Parks Canada
Symbol of the Government of Canada

Common menu bar links

Internal Audit and Evaluation Documents

Final Report
November 2006

Prepared by:
PARAGON Review and Consulting Inc.

Report tabled and approved by the A&E Committee

[ Previous | Table of Contents ]


6. Observations and Recommendations

6.1 Management Control Framework (MCF)

Blue

Minor improvements needed

Many of the controls are functioning as intended. However, some minor changes are necessary to make the control environment more effective and efficient.

Observations

We found that the MCF over financial management includes an annual business planning and budgetary process, through which NNBFU priorities are identified and established by the management team, and funds are allocated accordingly. Financial reports with budget comparison are prepared by NNBFU finance and are reviewed with responsible NNBFU managers at regular management meetings or individually with the NNBFU Superintendent. The Field Unit Management Committee meets monthly except during the summer months and is chaired by the Field Unit Superintendent. Minutes of the management committee meetings are maintained. Monitoring of financial performance against plans and budgets is ongoing.

Policies and procedures related to finance and administration activities are communicated to staff. These include direction and guidance with respect to financial coding, delegated financial authorities, and contracting and procurement. Roles and responsibilities of finance staff are clearly defined and documented.

Training on financial policies, procedures, and practices is provided to managers and staff through on the job training, ongoing advice/communication from the Manager Finance and Administration and Finance and Administration Officers, and through formal training sessions such as the financial management training provided by Regional Finance on a bi-annual basis and the mandatory on-line Finance and Administration Training Course FA101.

We found that the Manager, Finance and Administration has both payment authority (Section 33) and spending authority (Section 34). This represents an internal control risk. Although, the Manager, Finance and Administration does not exercise the payment authority at the NNBFU on an ongoing basis as this task has been delegated to another staff member in the finance group, to strengthen internal control the Section 33 payment authority delegated to the Manager, Finance and Administration should be revoked.

The audit team found that back up of computer system data is performed as instructed by the Atlantic Service Centre IT Group. This includes performance of daily, weekly, monthly, and annual back ups. Daily backups are kept in the server room. Storage of weekly, monthly, and annual back up tapes are kept in an offsite location. We found that all back up tapes are not kept in a fire proof cabinet at either the server site or the offsite location. This increases the risk of loss of information in the case of a fire.

Physical security measures in place at the NNBFU include building alarm systems in the Administration Office/Visitor Reception Centre building and the Historic Site buildings, controlled keys, and padlocks on the gated compounds during off-hours where equipment and machinery are stored. We were told that the alarm system at the Administration Office / Visitor Reception Centre had not been functioning for several months prior to our visit. During our visit the alarm system was repaired. The server room is located on the second floor of the building and the door is locked at all times and access is restricted. We were told that during the summer months the window is left open to cool the room. This situation increases the risk of loss of the server and back up tapes through theft.

Recommendations

  1. The Field Unit Superintendent should ensure that controls are in place to ensure that the Finance and Administration Manager don't exercise the section 34 authority and the section 33 authority on the same transaction to respect a proper segregation of duties.

Management Response:

Partial Agreement: In a large organization, this is possible but the section 6 in the Policy on Delegation states " Persons who are delegated authority to make decisions may be delegated either spending or payment authority, but usually not both. However, in small establishments, this distinction is not always possible, especially when an officer is assigned responsibilities as an alternate officer or when a financial officer administers a budget". This is the situation in the Northern New Brunswick Field Unit where the manager is the alternate. Corrective action taken: Effective immediately, when the Manager of Finance is signing section 33, we will ensure that either the FU Superintendent or her alternate will countersign section 34.

  1. The Field Unit Superintendent should ensure that back up tapes are stored safely at the offsite storage location and take actions to improve the security of the server room and its contents.

Management Response:

Agree: For the weekly and monthly backup tapes, a fireproof safe will be installed in the offsite location where the backup tapes will be stored no later than April 1, 2007. For the daily tapes, a small fireproof container will be purchased to store these tapes and will be installed in the server room.

Agree: For the security of the server room, prior to summer 2007, alternate ventilation will be addressed. This is presently being discussed with Asset Management to address the heat issue in the server room. The Field Unit will also contact the Service Centre to identify the requirements.

6.2 Revenues

Blue

Minor improvements needed

Many of the controls are functioning as intended. However, some minor changes are necessary to make the control environment more effective and efficient.

Observations

NNBF revenues are varied and include: Park Pass Fees, Camping Fees, Interpretative Program Fees, Staff Housing, Permits and Licences, Reservation Fees, and Historic Site Entrance Fees.

For the period April 1, 2006 to September 30, 2006, revenues from operations amounted to approximately $751K. The majority (79%) of this revenue was earned through Kouchibouguac National Park ($593K).

Detailed descriptions of the revenue processes and verification procedures followed were provided to the audit team. Roles and responsibilities of staff were clearly defined and personnel conducted their work with diligence. Permits are controlled and safeguarded. Reconciliation of revenues and analytic review of revenue data is performed by NNBFU finance personnel. A sample of 42 transactions were tested and the audit team found that overall, processes and controls related to revenue collection and recording were adequate.

The audit team did however identify one area where internal control could be strengthened by increasing the segregation of duties related to the deposit of funds, recording of receipts and the reconciliation of revenue recorded to deposited amounts. One individual performs these activities at Kouchibouguac National Park.

Recommendation

  1. The Field Unit Superintendent should ensure duties related to the deposit of funds, recording of receipts and reconciliation of revenue recorded to deposited amounts are segregated.

Management Response:

Agree: Management has met with employees. Duties have been modified for revenue deposits and recording for the operating season 2007. Duties have been divided. Two persons will now be involved in revenue processing for Kouchibouguac National Park. One employee will be responsible for the revenue deposits and the other will do the recording and the reconciliation.

6.3 Contracting

Blue

Minor improvements needed

Many of the controls are functioning as intended. However, some minor changes are necessary to make the control environment more effective and efficient.

Observations

The NNBFU enters into contracts for the procurement of goods and services using a variety of instruments including Services Contracts, Call Ups Against Standing Offers, Purchase Orders, and Acquisition Cards (discussed in Section 6.4).

The audit team found that NNBFU personnel are provided with contracting advice and assistance by the NNBFU Contracts, Procurement & Materiel Management Specialist and through the PCA Halifax Service Centre. In addition, the audit team found that training such as Finance and Administration 101 and procurement guides are made available to managers to assist them with contracting activities.

The NNBFU finance enters all contracts with a value of $1000 or greater into the SAP materiel management system. For contracts greater than $1000 this occurs at the initiation phase of the contract when the contract documents are being prepared by the NNBFU Contracts, Procurement & Materiel Management Specialist. For contracts less than $1000, entry into the materiel management system generally occurs at the time the invoice is submitted to finance for payment. The audit team found through interviews with NNBFU finance personnel that in the majority of cases no contract document exists for these items. This practise increases the risk of disputes with suppliers. Furthermore, not inputting the commitment into the SAP at time of the initiation of the contract also increases budgetary control risk.

The NNBFU Contracts, Procurement & Materiel Management Specialist does not provide a monitoring role on contracting activities. No management reports are prepared on contracting activities by the NNBFU Contracts, Procurement & Materiel Management Specialist or NNBFU Finance for use by management on a periodic basis to monitor contracting activities and compliance. The NNBFU Contracts, Procurement & Materiel Management Specialist and finance could prepare contract reports for NNBFU management to be used in monitoring contracting risks. ie. Number of sole source contracts, identification of contract amendments, identification of repeat sole source contracts to same supplier(s), number of contracts where finance had to create an after the fact commitment. No monitoring of contracting activities increases the risk of non-compliance to contracting policies that could result in a perception of unfairness and reduced value for money on funds spent.

A sample of 17 contracts (10 sole source and 7 competitive) with individual values of greater than $5000 was examined. The audit team found that contracting policies were generally being respected. We did however identify 3 instances were no sole source justification were found on file. Not having documented sole source justifications on file increases the risk of a perception of unfairness in the contracting process and not achieving best value for money spent.

Recommendations

  1. The Field Unit Superintendent should perform monitoring on contracting activities to strengthen compliance, reduce related budgetary risks, and enhance value for money on funds spent.

Management Response:

Agree: As of April 2007, a monthly report on contract activities will be sent to the Finance Manager and to the Field Unit Superintendent. The Finance Manager will provide a monitoring role to ensure compliance with contract policy.

  1. The Field Unit Superintendent should require authorized NNBFU staff to initiate contracts with a value of $1000 or less using Local Purchase Order Authorization Forms for goods and Professional Service Contracts for services.

Management Response:

Agree: A reminder will be sent in April 2007 to all NNBFU staff that initiates contracts. The field unit will also provide SAP training in April 07 and enhance the use of credit cards.

6.4 Use of Acquisition Cards

Blue

Minor improvements needed

Many of the controls are functioning as intended. However, some minor changes are necessary to make the control environment more effective and efficient.

Observations

There are 13 acquisition cards in use in the NNBFU. Credit limits on cards are determined based on expected usage and are approved by the cardholder's manager. Credit limits range from $5,000 to $20,000. There is at least one card for each business line. Transaction volume varies widely. There are usually more purchases in the summer because of increased customer traffic at this time of year.

The NNBFU has an Acquisition Card Co-ordinator. The role and responsibilities of the acquisition card coordinator have not been formally documented. The Acquisition Card Co-ordinator is the primary contact for the NNBFU with the Bank of Montreal and the PCA National Office Acquisition Card Co-ordinator. The Acquisition Card Co-ordinator has access to the Bank of Montreal Web site. The site provides various acquisition card usage reports which can be used in performing monitoring activities on the cards use. The Acquisition Card Co-ordinator does not perform any monitoring activities on the use of cards by NNBFU staff. The use of Bank of Montreal reports which are available online would enhance the monitoring of the use of the cards.

NNBFU finance monitors acquisition card expenditures during the reconciliation of monthly statements. Any purchases that are identified that do not comply with the Agency's policy are discussed with the cardholder directly.

TB policy requires that cardholders and their Responsibility Manager sign a written acknowledgement of responsibilities and obligations before receiving an acquisition card. The audit team found that this practise is not performed at the NNBFU. No signed Acknowledgement of Responsibilities and Obligations Forms were available for examination.

Twelve monthly statements were examined for 12 employees. The audit team found the following instances of non-compliance to PCA and TB policy:

  • Purchases were made by an individual other than the cardholder (2);
  • Receipt was missing supporting purchase (1); and,
  • Non-eligible purchase (1).

Recommendation

  1. The Field Unit Superintendent should ensure that roles and responsibilities of the acquisition card coordinator are documented and strengthened to include the monitoring of the use of the cards through review of the Bank of Montreal reports, which are available online.

Management Response:

Agree: Roles and responsibilities of the acquisition card coordinator will be clearly defined. In order to avoid any duplication, we are working with the Atlantic service centre and are targeting June 07 as completion date. The coordinator will also provide monthly reports to the Finance Manager to monitor usage. Any discrepancies or issues will immediately be addressed with the cardholder or his/her manager.

  1. The Field Unit Superintendent should ensure that upon the issuance of an acquisition card to a staff member that an Acknowledgement of Responsibilities and Obligations Form is signed by both the staff member and the Responsibility Centre Manager.

Management Response:

Agree: This will be done at the same time as the reminder mentioned in recommendation 8. This should be completed by June 2007.

  1. The Field Unit Superintendent should develop acquisition card procedures and perform monitoring activities to minimize the risk of:

    • Purchases being made using another individuals card;
    • Cardholders not providing supporting invoice documentation; and,
    • Ineligible purchases.

Management Response:

Agree: A written reminder with a copy of the Agency's policy will be sent to cardholders in April 07.

6.5 Expenditures for Travel

Yellow

Moderate improvements needed

Some controls are in place and functioning. However, major issues were noted and need to be addressed. These issues could impact on the achievement or not of program/operational objectives.

Observations

The audit team reviewed the processes for the authorization and processing of travel claims. The audit team found that travel claims are strictly audited prior to payment. Checkpoints are effective and easily visible. All rates set by Treasury Board are respected.

A sample of 20 travel claims was selected for examination. The audit team found the following instances of non-compliance to PCA and TB policy:

  • Seven trips where a Travel Authorization Approval Form was not approved and authorized prior to the employee's departure or was done after the trip;
  • One transaction involving a travel advance paid through the Departmental Bank Account which was not signed by the person responsible for S.33;
  • One travel claim involving travel by plane which was approved without a boarding pass or purchase receipt for the plane ticket; and,
  • One Travel claim of the FUS was signed S.34 by a subordinate.

Except for the items identified above, the audit team found that travel claims examined complied with the TBS Travel Directive and that expenditures are being verified for accuracy and eligibility and are properly certified.

Recommendations

  1. The Field Unit Superintendent should ensure that all travel is authorized prior to departure and that all travel claims include supporting justification documents before payment is released.

Management Response:

Agree: The Field Unit Superintendent will send in April o7 a reminder of the requirements in travel policy to all employees in the field unit. The Finance Manager will monitor the travel activities to see if additional training is required. If needed, training on the travel policy will be provided to staff during the 2007-operating season.

  1. The Manager Finance and Administration should ensure that travel claims of the Field Unit Superintendent are signed S.34 by the Director General Eastern Canada.

Management Response:

Agree: This has already been addressed; the documents reviewed were prior to April 2006. Since April 2006, all travel claims for the Field Unit Superintendent are being sent to the DGE for Section 34.

6.6 Payments to Suppliers

Yellow

Moderate improvements needed

Some controls are in place and functioning. However, major issues were noted and need to be addressed. These issues could impact on the achievement or not of program/operational objectives.

Observations

We conducted interviews with NNBFU finance and administration personnel and reviewed payment process descriptions provided. The majority of supplier payment transactions at the NNBFU are for amounts less that $1000. The audit team examined a sample of 38 supplier payments. Our testing of payment files found that payments made are properly recorded in the financial accounting system and that invoice approval procedures are being followed. We did however identify the following area where financial management and compliance can be strengthened.

We found that for contracts valued at less than $1,000 commitments are generally entered and committed in the financial accounting system after the invoice is received rather than at time of initiation of the contract. This practise impairs the accuracy and usefulness of free balance reporting information generated from the financial accounting system, weakens financial management control and increases the risk of reduced value for money on funds spent.

Recommendation

  1. The Field Unit Superintendent should ensure that financial commitments are entered into the financial accounting system and that contract terms are documented using appropriate contract documents upon initiation of the contract.

Management Response:

Partial Agreement: Increasing the use of credit cards and SAP for purchasing will reduce this. But there will always be a number of low value purchases for which we process payments prior to month end reporting that will only be committed at time of payment. Should a budget manager require a report prior to month end, the finance personnel will make sure these are taken into consideration.

6.7 Safeguarding of High Risk Valuable Small Items

Orange

Significant improvements needed

Controls in place are weak. Several major issues were noted that could jeopardize the accomplishment of program/operational objectives. Immediate management actions need to be taken to address the control deficiencies noted.

Observations

Through interviews with NNBFU finance staff and site personnel and review of documentation provided, the audit team found that:

  • High Risk Valuable (attractive) items such as digital cameras, GPS equipment and tools are generally entrusted to the managers who purchase them;
  • No formalized procedures have been established for staff dealing with the identification, recording and periodic monitoring of assets of this nature;
  • Monthly acquisition card registers completed by cardholders do not specifically provide for the identification of assets purchases;
  • Computer equipment including laptops when purchased by the NNBFU IT Administrative Assistant is given an inventory number and tagged.
  • The inventory of computer equipment assets in use at the NNBFU was performed in August 2006 by the NNBFU IT Administrative Assistant. The listing was reviewed during the audit visit. The inventory was performed at the request of the Atlantic Service Centre.

The management and safeguarding of attractive items could be strengthened by establishing formalized procedures related to the identification, recording and monitoring of these assets. This may include a requirement to conduct periodic physical inventory counts of these assets and the requirement to identify assets purchased on ACard register logs.

At the end of the audit work, the audit team was informed that National Office Finance is leading a working group set up to develop and implement a user friendly High Risk Low Dollar Value Items national system using the SAP integrated finance and materiel system. This inventory system will be operating by April 1st, 2007. Field Units will be required to populate the database with only new acquisitions purchased after April 1st, 2007. Entering current inventory is not yet mandatory.

Recommendation

  1. As a best practice, the NNBFU should consider doing a physical count to update its inventory lists in order to have accurate information to input into the new system when implemented.

Management Response:

Agree: A project has been developed and will be implemented. A student will be hired to assist the Contract, Procurement and Material Management personnel to complete a physical inventory during the summer of 2007. It is expected that Parks Canada will have the new system in place during the 2007 operating season. The Field Unit has identified an Administrative Assistant to assist with the input of the inventory in this system in order to have complete data by March 31st, 2008.

6.8 Financial Coding

Green

Controlled

Controls are functioning as intended and no additional actions are necessary at this time.

Observations

The financial coding of expenditures are performed by the individual managers who initiate the transactions. For revenues, the Visitor Services Manager identifies the revenue financial coding requirements at the beginning of the year. NNBFU Finance Revenue Officers perform financial coding on revenues throughout the year as they are received and recorded in the financial accounting system.

The audit team found that:

  • financial coding instruction and tools have been provided to managers by NNBFU Finance to be used as a resource in coding transactions;
  • Financial coding reference information is available to managers on the PCA intranet; and,
  • NNBFU finance personnel provide a challenge role on financial coding as part of account verification procedures and through review of financial reports.

The audit team examined the financial coding on a sample of 38 transactions and found one coding error. The coding was not on the supporting document. The audit team concludes that due diligence is exercised in the management of financial coding at the NNBFU.

Recommendation

None


[ Previous | Table of Contents ]