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Internal Audit Report

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April 2007

Table of Contents

• Executive Summary
• Introduction
• Focus of the Audit
• Context
• Findings, Recommendations and Management Action Plans
  • Management Control Framework
  • Compliance with Policies, Directives, Guidelines and Procedures
  • Monitoring
  • Reliability and Integrity of Financial Information

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Executive Summary

Travel and hospitality at the Canada Border Services Agency (CBSA) are governed by a number of Treasury Board of Canada Secretariat (TBS) policies, directives and guidelines.

An audit of travel and hospitality expenditures was included as part of the 2005-2006 annual audit plan. This audit is a component of the Multi-Year Audit Plan 2005-2008 addressing Stewardship — Compliance with Authorities.

The objective of the audit was to provide assurance that travel and hospitality expenditures were being administered in accordance with TBS and CBSA policies and directives.

The audit was conducted from March to July 2006 and included a review of travel and hospitality expenditures incurred by CBSA Headquarters branches and by the Quebec, Greater Toronto Area, Prairies and Pacific regions for the period of April 1, 2005, to March 31, 2006. Relocation expenditures were excluded from the scope of the audit.

Audit Findings

The audit found that the CBSA is in compliance with the TBS Travel Directive and the TBS Hospitality Policy. Opportunities were noted for improving the management control framework. At the time of the audit, the CBSA had developed hospitality directives; however, it did not have a travel directive to guide employees in applying the Travel Directive or a way to ensure that managers are interpreting it consistently. The audit noted that the roles and responsibilities regarding the issuance of travel authority numbers (TANs) could be improved to ensure that this key control within the travel management framework is strengthened.

According to the TBS policy, Account Verification, all travel and hospitality expenditures must be pre-authorized and verified by a delegated authority pursuant to the Financial Administration Act (FAA). A judgmental sample of 303 travel and 24 hospitality transactions were reviewed for audit test purposes. These transactions were reviewed to assess the adequacy of CBSA controls over the authorization and verification of travel claims. The audit found that hospitality expenditures were properly authorized as per the FAA and that the relevant claims were properly completed and complied with TBS and CBSA policy and directives. The audit found that most of the travel expenditures sampled were properly authorized as per the FAA and the TBS Travel Directive.

The audit reviewed and discussed CBSA claim and transaction verification procedures at the CBSA National Financial Transaction Centre (NFTC) and at the financial services units (FSUs) in the regions to assess the adequacy of monitoring controls for travel expenditures. From the Internal Audit Directorate’s interviews with responsible officers, the audit found that there are no established written procedures for monitoring and reporting results for travel claims. However, the discussions revealed that the CBSA had instituted an automated sampling process for transaction verification in the Agency’s financial system. As a result, the NFTC and FSUs review 100 percent of the hospitality expenditures: all travel transactions greater than $1,000 and random samples of travel transactions below $1,000.

The audit also reviewed the reliability and integrity of financial information and more specifically the travel information on the CBSA’s Web site under “Proactive Disclosure” that is posted in accordance with Government of Canada policies on public disclosure. The review identified a number of errors in the proactive disclosure reports due to inaccurate information or loss of information in posting to the Web site. There were a number of instances where travel expenditures were incorrectly reported in the financial system or the documentation was not available to confirm adjustments in the general ledger accounts.

The key areas of control that should be strengthened include the following:

• Reinforce the requirements of the TBS Travel Directive to ensure compliance with procedures and directives;
• Validate proactive disclosure reports and monitor the information posted on the CBSA Web site;
• Clarify the administrative directive for travel expenditures including roles and responsibilities for TAN holders; and
• Review and update procedures and instructions for the input and monitoring of travel expenditures and adjustments.

Management’s Response

The CBSA agrees with the findings and has taken, or is taking, appropriate action to implement all recommendations as elaborated in the management action plan sections of this report.

Introduction

Travel and hospitality at the Canada Border Services Agency (CBSA) are governed by a number of Treasury Board of Canada Secretariat (TBS) policies, directives and guidelines.

Business travel and hospitality expenses are authorized by managers with delegated financial signing authorities and paid by financial services units (FSUs) located in the regions or by the National Financial Transaction Centre (NFTC) in Montréal. The Comptrollership Branch has overall functional responsibility for travel and hospitality.

The following table outlines the travel and hospitality expenditures reported for the 2005-2006 fiscal year.

Expenditure	2005-2006 fiscal year
Travel (excluding relocation)	$33.2 million
Hospitality	$0.5 million

Government travel and hospitality are of interest to the public and the media and the public expects to be provided with assurance that these areas are being administered in a sound and effective manner. An audit on travel and hospitality expenditures was included in the Multi-Year Audit Plan approved by the Internal Audit and Evaluation Committee on March 17, 2005.

Focus of the Audit

Objective

The objective of the audit was to provide assurance that travel and hospitality expenditures were being administered in accordance with TBS and CBSA policies and directives.

Scope

The audit assessed the management control framework for the four phases of travel and hospitality expenditures (initiation, certification, settlement and monitoring) to ensure they were properly approved and recorded as per the applicable policy and procedures.

The audit was conducted from March to July 2006 and included a review of travel and hospitality expenditures incurred by CBSA Headquarters (HQ) and the Quebec, Greater Toronto Area, Prairies and Pacific regions for the period of April 1, 2005, to March 31, 2006. Relocation expenditures were excluded from the scope of the audit.

Methodology

The audit was conducted in accordance with the TBS Policy on Internal Audit. The methodology used in carrying out this audit included the following:

• Interviews with staff in the Comptrollership Branch to obtain the CBSA policies and procedures related to the processing of travel and hospitality claims and the related management control framework;
• Analysis of the TBS policy and CBSA directives on hospitality to confirm consistency;
• Interviews with managers and staff at HQ and at the selected regional offices directly involved in the processing of travel or hospitality claims to confirm that CBSA policies and procedures are being followed and are in accordance with TBS policies and directives;
• Visits to selected sites at HQ and in the Quebec, Greater Toronto Area, Prairies and Pacific regions to verify a sample of travel and hospitality transactions and the supporting documents. A judgmental sample of 303 travel transactions and 24 hospitality transactions was selected after the transactions from the appropriate general ledger (GL) accounts were stratified by dollar value; and
• A review of the disclosure of travel and hospitality expenditures of four selected senior level employees for the period of December 2, 2004, to March 1, 2006.

Context

The objective of the TBS Hospitality Policy is to ensure that economy and consistency in offering hospitality are maintained throughout the public service. To ensure conformity with this policy, the CBSA developed and issued hospitality directives to guide employees in applying the TBS policy. These directives detail the definition of hospitality, constraints on extending hospitality, responsibility in approving hospitality expenditures and the monitoring and reporting of hospitality expenditures.

For travel, the CBSA follows the TBS Travel Directive, which was developed in partnership with the Government of Canada (GC) and the collective agreement bargaining representatives under the By-Laws of the National Joint Council. The purpose of the Travel Directive is to ensure fair treatment of employees who are required to travel on government business. The provisions contained in the Travel Directive are mandatory and provide for the reimbursement of reasonable expenditures.

It should be noted that the CBSA was established in December 2003 by bringing together various groups of employees from the former Canada Customs and Revenue Agency (CCRA), Citizenship and Immigration Canada and the Canadian Food Inspection Agency. This is important in the context of this audit because the former CCRA was considered a separate employer and operated under policies that differ from the TBS policies. In some instances, there were former CCRA employees (now CBSA employees) who followed the CCRA’s Travel Policy until the signing of the collective agreements in March 2005. At the time of the audit, there remained about 20 employees who continued to operate under the CCRA policy.[ 1 ]

The Comptrollership Branch created a section called “Travel Services” on the CBSA’s intranet site that includes background, a link to the Travel AcXess Voyage portal and information for travellers and travel arrangers on accessing and using the portal. The first phase of this initiative for travel was launched on April 1, 2004, and the second phase on November 24, 2004.

In December 2003, the TBS issued a policy on the disclosure of travel and hospitality expenses, which required the mandatory publication of travel and hospitality expenditures for senior government officials. Public disclosure was initiated on March 31, 2004, and this information is to be updated every three months.

The Comptrollership Branch has prepared and distributed a Financial Administration Control Framework during the 2006-2007 fiscal year to ensure that the accounting information reported on the Agency’s financial system is accurate, complete, useful and reported on a timely basis. Beginning in the 2005-2006 fiscal year, the NFTC in Montréal is responsible for processing the payment of expenditures for HQ and, since the first quarter of 2006-2007, payment processing for two regions. The payment processing activity for the remaining six regions will be transferred early in the 2007-2008 fiscal year. This function includes the payment of travel and hospitality claims and supplier invoices for goods and services, and the settlement of American Express statements.

Findings, Recommendations and Management Action Plans

Management Control Framework

Policies and procedures are a key part of a management control framework. They outline senior management’s expectations of how the organization should manage its operations, including the roles and responsibilities of the different sections of the organization. These policies and procedures need to be consistent with TBS policies and directives and be communicated and easily accessible to the organization.

Hospitality

The CBSA has established hospitality directives to guide employees in applying the TBS Hospitality Policy. Having the CBSA hospitality directives in place promotes consistency throughout the organization as well as transparency and fiscal responsibility.

Travel

For travel, guidance is provided to employees to facilitate their travel arrangements (see the “Context” section). However, the audit found that one source of guidance that is easily accessible to employees on the administration of travel at the CBSA was not available. Employees had to consult multiple sources of information to obtain guidance on the administration of travel. However, since the audit was conducted, the Comptrollership Branch has improved the information related to travel by adding a part on mobility policies to its “Comptrollership Manual” intranet section and adding a link to the TBS Travel Directive.

The audit noted a number of instances where further clarity would enhance the existing management control framework for travel expenditures.

At the time of the audit, there was no guidance related to travelling home on weekends for instructors and facilitators at the CBSA Learning Centre in Rigaud, Quebec. Since this type of arrangement is not specifically covered in the TBS Travel Directive and there was no national CBSA travel directive, the FSUs in the regions had issued their own guidelines and they were found to be inconsistent.

In addition, the audit noted situations where employees on “continuous travel status” in excess of six months were handled as regular travel under Part III of the TBS Travel Directive.

Given that there was no Agency directive defining and clarifying the handling of continuous travel status, managers applied their own interpretation to the TBS Travel Directive to meet their operational needs.

Travel authority numbers

Employees on government business travel are required to have a travel authority number (TAN) in order to make travel arrangements with American Express Canada Inc. (AMEX). Each TAN consists of a 9-character alphanumeric code and it allows the government traveller to obtain transportation services paid by AMEX.

The number is obtained from a TAN holder who is responsible for issuing TANs and recording them in the TAN register. The register is a list of TANs to be used by the branch management services units (BMSUs) to authorize employees to arrange business travel through the Government Travel Service (GTS) contractor (BTI Canada GTS). A copy of the TAN register is sent to the NFTC for control purposes. To obtain a TAN, an approved Travel Authority and Advance (GC72) form should be submitted to the TAN holder. However, the audit did not reveal what the established requirements are for TAN holders to issue a TAN.

Interviews with TAN holders indicated that there was no specific directive on the issuance of TANs. In addition, the roles and responsibilities of TAN holders have not been documented.

There were 108 TAN holders across the Agency. The audit noted that the list of TAN holders was not up to date. Due to invalid contact information, the NFTC cannot validate information on TANs or commitments for travel.

The TAN numbers and information on travel costs are entered into the travel module of the Agency’s financial system as a future commitment and then are used to reconcile amounts billed by AMEX. However, the audit found at three of the sites visited that neither individual transportation costs related to a TAN nor the accrued air transportation costs were captured in the system when processing the GC72 and the Travel Expense Claim (GC73). This finding is further discussed in the “Reliability and Integrity of Financial Information” section.

Recommendation

1. Agency management should develop and communicate directives and procedures for continuous travel and for delineating the roles and responsibilities of TAN holders, the control over TANs and the reconciliation process for TANs, travel claims and AMEX statements/billings.

Management Action Plan	Completion Date
The Agency has developed and will communicate (via the CBSA intranet site) a directive and corresponding procedures for continuous travel tailored to the needs of its operations.	April 2007
The Agency has developed a TAN guidelines and procedures document and it has been distributed to all TAN holders.	Completed
The reconciliation process between the TANs, travel claims and AMEX statements has been reviewed and documented. The roles and responsibilities have been formally documented and communicated and any skill gaps are being addressed through information sessions.	Completed
Functional monitoring and follow-up of the travel suspense account has been increased in preparation for audited financial statements.	Completed

Compliance with Policies, Directives, Guidelines and Procedures

Pre-authorization

As part of TBS policy, all travel and hospitality expenditures must be pre-authorized by a delegated financial signing authority under the Financial Administration Act (FAA).

The audit noted that the hospitality expenditures were pre-authorized in accordance with TBS policy and the CBSA’s hospitality directives.

From the sample selected, the audit noted that most of the travel expenditures reviewed were pre-authorized either by a properly completed Travel Authority and Advance (GC72) form or a blanket/standing authority to travel.

However, the audit, did reveal some examples of non-compliance:

• The GC72 or the blanket/standing authority to travel was not available for 15 files of the sample; and
• It was noted that for one work program, five of the GC72 forms were not completed in accordance with requirements. The GC72 forms had omissions related to the travel itinerary and/or estimated travel costs such as transportation and accommodation costs.

Verification

As part of the TBS Travel Directive and Hospitality Policy, a delegated financial signing authority under the FAA must approve all travel and hospitality expense claims.

The BMSUs and the FSUs verify the claims for supporting documentation and adherence to the TBS Travel Directive or Hospitality Policy and the CBSA’s hospitality directives.

The audit noted that the Hospitality Expense (GC168) claims were completed properly in accordance with TBS policy and the CBSA’s hospitality directives.

The audit found that 292 of the 303 sampled travel expenditures included sufficient information in the Travel Expense Claim (GC73) forms, such as the claimant, purpose of travel, expenditures, authorized allowances and travel expenditures, with supporting receipts and invoices.

The remaining 11 travel expenditures sampled did not include the transportation expenditures. It was further noted that these incomplete claims were from the same work unit as noted above in the “Pre-authorization” section. Management has been advised of the examples of non-compliance.

The audit also verified the signing authority of claims and expenditures sampled and no deficiencies were noted.

Monitoring

The CBSA’s hospitality directives indicate that each regional finance office and the Financial Administration Division of the Comptrollership Branch are responsible for monitoring compliance of the hospitality expenditures paid in their respective areas.

For travel, no Agency procedures exist to specifically monitor travel claims. The interviews confirmed that there were no established written procedures for monitoring and reporting on results for travel claims.

The audit found that the Comptrollership Branch has instituted an automated sampling process for transaction verification in the Agency’s financial system. The system selects 100 percent of hospitality and all travel expenditures of $1,000 and over for verification. In addition, a random sample of travel expenditures is selected for amounts below that threshold.

The audit did not review the sampling methodology used by the Agency’s financial system for transaction verification. However, at the locations visited, the auditors noted that FSU officers were reviewing the claims selected by the system and making necessary corrections.

In addition, the audit noted at the time of the audit that there were no reports prepared by the Comptrollership Branch to communicate the results of the monitoring activity on hospitality and travel expenditures to management. Subsequent to the audit, management developed reports to provide the results of the monitoring activities for both travel and hospitality expenditures.

Reliability and Integrity of Financial Information

General ledger accounts information

Travel expenditures are processed through the travel module of the Agency’s financial system. The audit found instances where travel expenditures were not reported in a timely fashion or were incorrectly reported in the general ledger. Management uses financial information from the general ledger for
decision-making and the correct and consistent posting of travel expenditures is required. For example:

• For the one work program, flight expenditures were not to be captured when incurred or at the time the Travel Expense Claim (GC73) was submitted but when the AMEX bill was received. This inconsistency in processing expenditures resulted in incorrect financial information in the general ledger accounts at the time of commitment.

The audit found no evidence that these discrepancies were corrected as part of the verification of travel claims done by the FSU officers.

Recommendation

2.  Agency management should review and update its procedures and instructions for entering and correcting travel transactions in the Agency’s financial system.
   

Management Action Plan	Completion Date
The Agency’s Financial Administration Control Framework documents the roles and responsibilities and procedures for monitoring and correcting travel transactions.	Completed
The Agency will develop a travel expenditure control checklist for use by all employees and specifically those responsible for processing travel claims.	May 2007
The Agency will review the travel expenditure process requirements with the non-compliant work program area to identify operational issues and implement a process that ensures compliance.	August 2007

Adjustments to the general ledger accounts

Adjustments to the general ledger accounts are accomplished through a process of using journal vouchers. As required under section 9(1) of the FAA and recognized by generally accepted accounting principles, documentation supporting journal voucher transactions should be maintained and retained for monitoring and audit purposes.

In reviewing the audit sample, the audit noted that 32 transactions amounting to $1.2 million were posted to the various general ledger accounts in the Agency’s financial system for the correction of errors, transfer of funds to the proper cost centre and interdepartmental transfers. The audit found that the supporting documents for these adjustments were not available for review at the cost centres (originator of adjustments) when requested. For verification and monitoring purposes, there was no documentation to confirm that these adjustments were valid adjustments to the general ledger accounts. 

Recommendation

3. Agency management should reinforce the requirement to maintain supporting documentation related to journal voucher transactions.

Management Action Plan	Completion Date
The Agency has developed a journal voucher policy and procedures document to be communicated (via the CBSA’s intranet site) to all cost centres.	April 2007

Proactive disclosure of travel expenditures

On December 12, 2003, the GC announced a new policy for the mandatory publication of travel expenditures for selected government officials. The Agency is in compliance with this policy by posting this information on its Internet site.

The process at the CBSA to prepare the reports is as follows:

• Executive assistants of senior level employees prepare the proactive disclosure reports using the Agency’s financial system that are approved by the senior level employee.
• The Corporate Accounting Directorate of the Comptrollership Branch receives the approved proactive disclosure reports quarterly and performs a quality control review.
• The proactive disclosure reports are then forwarded to the Communications and Consultation Directorate for posting on the “Proactive Disclosure” section on the CBSA’s Web site.

A review of all travel expenditures for proactive disclosure was conducted for the period of December 2, 2004, to March 1, 2006. This exercise included a review of the quarterly information prepared by the executive assistants, the proactive disclosure reports posted on the Web site, information extracted from the Agency’s financial system reports and the source documentation that includes the travel authority and travel expense claims. 

This review identified a number of errors in the proactive disclosure reports in comparison to the source documentation of the travel expense claims. It was concluded that these errors resulted from inaccurate information in the travel module of the Agency’s financial system and because proactive disclosure reports are not reconciled to source documentation.

It was also noted that posting amendments to the Web site resulted in the loss of original information.  Subsequent to the audit, management addressed the errors identified in the review and have corrected the information posted on the Web site.

Recommendation

4. Senior management should validate the proactive disclosure reports with the source documentation of the travel expense claims and verify the accuracy of posting amendments to the Web site.

Management Action Plan	Completion Date
The proactive disclosure process has been amended. Senior management must sign their proactive disclosure reports before posting.	Completed
Procedures for posting amendments to the Web site have been revised.	Completed
All information lost as a result of posting amendments has been recovered and now appears on the Web site.	Completed

Notes

1. CBSA Departmental Performance Report 2005-2006 — Table 14: Travel Policies. [Return to text]