementation.

Management Responses for Section 3.1.1

INFC recognizes the need to improve documentation of accounting procedures and guidelines for processing transactions. Finance will undertake to review, revise and document all required accounting policies, procedures and guidelines in 2008-09. Subject to the provision of available operating budget funding, work will be undertaken via a professional services contract, using resources with specialized experience in federal government finance, accounting, and administrative systems and controls. The project will deliver a suite of updated and fully documented policies, procedures and guidelines. The result will ensure improved quality, accuracy, consistency and efficiency of practices in financial operations, as well as assist in training and orienting new financial services staff.

Timeline – May- Dec 2008
Activity-specific roles and responsibilities will be reviewed and refined in conjunction with the completion of key finance staffing actions, implementation of a revised suite of financial and administrative policies and procedures, and a new HR plan.

Finance & Administration will:
1. staff the position of Head, Accounting Operations (April 2008);
2. review, revise and document all required accounting policies, procedures and guidelines (December 2008);
3. develop and implement a new Human Resources Plan (March 2009).
Timeline – April 2008 – March 2009
Finance is planning to review, revise and document all required accounting policies, procedures and guidelines in 2008-09. This project will include the provision of appropriate procedures and guidance material for Finance staff regarding the proper classification, coding and treatment of capital asset transactions.

Timeline – May- Dec 2008
Communication, implementation and control procedures will be reviewed and established in conjunction with the development and approval of revised capital asset accounting procedures and guidance materials. Training and communication requirements for new policies and procedures will be addressed in the development of the communications plan for a renewed suite of policies and procedures.

Timeline – Sept-March 2008

Issues will also be addressed through individual learning plans of key finance personnel. Finance will provide Fund Centre Managers and administrative staff with program-specific guidance on applicable capital asset policies and procedures.

Timeline – Spring 2008

3.1.2 Timeliness of Payment of the Transaction

The Treasury Board Policy on "Payment Requisitioning and Payment on Due Date" generally states that payments must be made in accordance with the contract, as specified in a standard payment term, thirty days from receipt of the invoice or acceptance of the goods whichever is later.

Upon review of the financial procedures, there are several stamped dates on each transaction or invoice, which include when it was received by the Fund Centre Owner, and when INFC finance receives it. Typically, invoices go to the Fund Centre Owner first so that they can verify the charges, enter the financial coding, and perform Section 34. Once sent to INFC finance, a review of the coding and Delegation of Signing Authority is done. Generally, the invoices themselves also contain a description of the work period or reference to the terms within a Purchase Order and the date of official invoicing.

Findings for Section 3.1.2

Timeliness of Payment of Invoices aligned with TB Policy:

Based on the sample of transactions it appeared that invoices and transactions were being paid within thirty days of the date received by Finance, however, in several cases there was a longer turnaround time from the date of the invoice to the receipt within Finance. Per discussions with Finance and the Fund Centre Owners, sometimes the validation of the invoice requires more time before Section 34 can be completed to their satisfaction. Although the deviations are not always well documented, they did not appear significant and therefore there does not appear to be a procedural issue.

Recommendation for Section 3.1.2

No recommendations required.

3.1.3 The Accuracy of the Dollar Amount Entered into the Financial System

As part of the audit, we assessed whether the appropriate dollar amount as invoiced or supported through the Contribution Agreement Schedule of Payments or other documentation, was accurate.

Findings for Section 3.1.3

No Discrepancies Found for O&M Coding of Dollar Amounts:

No incorrect dollar amounts for Operating Maintenance expenditures were found within the audit sample. There were instances when invoice amounts were split between various Fund Centre Owners depending on the nature of work; however, the overall amount was entered correctly. Of note there was little to no support evidenced for the rationale for the multi-fund centre split; however based on verbal confirmations with those accountable, the allocations are reasonable and appropriately approved through individual Section 34s.

Insufficient Support for the Justification of Expenditures Incurred by Federal Delivery Partners:

Specific to Grants and Contribution the audit found insufficient supporting documentation for the recording of actual expenditures incurred by the Federal Delivery Partners (FDP) and to a lesser extent, by direct recipients. Initial advances supported by Contribution Agreements and review procedures by the Project Delivery teams, was not part of the scope of this audit; however the review of the recording of the movement of funding from the Suspense Accounts to the General Ledger Accounts was. Finance played a key role in the acceptance and reporting of these actual expenditures and was relied upon throughout the year as the main control. This information is critical to support the re-profiling of funding to future years, or the repayment of fund advances if not spent. While the Program Operations - Project Delivery team has responsibility to ensure compliance to the Contribution Agreement, the audit highlighted that the financial spending profiles are not regularly reconciled to external financial progress reports as there are limited integrated procedures between Finance, the Project Delivery teams and the FDPs.

Further, the audit review found the detail provided to support the expenditures and the methods of transmission had substantial control risks. Based on a sample of twenty-one G&C transactions, the audit was able to verify seventeen to contribution agreements or FDP excel spreadsheets confirming actual spend-to-date, however, these spreadsheets were not regarded as sufficient documentation. As an example, there was no indication that these spreadsheets were officially approved reports with clear evidence of authorization, by either the FDP or the INFC Fund Centre Manager. In addition, there was no password protection used in the transmission of the information, it was simply an excel file that could unintentionally be altered or have manual input errors. For the remaining four G&Cs sampled, no independent documentation could be found. The entries within the financial system were based on verbal communication with the FDPs and/or supporting documentation, which was not available to review. Based on this evidence, the audit could only conclude that the transactional coding for those sampled that had informal FDP excel files, was adequately reflected in the financial system. No independent FDP confirmations have been done at this time; however, INFC Finance did uncover discrepancies during the March 31, 2007 fiscal year end between final reported expenditures between INFC and the FDPs. Given the long-term nature of these projects and the annual re-profiling of the funding activities the risk of an overall (multi-year) misstatement has been assessed as moderate. This assumes that reliance can be placed on the established procedures of the FDP organizations.

Recommendations for Section 3.1.3

5. In conjunction with Program Operations, INFC Finance should examine the current provisions of the MOU with the FDPs to ensure the provisions provide sufficient clarity on what constituents a valid, timely, complete and accurate financial submission.

Management Responses for Section 3.1.3

5. The Director, Finance & Administration will work with Program Operations Branch to ensure that FDPs fully understand their obligations for the reporting of financial information under the government's policy on the management of OGD suspense accounts.

Timeline – April-Sept 2008

3.1.4 The Completeness of all Coded Transactions

The completeness of all transactions ensures the appropriate presentation of the financial position of the Department at a certain point in time. It aligns the financial obligation with the time in which the service or good was done or received. TB "Accounting Standard Policy and Principles" (effective April 2001) requires that accrual based accounting be done on a monthly basis for all significant transactions. The intent of this policy is to ensure the complete presentation of all legal financial obligations regardless of payment or independent invoicing. The audit procedures included a review of all 2007 fiscal year PAYE entries; a review of the subsequent two months after yearend of material entries; and discussions with Fund Centre Owners.

Findings for Section 3.1.4

Appropriate Coding of Transactions within the Correct Financial Period:

The review of sample transactions highlighted only one incorrect coding of financial charges within the wrong fiscal period ($270K missed accrual). The extrapolated dollar value of this deviation did not cause a material misstatement of the financial information. However, based on audit interviews, the accrual process and the assurance of completeness for reporting given the interdependencies with FDPs and other government departments (OGDs) have low to moderate inherent risks. While the guidance provided by Finance to Fund Centre Owners at yearend with regard to the preparation of accruals or unpaid services completed was confirmed as very useful, the turnaround time for completion did not align with the complexity and nature of these transactions. As a result, the Fund Center Owner could only provide high-level professional judgments as to what was outstanding which included a contingency. While no material discrepancies were found based on the audit sample, there is a need to continue to strengthen the accrual process especially as INFC evolves. INFC continues to place significant reliance on FDPs to provide the justification for actual expenditures, as well as reliance on OGDs to perform contracted services like accommodations. By dealing with these third parties, INFC's ability to assess first hand the amount of service performed within a short timeframe is limited.

Of note as a management issue, which will be discussed further under the findings of Monitoring of the Operating Budget, many Fund Centre Managers have adopted a form of accrual accounting within their own internal financial spreadsheets to help them forecast. They commented that the financial information currently being provided is not relevant as it is already out of date in the reflection of the services already performed but not invoiced. This reinforces the need to develop a clear process with regard to ensuring the capture of all financial transactions within a defined period.

Recommendations for Section 3.1.4

6. INFC Finance should continue to define and communicate the accrual accounting process and procedures. These procedures should reflect appropriate business timelines and complexities. With the improved adoption of regular accrual accounting, the monthly expenditure analysis will also be more valuable as a forecasting tool.

Management Responses for Section 3.1.4

6. INFC has had discussions over the past several months with the Department of Finance, Receiver General and the Office of the Comptroller General regarding the accrual of INFC program expenditures. Documentation of INFC's expenditure management and accrual practices has been shared with the OCG and will be revised as required pending OCG feedback. INFC-Finance will also be reviewing, revising and documenting all of its accrual practices in the connection with its review of accounting policies, procedures and guidelines in 2008-09.

Timeline – May- Dec 2008

3.2 Monitoring of the Operating Budget

The audit procedures applied and evidence collected consisted of:

Obtaining a copy of the July 2007 Variance Report issued to Fund Centre Owners;
Obtaining a copy of the October 2007 Forecast and Actuals Fund Centre report;
Obtaining selected examples of variance responses from Fund Centre Owners;
Interviewing thirteen non-finance INFC employees across various levels.

3.2.1 Evidence that Significant Variances to Budget are Identified and Documented and Sufficiently Reviewed

It is critical that not only is the review and reporting of actual results compared to budgets done, but that there is evident or documentation of this analysis, so as to ensure clear and consistent communication of the information to Executives, Financial Management, and other Government Departments. Having a clearly and consistently documented history of explanations and results also provides credibility to the information and allows management to focus on the pertinent business issues.

Findings for Section 3.2.1

Need of Improved Quality of Financial Information Supplied and of Expenditure Reports:

Based on the selection of interviewees, every Fund Center Manager maintained some form of independent financial tracking and reporting template. This information was used in various reporting manners, some formally through weekly team meetings with both staff and Executives while others only for assistance in the preparation of specific requests from Finance and their own mandate management.

Finance similarly, maintained both detailed and summarized salary and O&M expense and budget variance reports which were provided throughout April to October 2007. These reports were sent to Fund Centre Owners for their review for accuracy and approval. The audit highlighted some concerns with regard to the usefulness and accuracy of these reports. Based on this feedback and a sample review, there were some quality issues, which included:

inaccurate FTE charges sometimes due to outdated information submitted by the Fund Centre Owners and sometimes due to errors in calculations due to duplication etc;
incorrect charges such as travel claims in the wrong function or courier expenses in the wrong Fund Centre;
out of date information supplied by the Fund Centre Managers due to the subsequent receipt of invoices or work performed but not invoiced or inaccurate outstanding commitment balances;
different account classifications than were originally budgeted and submitted to Finance;
changes to budget allocations due to a lack of communication across all levels.

Due to the above issues, it is important to note the considerable amount of time (~ 3 days per month with ~ 2-5 Fund Centre financial adjustments) spent in the reconciliation process (largely by the administrative assistants) which is inefficient and a duplication of effort in some cases. Consequently, there was some frustration with the amount of time spent on the financial information provided, although all agree that the large staff turnover (both Finance and non-Finance) and organizational evolution have played a significant role in these issues.

Limited Quality Variance Explanations:

Although each Fund Centre owner consistently and thoroughly attempts to reconcile and approve the actual expenditures, very few responses back to Finance provided true variance explanations that address core business issues such as the delay of a Purchase Order along with the corrective steps needed to ensure successful delivery. The audit expected to find formal monthly variance summaries highlighting the impacts and risks of the current budget profile; however, the correspondance and documentation reviewed were often adhoc and informal, focusing solely on the mechanical mathematical accuracy, with sporadic official approval from Fund Centre Owners. This is because there was no explicit request for variance explanations, only for the validation of the accuracy of the information and confirmation of the commitments. There was no formal "challenge" process on a regular basis. There is also a perception that nothing is really done with the information that was provided and therefore enforcement of monthly approval is of limited consequence.

Need to Continue to Improve the Reporting Tools to be More User Friendly:

Through interviews, it was observed that the format of the report itself and the types of reports available were not user friendly and caused frustration during the reconciliation process to the individual Fund Centre Owner financial tracking spreadsheets. For example the processing of interdepartmental expenditures within the month were shown under the general ledger cost element 99000 rather than the correct general ledger account which consequently must then be re-allocated at a later date.

In addition, most Fund Centre Owners prepare their budgets using an activity-based approach, while the monthly finance report reflects the standard general ledger accounting classification. This discrepancy further impacts the reconciliation time, needed to allow Fund Centre Owners to understand and report on their activities in a meaningful business manner.

Many expressed a lack of clarity as to what and how they should review this report because they do not have direct access to system information and what detail is provided is limited. As a result, everyone approaches the reconciliation differently and to varying degrees but often not for efficient business reasons. There is a great deal of back and forth communication with regard to the system data provided so that there is an understanding of the context of individual transactions. It is unclear if direct access to the system would improve this reconciliation process; however, the current process has created many process duplications and inefficiencies (i.e. having Finance enter the changes to the commitments on behalf of the administrative assistants).

Need for Continued Strengthening of the Budget Allocation Process:

Finally, as a separate audit observation from interviews, it was noted that the ability to prepare variance analysis was affected by the current budget process. As INFC does not have an A Base, the establishment and monitoring against the original budget allocation is considered more difficult because of target adjustments and limited historical direction. While it was acknowledged that the typical budget cycle includes a strong "challenge" function and necessary re-prioritizations, there was a concern in that several of the larger Fund Centre activities require a long-term planning cycle and therefore need clarity of priorities and fund commitment upfront in order for them to effectively deliver their mandate. It was observed that once the budget allocations were given, there was a clear effort to attempt to align the funds to the individual mandate activities, which in turn helped facilitate the monitoring of actual expenditures; however, this effort does take time and therefore improved prioritization and integrated budget planning at all levels would be beneficial.

Recommendations for Section 3.2.1

7. In conjunction with Fund Centre Owners, INFC Finance should lead a review to understand the complete financial reporting requirements for both finance and non-finance users and develop a report that will more effectively utilize the time of those involved in the daily management of financial activities.

8. With the establishment of the key financial reporting requirements, INFC Finance should design and document procedures to monitor the quality and effectiveness of the information, the reporting tools and analysis supplied by non-Finance.

9. In conjunction with Management, INFC Finance should reinforce the structure and commitment to monitoring variance explanations to ensure adherence and quality decision making. There should be a formal review of the process with clear expectations of what and how communication should be done.

10. In conjunction with Management, INFC Corporate Services should re-assess their current financial system tools to ensure they are effective and efficient to meet the short and long-term objectives of the Department.

Management Responses for Section 3.2.1

7. INFC-Finance has begun to review and develop modifications to the monthly financial reporting process. The objective of proposed improvements is to improve overall readability, facilitate interpretation of results, and ensure that managers' information and requirements are being met. Feedback on proposed changes will be sought from fund center managers.

Timeline – April – June 2008

8-9. Finance will be reviewing, revising and documenting its key financial and administrative policies, procedures and guidelines in 2008-09. This project will include the financial reporting cycle.

Financial data quality and the interpretation of results will be improved by an enhanced general level of finance support and advice to program managers and administrative staff. Support will include improved documentation and consistency of accounting policies and procedures, additional expertise, advice and challenge from the new Head of Accounting Operations, and the planned new INFC Financial Administration Manual which will serve as a key reference guide for program personnel.

Expected results include a more detailed and informative explanation of budget variances.

Timeline – April –Dec 2008

10. INFC-Finance is in the process of re-negotiating its shared service arrangements with Industry Canada in a number of areas, including the provision of financial systems services. Both parties recognize that the current situation is not a good long-term solution. INFC is working with Industry Canada to improve short-term financial systems services.

Timeline – Spring 2008.

INFC will be exploring additional options for a long-term solution in the course of 2008-09.

Timeline – Sept – March 2008

3.2.2 Evidence that Individuals with Budget Authority and Responsibility are Involved with Decisions to Change Budget Allocations.

By ensuring accurate and timely financial updates, each Fund Centre Owner as well as the Executive team, can gain flexibility in their decisions as to how and sometimes when to execute their deliverables. This integration of deliverables and cost and overall funding allows for effective cash and program management. It allows for the continual re-prioritization of critical or new deliverables.

Findings for Section 3.2.2

Budget Re-allocation Activities Understood and Managed:

The audit interviews highlighted an overall understanding and effort to shift budget allocations between Fund Centres of the same owner, and between different types of expenditures (salary versus contracting dollars). However, given the limited scope timeframe of this audit (April 2007 to October 2007), the full challenge cycle and amount of lapsed funding was not reviewed completely and consequently there were no significant re-allocations done as it was too early in the typical project delivery cycle to make any major changes. As per all those interviewed, the significant re-allocations of O&M or re-profiling of G&Cs is typically started in the November to February timeframe and is co-ordinated by Finance. This later start is likely due to there being minimal consequences to lapsing funds, and the uncertainty or risk associated with the unknown short and long-term deliverables.

Recommendations for Section 3.2.2

No recommendation required.

3.2.3 Evidence of the Reporting of Actual Results Compared to Budgeted Amounts has Appropriate Management Review

Without proper communication channels to fully utilize the variance analysis, the process will have no merit. All levels of Program Delivery and Fund Centre Owners bring a subject matter expertise to the execution of the deliverables, and therefore in order to leverage it, there must be a clear and consistent approach to the communication of all information including variance analysis.

Findings for Section 3.2.3

Need to Continue Efforts to Provide Clarity around Financial Variance Reporting Process and Regularity of Financial Reviews at Executive Committee Level:

The audit interviews highlighted that at the Fund Centre Owner level, there were no formal communication processes with regard to financial reviews of actual expenditures and variance explanations between themselves and Executives. While all of those interviewed agreed that there are informal discussions through Finance of their reported variances, most were not aware of what if anything was presented to the Executives or at the ADM Committee meetings and were uncertain what that "status" of their monthly variance explanations was. In addition, the October 2007 Executive Review of variances and revised forecasts was the only identified occasion for a complete variance analysis. There was further concern, particularly with the "project" oriented activities that given the evolving mandate and consequential impacts to the support functions, there is a need for more cross-functional reviews and integration.

At the Executive Committee level, Finance communicated as required a consolidated view of the financial results and highlighted key issues. This presentation was not done regularly throughout the audit timeframe as it was considered not of value because the implementation of the year's mandate had just begun. The was no evidence of concern regarding any potential lack of financial communication at the Executive Level during this timeframe.

Given the limited six month scope of the Monitoring to the Operating Budget audit, we were informed that there is a significant increase in reporting throughout the December to March timeframe. However, it should be noted the impact of this limited finanical reporting and understanding of the process is diminished, by the fact that INFC is relatively small and flat to allow for close "hands on" involvement at all levels. Additionally, several Fund Centre Owners have developed their own internal communication processes (for example the SIMSI update report) to ensure a communication channel across all levels. However, without having established processes for regular review of finanical information and an understanding of the reporting processes at all levels, there is a risk that decisions are made in isolation and may not have an integrated solution. As well, an Executive review reinforces the accountability framework through visibility and transparency of information and commitment to the reporting process.

Recommendations for Section 3.2.3

11. INFC Finance should review the processes around the collection, analysis, and communication of the monthly variance explanations to both the Executive Committee and Fund Centre Managers to strengthen the visibility and commitment to these financial action plans.

Management Responses for Section 3.2.3

11. Visibility, commitment and accountability to financial plans will be strengthened via the resulting improvements in data quality and analysis, and an expected increase in accuracy, timeliness and usefulness of financial information to fund center managers and senior management.

Timeline – Spring 2008

The processes surrounding the collection, analysis and communication of monthly financial reports will be described and documented in revised financial procedures, as well as the proposed new INFC Financial Administration Manual.

Timeline – April –Dec 2008

3.2.4 Evidence of Clarity of Roles and Responsibilities When Providing Variance Explanations

The necessity of clarity of roles and responsibilities for variance analysis helps to ensure accountability and appropriateness of the effort. Variance analysis is not merely the formality of ensuring the mathematical accuracy of the transactions, but rather includes the understanding of the when, why and so what of the integration of the actual expenditures to the successful delivery of the mandate. It was the expectation of the audit that there would be clear documentation of the expectations of providing variance analysis.

Findings for Section 3.2.4

Limited Documentation and Consistency in Performing Roles and Responsibilities for Variance Explanations:

There is informal evidence of clear accountability and effort across all Fund Centre Owners with regard to monthly variance explanations. However, there is little documentation with regard to roles and responsibilities of this exercise. As noted previously there is a unique process amongst each Fund Centre Owner with regard to fulfilling this obligation. Most have delegated the task to administrative assistants and in one case one FTE was hired to specifically be accountable for the financial administration of project deliverables. And while this appeared adequate based on the six month scope of the audit review, there was a clear indication that the process could be more efficient with better quality documentation.

Recommendations for Section 3.2.4

12. In conjunction with the Management, INFC Finance should lead the development of Finance roles and responsibilities specifically with regard to assisting in monitoring budget variances and establishing the expectations around "challenging" the information. This might require a shift in finance skill set from technical accounting to business analyst; however it will ensure a consistent approach and better utilize everyone's time.

Management Responses for Section 3.2.4

12. The development of an enhanced financial management "challenge" function will be considered in the context of a review of Finance & Administration's long- term functional structure and capacity.

The review and development of a challenge function will be considered in the context of F&A's commitment to develop an HR plan in 2008-09.

Timeline Sept- Mar 2009

3.2.5 Evidence of Clarity of Criteria for Usage and Re-allocation of Funding

In order to achieve an appropriate prioritization of the organizational deliverables, there needs to be a clear understanding of the mandate, of the detailed action plans on how to deliver the mandate, of the integration with INFC overall requirements, and of the inherent risk of the nature of the work to be performed. This prioritization process, in order to achieve effective and efficient project delivery cannot be a one-time process. It must remain a continual cycle, documented through business plans and risk assessments at all levels in order to minimize the risks inherent in any project delivery.

Findings for Section 3.2.5

Informal Criteria for Prioritization Activities at Execution Level:

As mentioned above, there is evidence across all functions of detailed planning templates and efforts of integration for all INFC requirements and deliverables. In addition, continuing throughout the six months audited there were ongoing reviews of the plan details. These ongoing reviews were informal, unstructured, and often functionally focused. There were no significant re-allocation decisions of funding changes across Fund Centre Owners, made during the audit timeframe; however, there were continuous adjustments at the execution level of the plan within individual groups. Examples of these adjustments are the modifications to the SIMSI Task Authorizations requirements with the commencement of the Building Canada Fund, and the borrowing of actual FTE allocations within Executive portfolios for unplanned re-prioritized requirements.

It should be noted that once the re-organization of INFC occurs and there is an established structure, the department would be able focus on the development of a strategic plan, which will strengthen the budget prioritization and monitoring exercise.

Recommendations for Section 3.2.5

No recommendation required.

3.3 Implementation of Action Plan for Delegation of Signing Authority Policy and Procedures

3.3.1 Establish controls to ensure that when a new Minister is appointed, new Delegation of Financial Authorities documents are prepared as soon as possible for the Minister's approval.

Although the existing Delegation of Authority remains in effect throughout the transition of a New Minister, it is important that there is a process in place to ensure an expedient review and necessary adjustments in accordance with the New Minister's mandate and priorities.

Findings for section 3.3.1

Need for Continued Strengthening of DOA procedures to Ensure Explicit Identification of Key Activities upon Ministerial Change:

INFC Finance has drafted a Delegation of Signing Authorities Procedures as of May 2007. This document does make reference to the requirement for an immediate review upon a Ministerial change; however it is not explicit as to the specifics of what controls will be relied upon to ensure a timely revision (such as a clear audit trail through documentation of procedures followed and communication of exceptions). The guidelines should be explicit and include the specific procedures that INFC will follow to discharge its responsibilities. While the activity is understood, the documented structure to enforce it needs to be strengthened otherwise INFC remains in a similar situation as in the past.

Recommendations for section 3.3.1

13. INFC Finance should continue to strengthen their current Delegation of Signing Authority Policy and Procedure guidelines with regard to Ministerial changes. For example, it should include the requirement for 1) formal documentation of all communication steps followed, 2) key escalation reporting mechanisms to highlight issues, and 3) any other evidence of INFC's due diligence controls.

Management Responses for section 3.3.1

13-17.The Delegation of Signing Authority Policy and Procedures guidelines will be included in the proposed review and revision of finance and administrative policies, procedures and guidelines. The review will ensure that INFC policy and practices conform with federal government best practices on the management of delegation of authority, due diligence with respect to JV & invoice approvals, and the administration and processing of signature cards.

Timeline – Dec 2008

Training and communication requirements will be identified in the course of the proposed review.

Timeline – Dec – March 2009

Additional guidance to administrative staff will be provided in the proposed new INFC-Finance and Administration Manual.

Timeline – Fall 2008

3.3.2 Revise delegation instruments to ensure that all departmental financial authorities are addressed and delegated to specific positions.

In particular the OAG Horizontal Audit recommendation referred to the lack of clarity around who has Delegation of Authority for the initiation of Information Technology projects within the INFC Delegation of Signing Authority Policy. While fund commitments, goods and services acceptance, and payment release, are clear within the Delegation of Authority, it is also important for larger projects, which result in the long-term allocation of resources to have some form of approval indicating the appropriate value-added assessment, review of solution alternatives and financial impact (capitalization versus operating). In essence, the approval of a complete business case evaluation, done upfront before the actual commitment of funds. Although there is a TB "Project Approval" Policy, the INFC Policy was not explicit in identifying this authority.

Findings for section 3.3.2

Need to Strengthen the Documentation and Clarity With Regard to Appropriate Implementation of Project Initiation Approval:

The inclusion of a formal Project Initiation Approval section has been added to the Delegation of Signing Authority Policy as of May 2007; however, the overall revised Policy document remains unapproved. In the review of this new section, the audit found it to be generic with limited implementation guidelines specific to INFC. It did reference IT new and renewal projects at a high-level, and provided a reference to the TB "Project Approval" Policy. However, as noted above, there is a need for further clarification with regard to what qualifies as a "Capital" project or a "capital transaction" within IT projects. For example, INFC could be explicit with regard to when leasehold improvement capitalization is appropriate. The TB Policy explicitly requires the estimate of all project activities including the identification of capital, ongoing maintenance, and one-time operating costs. Therefore, further clarification specific to INFC activities will help to ensure that there is a clearer understanding of this process and approval mechanism and will provide a more complete policy guideline with specific INFC interpretation. The impact of this issue is low risk given the nature of INFC's current activities and projects, and because INFC has completed a five-year, Capital restatement in the fiscal year ended March 31, 2007 reflecting precisely an adjustment from operating to capital. However, upfront clarity in the guidelines will ensure a proactive control providing better planning and timely identification of capital acquisitions.

Need for Clarity With Regard to Section 34 on Financial Adjustments:

One specific area of concern highlighted during the course of the audit was with regard to intention of the Section 34 Finance approval on Journal Vouchers for the recognition of G&C actual expenditures. While the total G&C's advances were monitored and approved by the Fund Centre Owner, the acceptance from FDP submissions and reporting of the actual expenditures appeared to have been approved by Finance through their sign-off of Section 34 on their Journal Voucher. Through discussions with Finance, the intention was not to represent a Section 34 approval of expenditures but rather an approval of the posting of the Journal Voucher. Therefore, there is a need for clarity with regard to the supporting documentation submitted by the FDP as indicated in Section 3.3 and Finance Journal Voucher due diligence approval.

Recommendations for section 3.3.2

14. INFC Finance should continue to review its current Delegation of Signing Authority Policy and Procedure guidelines and provide further detail with regard to what constitutes a project or capital transaction. As part of this review, an assessment of training and communication strategies should be done to ensure an effective implementation of the new policy.

15. INFC Finance should clarify the intent and document the procedures with regard to the Journal Voucher due diligence approval. This should be part of the Delegation of Signing Authority Policy and Procedures.

Management Responses for Section 3.3.2

See Management Responses #13-17 for section 3.3.2

3.3.3 Develop written procedures on Delegation of Financial Authorities in order to provide additional guidance and instructions to the staff and to reinforce the delegated authority controls.

A control environment should include not only clear written policies, but also procedures outlining key actions, which ensure the effective implementation of the documented policy. Without procedures, the interpretation of the policy becomes subjective.

Findings for section 3.3.3

Delegation of Signing Authorities Procedures Completed But Remain at Very High-Level:

A Delegation of Signing Authorities Procedures document was developed and approved in May 2007. The audit review found the document to be very high-level. It was expected that this document would be a "working" document which outlined very specific activities or core controls such as "what monitoring controls would be relied upon, structured processes for whom and when review and exception reports would be done; specific training requirements for those responsible for implementation, etc." Rather, the document was generic in the details of how it was to be implemented. It typically outlined the requirements, however it fell short of identifying key activities and more importantly the role of non-financial INFC employees and Executives and their accountability in providing subject matter expertise with regard to current and complete legislative compliance.

Recommendation for section 3.3.3

16. In conjunction with Management, INFC Finance should review the Delegation of Signing Authorities Procedures to ensure they have appropriate and comprehensive detail. They should identify key activities and processes; who is accountable for them; and, how and when they are to be delivered.

Management Responses for section 3.3.3

See Management Responses #13-17

3.3.4 Develop Specimen Signature Cards with the detailed authority type and level as well as authority limitations.

In order to ensure the appropriate review of individual Delegation of Signing Authorities, INFC must have the fundamental tools against which to challenge the submitted approvals. These tools not only include the appropriately approved signatures, and applicable authority types and levels, but also the assurance that the collection and ownership of the information is current, complete, and communicated.

Findings for section 3.3.4

Format Revision and Collection of Updated Specimen Cards Substantially Complete:

Through the initial audit survey, it was communicated that the selection of a Standard Specimen card had been completed, and that INFC was currently in the process of updating all Specimen cards during the period of summer 2007. Based on this information, the audit sample validated all Section 32 and 34 approvals against the updated Specimen Cards, which highlighted three deviations (out of fifty transactions). These deviations based on discussions with INFC Finance and Fund Centre Owners are likely the result of lack of documentation as opposed to inappropriate approval. The signatures were validated against those on record; however, the audit was unable to find supporting documentation that these approvers had "acting" authority for the fund centre against which they were representing at the time in question. This documentation is a key audit trail for the evidence of appropriate approval, and while there was a general understanding of its importance, further discussions with INFC finance highlighted the fact that there was no central owner or accountable person who had a clear ownership of the specifics of maintaining a complete specimen card database.

Recommendation for section 3.3.4

17. INFC Finance should develop and document activity specific roles and responsibilities and procedural guidelines, which should include the complete processing requirements for Specimen Cards (See recommendation 2 in Section 3.1).

Management Responses for section 3.3.4

See Management Responses #13-17

3.3.5 Develop written procedures for the annual review and revision of Delegation of Financial Authorities.

Within the documented Delegation of Signing Authorities Procedures, there is a need to ensure an annual review, which will help to reinforce appropriate division of responsibilities and strengthen the level of control over authority review and revisions.

Findings for section 3.3.5

Documented Procedural Detail for Annual Review of Delegation of Signing Authority Policy but at Very Generic High-Level:

The May 2007 Delegation of Signing Authorities Procedures, does make specific reference to the requirement of an annual review of the policy. However, the procedures are generic and simply re-state the requirement for review. It was expected that more explicit core actions would be identified such as a structured Executive review and sign-off. The procedures document is of limited value as it leaves the interpretation of implementation very judgmental and subjective.

Recommendations for section 3.3.5

See Section 3.3.1 recommendation and applicable management response.

3.3.6 Re-assess monitoring controls over compliance with financial management laws, policies and authorities to ensure clear and documented reporting channels and ongoing monitoring by Finance, are performed and documented.

With the continued structural changes within INFC, it is imperative that clear controls be identified in order to ensure an effective monitoring process of compliance and appropriateness. The action of identifying the need, needs to be followed by the "how" it will be accomplished. Therefore, the audit expected to find very explicit process details of monitoring activities.

Findings for section 3.3.6

No Documentation of Monitoring Controls Around Delegation of Signing Authority Policy:

The audit did not find any reference to procedures or accountability with regard to the ongoing monitoring of compliance or assessment of appropriateness within the May 2007 "Delegation of Signing Authorities Procedures". While there is an undocumented understanding of the requirement, there is no explicit documentation within the procedures guideline of any core controls or processes.

Recommendations for section 3.3.6

See Section 3.3.1 recommendation and applicable management response.

Appendix A

List of Recommendations and Management Response

Recommendations were based on the audit findings (listed in order that they appear in the audit report).

The responses provided below, approved by senior management, describe actions taken or planned in order to address recommendations made in this audit report.

Recommendations	Responsibility	Response and Actions to be taken (including timeline)
Financial Coding
1. In order to demonstrate the appropriate financial stewardship, and maintain an historical database for future analysis, INFC Finance should establish guidelines for all transactional processing activities including the applicable documentation processes.	Director, Finance & Administration	INFC recognizes the need to improve documentation of accounting procedures and guidelines for processing transactions. Finance will undertake to review, revise and document all required accounting policies, procedures and guidelines in 2008-09. Subject to the provision of available operating budget funding, work will be undertaken via a professional services contract, using resources with specialized experience in federal government finance, accounting, and administrative systems and controls. The project will deliver a suite of updated and fully documented policies, procedures and guidelines. The result will ensure improved quality, accuracy, consistency and efficiency of practices in financial operations, as well as assist in training and orienting new financial services staff. Timeline – May- Dec 2008
2. INFC Finance and Administration should develop activity specific roles and responsibilities. In conjunction with this clarity, INFC Finance should ensure the documentation and implementation of formal procedures to monitor the compliance and understanding of these roles and responsibilities.	Director, Finance & Administration	Activity-specific roles and responsibilities will be reviewed and refined in conjunction with the completion of key finance staffing actions, implementation of a revised suite of financial and administrative policies and procedures, and a new HR plan. Finance & Administration will: staff the position of Head, Accounting Operations (April 2008); review, revise and document all required accounting policies, procedures and guidelines (December 2008); develop and implement a new Human Resources Plan (March 2009). Timeline – April 2008 – March 2009
3. INFC Finance should review the processes surrounding the application and understanding by Finance of the TB "Policy on Classification and Coding of Financial Transactions" and TB "Accounting Standard 3.1 - Capital Assets".	Director, Finance & Administration	Finance is planning to review, revise and document all required accounting policies, procedures and guidelines in 2008-09. This project will include the provision of appropriate procedures and guidance material for Finance staff regarding the proper classification, coding and treatment of capital asset transactions. Timeline – May- Dec 2008
4.INFC Finance should ensure there is an effective communication and monitoring process for the implementation of the TB "Policy on Classification and Coding of Financial Transactions" and TB "Accounting Standard 3.1 - Capital Assets" by Finance, Fund Centre Managers and Administrative staff. This process should encompass both training and control mechanisms to attest to its ongoing effective implementation.	Director, Finance & Administration	Communication, implementation and control procedures will be reviewed and established in conjunction with the development and approval of revised capital asset accounting procedures and guidance materials. Training and communication requirements for new policies and procedures will be addressed in the development of the communications plan for a renewed suite of policies and procedures, as well as through individual learning plans of key finance personnel. Finance will provide Fund Centre Managers and administrative staff with program-specific guidance on applicable capital asset policies and procedures. Timeline – Sept-March 2008
5. In conjunction with Program Operations, INFC Finance should examine the current provisions of the MOU with the FDPs to ensure the provisions provide sufficient clarity on what constituents a valid, timely, complete and accurate financial submission.	Director, Finance & Administration; DG, Program Operations	The Director, Finance & Administration will work with Program Operations Branch to ensure that FDPs fully understand their obligations for the reporting of financial information under the government's policy on the management of OGD suspense accounts. Timeline – April-Sept 2008
6. INFC Finance should continue to define and communicate the accrual accounting process and procedures. These procedures should reflect appropriate business timelines and complexities. With the improved adoption of regular accrual accounting, the monthly expenditure analysis will also be more valuable as a forecasting tool.	Director, Finance & Administration	INFC has had discussions over the past several months with the Department of Finance, Receiver General and the Office of the Comptroller General regarding the accrual of INFC program expenditures. Documentation of INFC's expenditure management and accrual practices has been shared with the OCG and will be revised as required pending OCG feedback. INFC-Finance will also be reviewing, revising and documenting all of its accrual practices in the connection with its review of accounting policies, procedures and guidelines in 2008-09. Timeline – May- Dec 2008
Monitoring of the Operating Budget
7. In conjunction with Fund Centre Owners, INFC Finance should lead a review to understand the complete financial reporting requirements of the finance and non-finance users, and develop a report that will more effectively utilize the time of those involved in the daily management of financial activities.	Director, Finance & Administration; Fund Centre Managers	INFC-Finance has begun to review and develop modifications to the monthly financial reporting process. The objective of proposed improvements is to improve overall readability, facilitate interpretation of results, and ensure that managers' information and requirements are being met. Feedback on proposed changes will be sought from fund center managers. Timeline – April – June 2008
8. With the establishment of the key financial reporting requirements, INFC Finance should design and document procedures to monitor the quality and effectiveness of the information, the reporting tools and analysis supplied by non-Finance.	Director, Finance & Administration	(Rec. 8 & 9) Finance will be reviewing, revising and documenting its key financial and administrative policies, procedures and guidelines in 2008-09. This project will include the financial reporting cycle. Financial data quality and the interpretation of results will be improved by an enhanced general level of finance support and advice to program managers and administrative staff.
9. In conjunction with Management, INFC Finance should reinforce the structure and commitment to monitoring variance explanations to ensure adherence and quality decision making. There should be a formal review of the process with clear expectations of what and how communication should be done.	Director, Finance & Administration; Fund Centre Managers	Support will include improved documentation and consistency of accounting policies and procedures, additional expertise, advice and challenge from the new Head of Accounting Operations, and the planned new INFC Financial Administration Manual which will serve as a key reference guide for program personnel. Expected results include a more detailed and informative explanation of budget variances. Timeline – April –Dec 2008
10. In conjunction with Management, INFC Corporate Services should re-assess their current financial system tools to ensure they are effective and efficient to meet the short and long-term objectives of the Department.	Director, Finance & Administration	INFC-Finance is in the process of re-negotiating its shared service arrangements with Industry Canada in a number of areas, including the provision of financial systems services. Both parties recognize that the current situation is not a good long-term solution. INFC is working with Industry Canada to improve short-term financial systems services, and will be exploring additional options for a long-term solution in the course of 2008-09. Timeline – April –Dec 2008
11. INFC Finance should review the processes around the collection, analysis, and communication of the monthly variance explanations to both the Executive Committee and Fund Centre Managers to strengthen the visibility and commitment to these financial action plans.	Director, Finance & Administration; Fund Centre Managers	The processes surrounding the collection, analysis and communication of monthly financial reports will be described and documented in revised financial procedures as well as the proposed new INFC Financial Administration Manual. Visibility, commitment and accountability to financial plans will be strengthened via the resulting improvements in data quality and analysis, and an expected increase in accuracy, timeliness and usefulness of financial information to fund center managers and senior management. Timeline – April –Dec 2008
12. In conjunction with Management, INFC Finance should lead the development of Finance roles and responsibilities specifically with regard to assisting in monitoring budget variances and establishing the expectations around "challenging" the information. This might require a shift in finance skill set from technical accounting to business analyst; however it will ensure a consistent approach and better utilize everyone's time.	Director, Finance & Administration; ADM, Corporate Services	The development of an enhanced financial management "challenge" function will be considered in the context of a review of Finance & Administration's long- term functional structure and capacity. The review and development of a challenge function will be considered in the context of F&A's commitment to develop an HR plan in 2008-09. Timeline Sept- Mar 2009
Implementation of Action Plan for Delegation of Signing Authority Policy and procedures
13. INFC Finance should continue to strengthen their current Delegation of Signing Authority Policy and Procedure guidelines with regard to Ministerial changes. For example, it should include the requirement for 1) formal documentation of all communication steps followed, 2) key escalation reporting mechanisms to highlight issues, and 3) any other evidence of INFC's due diligence controls.	Director, Finance & Administration	(Recommendations 13 to 17) The Delegation of Signing Authority Policy and Procedures guidelines will be included in the proposed review and revision of finance and administrative policies, procedures and guidelines. The review will ensure that INFC policy and practices conform with federal government best practices on the management of delegation of authority, due diligence with respect to JV & invoice approvals, and the administration and processing of signature cards. Training and communication requirements will be identified in the course of the proposed review. Additional guidance to administrative staff will be provided in the proposed new INFC-Finance and Administration Manual. Timeline – May - Dec 2008
14. INFC Finance should continue to review their current Delegation of Signing Authority Policy and Procedure guidelines and provide further detail with regard to what constitutes a project or capital transaction. As part of this review, an assessment of training and communication strategies should be done to ensure an effective implementation of the new policy.	Director, Finance & Administration
15. INFC Finance should clarify the intent and document the procedures with regard to the Journal Voucher due diligence approval. This should be part of the Delegation of Signing Authority Policy and Procedures.	Director, Finance & Administration
16. In conjunction with Management, INFC Finance should review the Delegation of Signing Authorities Procedures to ensure they have appropriate and comprehensive detail. They should identify key activities and processes; who is accountable for them; and, how and when they are to be delivered.	Director, Finance & Administration
17. INFC Finance should develop and document activity specific roles and responsibilities and procedural guidelines, which should include the complete processing requirements for Specimen Cards (See recommendation 2 in Section 3.1.1).	Director, Finance & Administration

Date modified:: 2008-08-08

Audit of the Financial Management Accountability Framework with regard to: Financial Coding, Monitoring of the Operating Budget, and Implementation of Action Plan for delegation of signing authority policy and procedures

Table of Contents

Executive Summary

Objective 1 – "Financial Coding":

Objective 2 – "Monitoring of the Operating Budget":

Objective 3 – "Implementation of the Action Plan for the Delegation of Signing Authority Policy and Procedures":

Audit Opinion

Statement of Assurance/Reliance

Key Recommendations

Financial Coding:

Monitoring of the Operating Budget:

Implementation of Action Plan for Delegation of Signing Authority:

1.0 Background

Three Year Internal Audit Plan:

Financial Statements Details:

2.0 Audit Objectives, Scope and Approach

2.1 Audit Objectives

Core Management Controls:

Financial Coding

Monitoring of the Operating Budget

Implementation of Action Plan for Delegation of Signing Authority Policy and Procedures

2.2 Audit Scope

2.2.1 Financial Coding:

2.2.2 Monitoring of the Operating Budget:

2.2.3 Implementation of Action Plan for Delegation of Signing Authority Policy and Procedures:

Planning timeframe for all three audits:

2.3 Audit Approach

2.3.1 Preliminary Audit Survey and Information Collection

2.3.2 Execution Phase

3.0 Findings and Recommendations

3.1 Financial Coding

3.1.1 Appropriateness of Fund Centre, Authority Code, General Ledger Account, and Other

Findings for Section 3.1.1

Missing Supporting Audit Evidence (Invoices):

Need to Continue to Strengthen the Process Regarding the Classification between O&M Expenditures versus Capital Assets:

Use of Generic General Ledger Account Classifications for O&M:

Lack of Procedural Guidelines and Clarity of Roles and Responsibilities:

Need for More Communication between Finance and Non-Finance Employees:

Recommendations for Section 3.1.1

Management Responses for Section 3.1.1

3.1.2 Timeliness of Payment of the Transaction

Findings for Section 3.1.2

Timeliness of Payment of Invoices aligned with TB Policy:

Recommendation for Section 3.1.2

3.1.3 The Accuracy of the Dollar Amount Entered into the Financial System

Findings for Section 3.1.3

No Discrepancies Found for O&M Coding of Dollar Amounts:

Insufficient Support for the Justification of Expenditures Incurred by Federal Delivery Partners:

Recommendations for Section 3.1.3

Management Responses for Section 3.1.3

3.1.4 The Completeness of all Coded Transactions

Findings for Section 3.1.4

Appropriate Coding of Transactions within the Correct Financial Period:

Recommendations for Section 3.1.4

Management Responses for Section 3.1.4

3.2 Monitoring of the Operating Budget

3.2.1 Evidence that Significant Variances to Budget are Identified and Documented and Sufficiently Reviewed

Findings for Section 3.2.1

Need of Improved Quality of Financial Information Supplied and of Expenditure Reports:

Limited Quality Variance Explanations:

Need to Continue to Improve the Reporting Tools to be More User Friendly:

Need for Continued Strengthening of the Budget Allocation Process:

Recommendations for Section 3.2.1

Management Responses for Section 3.2.1

3.2.2 Evidence that Individuals with Budget Authority and Responsibility are Involved with Decisions to Change Budget Allocations.

Findings for Section 3.2.2

Budget Re-allocation Activities Understood and Managed:

Recommendations for Section 3.2.2

3.2.3 Evidence of the Reporting of Actual Results Compared to Budgeted Amounts has Appropriate Management Review

Findings for Section 3.2.3

Need to Continue Efforts to Provide Clarity around Financial Variance Reporting Process and Regularity of Financial Reviews at Executive Committee Level:

Recommendations for Section 3.2.3

Management Responses for Section 3.2.3

3.2.4 Evidence of Clarity of Roles and Responsibilities When Providing Variance Explanations

Findings for Section 3.2.4

Limited Documentation and Consistency in Performing Roles and Responsibilities for Variance Explanations:

Recommendations for Section 3.2.4

Management Responses for Section 3.2.4

3.2.5 Evidence of Clarity of Criteria for Usage and Re-allocation of Funding

Findings for Section 3.2.5