Audit of Travel and Hospitality Citizenship and Immigration Canada National Headquarters and Domestic Regions

Audit Report
Internal Audit and Accountability Branch
Citizenship and Immigration Canada
February 2011

Table of Contents

• Acronyms Used in the Report
• Executive Summary
• 1.0 Introduction
  • 1.1 Background
    • 1.1.1 Overview of Travel and Hospitality Within CIC
    • 1.1.2 Travel
    • 1.1.3 Hospitality
    • 1.1.4 Proactive Disclosure of Travel and Hospitality Expenses
  • 1.2 Audit Risk Assessment
  • 1.3 Audit Objectives
  • 1.4 Audit Criteria
  • 1.5 Audit Scope
  • 1.6 Audit Methodology
• 2.0 Audit Conclusions
• 3.0 Observations and Recommendations
  • 3.1 Management Control Framework
    • 3.1.1 CIC Guidelines for Travel and Hospitality / Training
    • 3.1.2 Accountability / Authority Framework
    • 3.1.3 Monitoring
    • 3.1.4 Processing, Reporting and Quality of Information
  • 3.2 Compliance with TBS, NJC and CIC Policies and Directives
    • 3.2.1 Pre-Authorization
    • 3.2.2 Spending and Payment Authorities
    • 3.2.3 Proactive Disclosure
• Appendix A: Detailed Audit Criteria
• Appendix B: Management Action Plan
• Appendix C: Audit Time Line

Acronyms Used in the Report

BTA

Blanket Travel Authority

CIC

Citizenship and Immigration Canada

DCFO

Deputy Chief Financial Officer

DG

Director General

FAA

Financial Administration Act

GL

General Ledger

NHQ

National Headquarters

NJC

National Joint Council

SAP

Systems Applications and Products

TAN

Travel Authority Number

TBS

Treasury Board Secretariat

T&H

Travel and Hospitality

Executive Summary

The Risk-Based Audit Plan for 2009–2012 of the Citizenship and Immigration Canada (CIC) Internal Audit and Accountability Branch included an audit of the stewardship of travel and hospitality (T&H). This audit on the internal control framework in place and the relevant policies and directives. The on-site field work was conducted in January and February 2010.

The audit was conducted in accordance with the Internal Auditing Standards for the Government of Canada and the International Standards for the Professional Practice of Internal Auditing.

The audit objectives were:

• To assess the adequacy of the existing management control framework for T&H in order to ensure that expenses of that nature were properly approved and recorded in CIC’s financial records.
• To determine the level of compliance with the directives, policies and guidelines governing T&H programs, and with the mandatory publication of T&H expenses for selected government officials.

The audit covered T&H expenses incurred between April 1, 2008, and June 30, 2009, paid at national headquarters (NHQ) and the Ontario, Prairies and Northern Territories, British Columbia and Yukon, Quebec and Atlantic regions. The audit was national in scope and included audit work at NHQ. We asked the regions to send the selected files to NHQ for our review.

The audit examined T&H expenses in order to assess the processes in place as described by the Department’s Finance Sector. It also assessed the integrity and effectiveness of the proactive disclosure process. The audit examined the travel expenses of both public and non-public servants in Canada and abroad during that period.

The audit concluded that:

• Several elements of a sound management control framework are in place at CIC; accountability is well defined, mechanisms are in place to monitor transactions and overall, transactions are processed and reported properly. However, there is a need to strengthen the departmental travel guidelines and the delegation of financial authorities.
• All the payments we examined were approved by individuals with the appropriate delegated authority. However, in some cases, there was insufficient evidence to determine whether the sequence of these approvals was in accordance with the Directive on Delegation of Financial Authorities for Disbursements.

Overall, we found that for all travel and hospitality expenditures, payment authority under Section 33 of the Financial Administration Act (FAA) had been exercised in accordance with the applicable legislation. The purpose of the key audit recommendations is to strengthen controls for pre-authorization, delegation of financial authorities and departmental travel guidelines.

The report provides detailed observations and recommendations. Management responses and an action plan are included.

1.0 Introduction

The CIC Risk-Based Audit Plan completed by the Internal Audit and Accountability Branch for 2009–2012 identified the need for an audit of the T&H stewardship.

1.1 Background

Government expenditures for T&H are subject to ongoing public and media interest. People are looking for assurance that public money is well spent. They want more scrutiny and vigilant monitoring of those types of expenditures. Furthermore, since the public requested more transparency, a policy on the mandatory publication of T&H expenses for selected government officials—known as proactive disclosure—was put in place. This information is available to the general public and can be consulted on CIC’s website.

1.1.1 Overview of Travel and Hospitality Within CIC

The overall responsibility for T&H falls under the Finance Sector. Files and supporting documents concerning travel and hospitality of NHQ staff are verified and managed by the Accounting Operations Section of the Finance Sector, and kept at the Records Operation Office of the Information Management Directorate under Corporate Services Sector.

Managers are expected to ensure that T&H activities are authorized and claimed in accordance with the provisions of Treasury Board Secretariat (TBS), National Joint Council (NJC) and CIC policies, directives and guidelines. Employees are expected to:

• be familiar with the provisions of TBS, NJC and CIC policies, directives and guidelines;
• consult and obtain authorization for travel and hospitality in accordance with the directives;
• complete and submit in a timely manner T&H expense claims and all supporting documents required for approval from their managers.

1.1.2 Travel

In 2009–2010, CIC had approximately 3,946 full-time equivalents^{Footnote 1} who worked in 46 points of service within Canada and 90 points of service in 76 countries. Given the geographic expanse of CIC’s operations, a large number of employees at various levels of the organization are required to travel frequently on government business, both within Canada and abroad. T&H expenditures in the missions abroad are systematically verified by the internal audit team when mission audits are performed.

In 2008–2009, excluding the Canadian missions abroad, CIC spent $10,460,984^{Footnote 2} on travel expenses.

The rules and principles governing travel expenses are outlined in the National Joint Council’s Travel Directive and the Special Travel Authorities established by the TBS. The purpose of these directives is to ensure fair treatment of employees required to travel on government business and to provide documentation for the reimbursement of reasonable expenses, such as transportation, accommodation, meals and incidentals. The directives reinforce the need for all travel transactions to be processed in accordance with sections 32, 33 and 34 of the Financial Administration Act (FAA), and for regular monitoring of claims. They also direct departments to ensure adherence to the requirements of the FAA.

1.1.3 Hospitality

Hospitality is defined as the provision of a reception offering meals, refreshments and special events to guests of government departments or agencies. It includes expenses encountered while hosting conferences.

The Government of Canada extends hospitality in accordance with the rules and principles outlined in the TBS Hospitality Policy. The objective of the policy is to ensure that the hospitality extended is economical, consistent and appropriate for facilitating government business. Hospitality may be extended to non-public servants when it facilitates government or departmental business, or when it is considered desirable as a matter of courtesy and protocol.

In accordance, CIC has developed its own hospitality guidelines. The purpose of those guidelines is to clarify the forms of hospitality and the occasions for which hospitality may be extended on behalf of CIC or the federal government. They also confirm the approval process and the delegation limits that must be adhered to when preparing a request under the TBS Hospitality Policy and CIC’s Hospitality Guidelines.

In 2008–2009, excluding the missions abroad, a total of $466,187^{Footnote 3} was claimed for hospitality.

1.1.4 Proactive Disclosure of Travel and Hospitality Expenses

Overall responsibility for reporting proactive disclosure falls under the Finance Sector. The Accounting Operations Section is responsible for account verification, processing and monitoring submitted T&H expenses. The Financial Policy and Internal Control Division is in charge of compiling all the necessary information for proactive disclosure and publishing it on CIC’s website.

The information on CIC’s website is updated every three months, and expense information must be posted online within 30 days of the end of each reporting period.

1.2 Audit Risk Assessment

The audit was selected based on an assessment of the risk factors and weighting criteria used to develop the Risk-Based Audit Plan. The audit team used information obtained through preliminary interviews and the absence of previous audit coverage within the Department on travel and hospitality to confirm the preliminary risk assessment.

Of the risk factors assessed, the primary risks fall into the following categories:

• Potential for loss of reputation and public confidence – Expenditures on government travel and hospitality are subject to ongoing interest by the public and media. Regardless of the total dollars involved, these expenditures frequently become indicators of a department’s prudence and probity in the management of public funds, and are subject to media criticism. Therefore, the risk of loss of public confidence is high.
• Clarity and importance of policies and procedures – Procedures and practices in place related to T&H may not be effective or consistently applied throughout the Department, resulting in a risk of errors or omissions.
• Complexity of accountabilities and operations – Although accountabilities are clearly established and judgmental decision making is limited, there is a risk that controls in place to detect and prevent intentional or unintentional errors or omissions and fraudulent activities are not adequate.

1.3 Audit Objectives

The audit objectives were:

• To assess the adequacy of the existing Management Control Framework for T&H in order to ensure that T&H expenses were properly approved and recorded in CIC’s financial records.
• To determine the level of compliance with the directives, policies and guidelines governing T&H programs, and with the mandatory publication of T&H expenses for selected government officials.

1.4 Audit Criteria

The audit criteria are the benchmarks against which the subject matter of the audit engagement was assessed. The criteria that were used in the audit are based on relevant TBS, NJC and CIC legislation, policies and directives. The detailed criteria for the audit and sources of criteria are presented in Appendix A.

1.5 Audit Scope

The audit covered T&H expenses incurred between April 1, 2008, and June 30, 2009, at NHQ and in the Ontario, Prairies/Northern Territories, British Columbia/Yukon, Quebec and Atlantic regions. It examined departmental travel expenses within Canada and abroad during that period.

The scope of this audit does not include

• Travel for the purposes of relocation, as this is a distinct process covered under a separate National Joint Council directive;
• T&H expenditures from overseas missions, as these are systematically verified by the internal audit team as part of their mission audit programs;
• Identification of opportunities for cost savings in travel planning and arrangements, such as use of travel cards or the negotiated contracts and rates for airfares, hotels and car rentals.

The audit was national in scope and included audit work at NHQ. We asked the regions to send selected files to NHQ for our review.

1.6 Audit Methodology

This audit involved an examination of the processes and procedures associated with the overall framework for T&H, pre-authorization of expenditures, supporting documents for expense claims, proactive disclosure of T&H expenses for selected senior CIC officials and eligibility of expenditures.

Audit field work was conducted in January and February 2010 and included the following:

• Preliminary interviews with staff in the NHQ Finance Sector concerning T&H processing activities, documentation, approval process, advice, support and training provided, and possible areas of improvement.
• Comparative analysis of TBS and NJC policies and directives and CIC internal guidelines to ensure consistency.
• Examination of CIC guidelines related to the processing of T&H claims and the related Management Control Framework.
• Review and assessment of controls, monitoring and reporting mechanisms in place.
• Interviews with managers and staff at NHQ to determine whether CIC internal guidelines are in accordance with TBS and NJC policies and directives, and whether they are being followed. The interviewees were the head of accounting at NHQ, financial analysts, administrative assistants and travellers.
• Review of the following three samples:
  • 95 travel claims were randomly selected using a statistical approach from a population of claims made between April 1, 2008, and June 30, 2009;
  • 42 hospitality claims were randomly selected using a statistical approach from a population of claims made between April 1, 2008, and June 30, 2009; and
  • 20 proactive disclosure files were judgmentally selected for the period of March 2, 2008, to March 1, 2009.

The audit was conducted in accordance with the Internal Auditing Standards for the Government of Canada and the International Standards for the Professional Practice of Internal Auditing.

2.0 Audit Conclusions

Based on our examination, we concluded that:

• Several elements of a sound management control framework were in place within CIC; accountability was well defined, mechanisms were in place to monitor transactions, and overall, transactions were processed and reported properly. However, there is a need to strengthen the departmental travel guidelines and the delegation of financial authorities.
• All the payments we examined were approved by individuals with the appropriate delegated authority. However, in some cases, there was insufficient evidence to determine whether the sequence of these approvals was in accordance with the Directive on Delegation of Financial Authorities for Disbursements.

Detailed observations and recommendations are outlined below.

3.0 Observations and Recommendations

3.1 Management Control Framework

The audit examined the policies, procedures and guidelines in place and reviewed the monitoring and reporting of costs, as well as the verification mechanisms used to manage T&H processes.

3.1.1 CIC Guidelines for Travel and Hospitality / Training

We expected to find that T&H policies and procedures were in place to assist and guide employees in the administration of these activities and that they were consistent with those issued by TBS and NJC. We examined T&H policies, directives and guidelines used by CIC and reviewed the procedures in place for T&H.

Guidelines for Hospitality

CIC follows the TBS Hospitality Policy as its primary direction. In addition, the Department has developed its own hospitality guidelines to guide employees in applying the TBS policy. They meet CIC’s operational needs because they clarify the forms of hospitality and occasions for which hospitality can be extended. They also confirm the approval process and the delegation limits that must be adhered to when preparing a request.

The CIC Hospitality Guidelines were compared to the TBS Hospitality Policy to identify any gaps or inconsistencies. This side-by-side analysis confirmed that CIC’s guidelines were in line with the TBS policy.

Guidelines for Travel

The NJC Travel Directive provides the primary direction for travel activities within CIC. We found that the directive did not specify procedures for management oversight. For example, it did not specify the forms to use within CIC, the processing steps leading to reimbursement, the terms and conditions for the use of the Blanket Travel Authority (BTA), the controls over non-public servants’ travel and the roles and responsibilities of Travel Authority Number (TAN) holders.

CIC follows the NJC Travel Directive but has not developed additional departmental guidelines on travel that address its operational needs, unlike the guidelines developed for hospitality. Such guidelines would provide employees with specific guidance that would facilitate their travel arrangements, thereby preventing them from having to consult multiple sources of information. This would limit misinterpretations and ensure consistency in application.

Training

We expected to find that training related to T&H was available in order to ensure that all parties were aware of their responsibilities and the process to be followed in both areas.

We conducted four interviews at NHQ: two Executive Administrative Assistants who prepare claims, and two travellers. None of the people interviewed had received formal training.

Our compliance review of sampled travel files demonstrated that claims submitted to the Finance Sector for processing contained administrative errors in 63 files out of the 95 examined, which increases the workload of financial assistants who are responsible for making the appropriate corrections. Formal training for the staff involved in the process would increase awareness of proper travel procedures. Since conducting our audit, the Finance Sector has informed us that it has started offering and delivering more formal training on T&H. We have confirmed the availability of new training sessions for administrative officers at NHQ in the areas of travel, hospitality and delegation of authority. These sessions are part of the NHQ course schedule for 2010–2011.

3.1.2 Accountability / Authority Framework

In assessing the existing Management Control Framework for T&H, we expected to find clearly defined roles and responsibilities at the national and regional levels. We also expected to find that financial authorities were appropriately delegated, ensuring that T&H expenses were properly approved and recorded, and that it was functioning as intended.

The FAA provides legislation on the financial administration of the Government of Canada. Section 32 of the FAA requires the verification of the availability of funds and the commitment of funds against an appropriation (budget) before the expense is incurred. Section 34 provides the authority to certify that the work was performed and that the goods were supplied or the services were rendered as contracted. Section 33 provides the authority to pay the expenditures after ensuring that the payment is a lawful charge against an appropriation and that sections 32 and 34 have been properly exercised.

Delegation of financial authorities

The TBS policy on delegation of authorities (replaced on October 1, 2009, by the Directive on Delegation of Financial Authorities for Disbursements) provides guidelines to ensure that appropriate financial and operational management controls are applied to the delegation of financial authorities associated with the expenditure process.

CIC has entrusted its financial officers with the required payment authority through the delegation of financial signing authorities document, which is authorized by the Minister.

During our audit, we learned that for NHQ, delegated authorities are maintained and updated through an Excel spreadsheet. It is intended to indicate the cost centres, the names of the fund centres, the names of the managers and possible replacement managers with delegation authority, and the names and telephone numbers of the administrative staff. It is maintained and updated by Accounting Operations in the Finance Sector.

We examined the tools used in the process and used them to assess whether approvals were made by persons who had appropriate financial authorities. We were not able to confirm the validity of some of the delegated authorities without obtaining additional information from Accounting Operations. Also, managers in a standing authority status are granted authority to sign without a determined end date, which contravenes the Policy on Delegation of Financial Authorities for Disbursements that was in place at the time of the audit. New specimen cards should be signed at the beginning of each year.

If specimen cards are not kept up to date, the current risk for CIC is that T&H expenses may be incurred without proper authority. However, we didn’t find any cases where this had occurred.

3.1.3 Monitoring

We expected to find a monitoring process in place for T&H activities to ensure compliance with the appropriate policies and guidelines.

The responsibility for account verification and related financial controls rests with the officers who are delegated payment authority pursuant to FAA Section 33. The officers must provide assurance of the adequacy of the spending authority (Section 34) before authorizing payment.

We found that for the period of our review, CIC had complied with the TBS Account Verification Policy because every T&H claim was subject to financial review before the payment was processed. Financial officers reviewed all the claims.

Moreover, a monitoring team reporting to accounting operations was established in the summer of 2007 to ensure that proper controls were in place for compliance. The team performed some reviews at NHQ and in the regions, and one of its roles is to verify whether T&H expenditures are in accordance with the existing policies, directives and guidelines by selecting and reviewing a sample of transactions. In 2009–2010, a monitoring project was conducted by Corporate Accounting on the 2007–2008 T&H expenses at NHQ. A remedial action plan was put in place and remains in place.

We concluded that a monitoring mechanism to detect non-compliance was in place.

3.1.4 Processing, Reporting and Quality of Information

We expected to find that T&H transactions were correctly reflected in the financial system. In addition, we expected to find that CIC produced reports outlining T&H expenditures and that the reports, if they existed, met management’s information needs for decision-making purposes.

Processing and Reporting

SAP is the financial system used to record T&H financial transactions at CIC. A coding line is composed of elements, such as fund centres and the general ledger (GL) accounts that specify the nature of the transaction. Management uses financial information from the GL for decision making. A correct and consistent posting of expenditures is required. A lack of uniform direction and discipline in recording transactions at NHQ and in the regions could undermine the accuracy and subsequent usefulness of the existing information.

We compared all travel and hospitality files selected as part of our sample with the SAP journal vouchers to ensure that correct data were reflected in CIC financial systems. Overall, we found this to be the case.

File management

For our sample review, NHQ Finance and the domestic regions were asked to provide us with the original physical files. All travel files were retrieved and received. During the time of the audit, four of the 42 hospitality files could not be found. When the replacement samples were requested, one of four was missing again. Consequently, we reviewed 41 hospitality files. The situation was confirmed with the record operations office.

3.2 Compliance with TBS, NJC and CIC Policies and Directives

CIC’s T&H processes were assessed to determine their level of compliance with the NJC Travel Directive and TBS Special Travel Authorities, the TBS and CIC hospitality policies and guidelines, and the TBS policy on mandatory publication of T&H expenses for selected government officials.

Sample testing was used to ensure that compliance expectations were met.

3.2.1 Pre-Authorization

We expected to find that T&H expenditure claims were approved in advance by appropriately delegated officials and that the pre-authorization forms were properly filled out.

Travel

The NJC Travel Directive states the following: “Government travel shall be authorized in advance in writing to ensure that all travel arrangements are in compliance with the provisions of this directive.”

The results of our testing showed that all trips were business-related. Thirteen authorizations to travel were signed after the travel took place, and 12 signatures were not dated, meaning that there was insufficient evidence to determine if the authorization occurred prior to the travel.

Hospitality

Pre-authorization of hospitality events offers an opportunity to demonstrate spending transparency in addition to strengthening overall accountability and due diligence.

At CIC, hospitality expenses must be formally authorized in advance by the appropriate level of delegation. For approval, a hospitality form must always be completed and signed by someone with the required delegated authority to validate the expense before an event is held.

Our review of 41 hospitality claims revealed that four claims were not pre-approved in accordance with the Hospitality Policy. One authorization was signed after the hospitality took place, and three signatures were not dated, meaning that there was insufficient evidence to determine whether the authorization occurred prior to the hospitality.

To meet the compliance expectations, it is critical that TBS and departmental guidelines regarding the pre-authorization of T&H expenses be followed. Our review of claims suggests that more discipline needs to be applied to strengthen the pre-approval process. Employees and managers should be made aware of the importance of pre-approval of T&H expenses and the need to complete the pre-authorization forms with all required information.

3.2.2 Spending and Payment Authorities

We expected to find that T&H expense claims were verified and had the required supporting documents prior to exercising spending and payment authorities under sections 34 and 33 of the FAA, and in accordance with CIC’s established delegated authorities and the TBS authorized allowances.

Travel

To obtain travel reimbursement, CIC travellers must prepare and forward to their managers for approval a travel expense claim, along with all supporting documents, including original receipts and an explanation for any deviation from the NJC Travel Directive. Once the manager has reviewed and approved the claim under FAA Section 34, the claim is forwarded to Finance for further processing and verification prior to issuing a payment.

We found that all 95 travel claims examined were made for expenditures for governmental travel purposes. No personal expenses were found. Overall, the key information was obtained prior to processing payment and the required supporting documents accompanied the claims. However, in five cases, FAA Section 34 certification was not dated, meaning that there was insufficient evidence to confirm whether the sequence of authorities was respected.

We found that for all travel expenditures, payment authority under Section 33 of the FAA had been exercised in accordance with the applicable legislation.

Hospitality

We expected to find that the hospitality claims reviewed met the TBS Hospitality Policy requirements.

Our review of 41 hospitality claims revealed that in six cases, the form was incomplete and key information was missing, such as the dates of the signatures (four), the number of people attending (one) and the name of the claimant (one). Two hospitality claims amounting to over $5,000 did not have a purchase order although the delegated authority was appropriate. The CIC Contracting Delegation and Accountability Framework make it clear that a purchase order must be established by Procurement and Contracting Services for any event costing more than $5,000.

We found that for all hospitality expenditures, payment authority under Section 33 of the FAA had been exercised in accordance with the applicable legislation.

3.2.3 Proactive Disclosure

We expected to find that all T&H expenses for selected CIC officials were published on the CIC website in a comprehensive, accurate, consistent and timely manner, as mandated.

We selected and reviewed 20 judgmental samples of proactive disclosures. We found that the information disclosed was accurate. The reports were reconciled with the source documents.

Appendix A: Detailed Audit Criteria

Line of Enquiry 1: Management Control Framework

• 1.1 CIC guidelines for T&H: CIC T&H guidelines are clearly defined and consistent with TBS and NJC policies and directives.
• 1.2 Accountability and authority framework: Roles, responsibilities and accountabilities for the T&H processes are clearly and adequately defined and understood by delegated managers at NHQ and in the regions.
• 1.3 Communications and training: Communications and training related to T&H programs are clear and consistent throughout NHQ and the regions to ensure that all parties involved are fully aware of their responsibilities.
• 1.4 Monitoring: Monitoring practices are adequate to ensure compliance with T&H policies and directives. Risks are identified, assessed and managed on an ongoing basis.
• 1.5 Processing, reporting and quality of information: Processing and reporting are conducted in a comprehensive, accurate, consistent and timely manner to ensure that correct data are reflected in CIC’s financial system.

Line of Enquiry 2: Compliance with TBS, NJC and CIC Policies and Directives

• 2.1 Pre-authorization: T&H expenses are pre-authorized to ensure that they are incurred or extended in accordance with the provisions of the TBS, NJC and CIC policies.
• 2.2 Spending and payment authorities—sections 34 and 33: T&H expense claims are verified and have the required supporting documents prior to exercising spending and payment authorities under sections 34 and 33 of the FAA, and in accordance with CIC established delegated authorities and TBS authorized allowances.
• 2.3 Proactive disclosure: All T&H expenses for selected CIC officials are published on the CIC website as mandated in a comprehensive, accurate, consistent and timely manner.

Sources of Criteria

• Financial Administration Act
• NJC Travel Directive
• TBS Special Travel Authorities
• TBS Hospitality Policy
• TBS Account Verification Policy
• TBS Guidance document on the Proactive Disclosure of T&H Expenses
• CIC Departmental Hospitality Guidelines
• TBS Policy on Delegation of Financial Authorities for Disbursements
• CIC financial policies

Appendix B: Management Action Plan

Appendix C: Audit Time Line

• Audit planning: August to October 2009
• On-site examination: January and February 2010
• Clearance draft to management for comments: April 28, 2010
• Management action plan finalized: February 1, 2011
• Report recommended by the Audit Committee for Deputy Minister approval: February 10, 2011
• Report approved by Deputy Minister: February 10, 2011