Audit of the Delegation of Financial Authorities

Final Report
September 24, 2008

Executive Summary and Management Response and Action Plan

Note: To obtain a copy of the full report, contact the office of the Chief Audit and Evaluation Executive, Privy Council Office.

Executive Summary

Audit Objective

The objective of this audit was to assess the adequacy and effectiveness of the delegation of financial authority instruments and mechanisms in Privy Council Office (PCO).

Audit Scope

The audit examined both the infrastructure of delegated financial authorities at PCO and the exercise of these authorities by testing expenditures recorded for the twelve-month period ending September 30, 2007.  Compensation payments were excluded from the audit, except for expenditures for overtime and the exercise of payment authority related to payroll transactions.

Audit Opinion

In my opinion, PCO’s framework of management controls and instruments for the delegation and exercise of financial authorities, although complicated by centralized procurement and finance functions, is for the most part adequate and consistent with requirements.  Delegated authorities are generally well exercised.  However, framework improvements are warranted: (i) to better document and communicate relevant roles, responsibilities, processes and controls in light of centralized functions; (ii) to improve certain aspects of the quality assurance review process as outlined in Treasury Board policy; and (iii) to improve segregation of duties and clarify and strengthen the accountability of responsibility centre managers for the exercise of delegated authorities.

Statement of Assurance

The audit was conducted in accordance with the requirements of the Treasury Board policy, directives and standards on internal audit. In my professional judgment as Chief Audit Executive, sufficient and appropriate audit procedures were conducted and evidence gathered to support the accuracy of the opinion provided to senior management and contained in this report. The opinion is based on a comparison of the conditions as they existed at the time of audit against pre-established audit criteria which were agreed to by management, and is applicable only to the processes and transactions examined in relation to the entity examined. 

Summary of Findings

The audit found that the majority of elements that constitute PCO’s control framework for the delegation of financial authorities are consistent with legislative and policy requirements, but some improvements are needed.  The major findings contained in this report that have resulted in audit recommendations pertain to control improvement opportunities in the areas of departmental policies and procedures, quality assurance over account verification processes, and segregation of duties.  Findings which did not result in audit recommendations but which were nonetheless brought to management’s attention included matters of budgetary control, lack of certain pre-approvals, and improvements to documentation.  Given that PCO was reviewing its Delegation of Financial Authorities chart during the audit, preliminary audit results were communicated to management for their consideration towards finalizing a revised departmental delegation chart.

Summary of Recommendations

The audit recommends that the Assistant Deputy Minister, Corporate Services Branch: (i) modernize and promulgate an updated PCO policy and/or procedures document on delegation of financial authorities and related account verification responsibilities; (ii) improve the FAA 33 quality assurance review process to reflect consideration of risk, to report errors so that corrective action can be taken, and to apprise senior management of the overall quality assurance results; and (iii) adjust key delegations and processes relating to contracting authority and the authority to certify payments for contract performance and price.

Management’s Response and Action Plan

Management has accepted the report’s findings and recommendations.  Management’s response and action plan are set out in Appendix B.

Signature of Chief Audit Executive

Jim Hamer
Director, Audit and Evaluation

Appendix B - Management Response And Action Plan