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Internal Audit Report
April 8th, 2010
Table of Contents
- Executive Summary
- 1.0 Introduction
- 2.0 Audit Opinion
- 3.0 Findings, Recommendations and Action Plans
- Appendix A – Treasury Board Secretariat Policy Requirements
- Appendix B – Corporate Finance Divisions
- Appendix C – Audit Criteria
- Appendix D – List of Acronyms
Executive Summary
Background
The Audit of the Financial Management Framework of the Canada Border Services Agency (CBSA) took place between April and November 2009. This audit was conducted by Ernst & Young in close collaboration with the Internal Audit and Program Evaluation Directorate (IAPED) of the CBSA.
The Treasury Board Secretariat (TB) of Canada approved the Policy on Financial Management Governance (the “Policy”) effective April 1, 2009. The Policy establishes a framework specific to roles and responsibilities for financial management governance for departments and agencies. It replaces the previous TB Policy on Responsibilities and Organization for Comptrollership that was issued in 1996.
The new Policy expands guidance on specific roles and responsibilities and defines a broader level of accountability expected from departmental officials. The financial management and stewardship responsibilities of the Deputy Head, the Agency's Audit Committee (AC), Chief Financial Officer and senior departmental managers are described in this policy, as well as the monitoring and reporting requirements and the consequences of non-compliance with the Policy. (See Appendix 1, Table 2.)
The AC approved the Audit of the Responsibilities and Organization for Comptrollership as part of the CBSA's Multi-Year Audit Plan 2007-2010. The IAPED had not previously conducted audits of this area. As a result of the new TB Policy on Financial Management Governance, the audit focused on this new policy and taking stock of the Agency's financial control framework. The audit criteria included assessing the Agency's current financial management framework and compliance with the new Policy, and identifying leading practices and areas of improvement within the Agency.
Objective and Scope
The objective of the audit was to assess the current state and adequacy of the financial management framework at the CBSA.
The audit scope included an analysis of the division of roles and responsibilities, the effectiveness of the organizational structure and the compliance of the financial management governance framework throughout the CBSA with the TB Policy on Financial Management Governance. Selected CBSA branches, the Quebec and National Capital Regions and the National Financial Transaction Centre (NFTC) were incorporated as part of the audit.
Audit procedures were conducted to determine whether the financial management structure, guidance documents, and monitoring and reporting processes were adequate for the essential elements of a financial management framework, including financial planning/budgeting, financial policy development, financial accounting and reporting, accountability, monitoring and control, revenue and expenditure management and asset management.
The audit scope did not include assessing compliance with the Treasury Board Policy on Internal Control, an evaluation of the effectiveness of the AC, controls testing, effectiveness of the financial reporting systems, or information technology, as those areas would be addressed as part of specific audits and not as part of an assessment of the overall framework in place for financial management governance
Statement of Assurance
The audit engagement was planned and conducted in accordance with the Internal Auditing Standards for the Government of Canada.
Audit Opinion
A fair number of elements of a sound financial management framework are in place within the CBSA that provide a foundation for building stronger financial management across the Agency. However, there is a need to strengthen this framework to provide more robust financial governance and oversight, particularly in the area of Consolidated Revenue Fund (CRF) revenue management and accountability of regional finance organizations.
Main Observations
Certain elements of the CBSA's financial management framework were consistent with TB policies and directives. A sound financial management organizational structure had been established at National Headquarters with the introduction of Branch Comptrollers and the development of the National Financial Transaction Centre (NFTC). However, the regional organizational model was not structured and adequately resourced to support strong financial management governance (e.g. oversight, challenge and monitoring functions).
Financial governance committees, and oversight and monitoring of expenditures were in place. However, monitoring and sharing of Agency CRF revenue information and data were not systematically conducted on a regular basis and reported to senior management. As well, a robust revenue management framework, including reporting and monitoring of key elements (e.g. revenue type, quantity, locations, economic factors, and volumes) does not exist.
Management Response
The Corporate Finance Directorate appreciates the comprehensive review performed during this audit. The timing was quite appropriate since the Corporate Finance Directorate has recently implemented several key initiatives to improve the financial framework at the CBSA. These initiatives include:
- The implementation of an arm's length Division for Strategic Financial Planning and Oversight. This division is responsible for reviewing all Treasury Board submissions and Memoranda to Cabinet to make sure resourcing assumptions are credible and costing models have been rigorously applied.
- The development of the NFTC in Montréal, independent from all other managerial and financial functions in the CBSA. This NFTC is responsible for carrying out the independent account verification procedures stipulated in the Financial Administration Act, section 26.
- The introduction and co-location of branch comptrollers working directly with each CBSA Vice-President to provide quality professional financial advice and to coordinate all financial reporting and forecasting in each branch.
The Corporate Finance Directorate acknowledges that other areas in the CBSA financial realm require attention and the management responses and action plans presented in this report represent further areas for improvement. The assessment under the Treasury Board Secretariat Management Accountability Framework of CBSA financial management and control has consistently been rated as fully satisfactory, and the Corporate Finance Directorate continues to strive for higher ratings.
In closing, the CBSA is currently implementing an aggressive management Change Agenda. The internal audit findings strongly confirm that the plans for this new approach in the CBSA will strongly align with the recommendations of the audit team.
1.0 Introduction
1.1 Background
The Treasury Board Secretariat (TB) approved the Policy on Financial Management Governance (the “Policy”) effective April 1, 2009. The Policy establishes a framework specific to roles and responsibilities for financial management governance. It replaces the previous TB Policy on Responsibilities and Organization for Comptrollership that was issued in 1996 (refer to Appendix A, Table 1).
The new Policy expands the guidance on specific roles and responsibilities than was previously available and defines a broader level of accountability expected from departmental officials. The financial management and stewardship responsibilities of the Deputy Head, the Agency's Audit Committee (AC), Chief Financial Officer (CFO) and senior departmental managers are described in the Policy, as well as the monitoring and reporting requirements and the consequences of non-compliance with the Policy. The Policy also provides a clear description of the Comptroller General of Canada's role as it relates to financial management governance. The requirements of the Policy with respect to the roles and responsibilities of various stakeholders are summarized in Appendix A, Table 2.
The Vice-President (VP) of the Comptrollership Branch is the CFO of the Canada Border Services Agency (CBSA) and is responsible for providing direction on, and implementation and monitoring of, the Policy on Financial Management Governance.
Specific roles and responsibilities of each of the five Corporate Finance divisions within the Comptrollership Branch are described briefly under Appendix B.
At National Headquarters, each of the seven CBSA branches is supported by a Branch Management Services Unit (BMSU) and a branch comptroller. The BMSUs perform various administrative functions relating to the financial management policies and provide support to administer and manage functions related to the performance of Section 34 of the Financial Administration Act (FAA). A branch comptroller is responsible for assisting in the financial management of the branch and reports directly to the Director of Resource Management, Comptrollership Branch.
Similarly, each of the CBSA regions is supported by a Regional Management Services Unit (RMSU) under the responsibility of respective regional directors general (RDG). The responsibilities of the RMSUs include financial reporting, planning and budgeting. The Senior Finance Officer (SFO) of each region reports to the Regional Director of Planning and Program Integration. Functionally the SFOs report to the Director General, Corporate Finance, Comptrollership Branch.
Effective fiscal year 2008-09, the Agency's payment processing function was centralized at the National Financial Transaction Centre (NFTC) in Montréal. The NFTC is primarily responsible for processing and approving payments under Section 33 of the FAA.
Within the CBSA, there have not been previous audits of the Policy on Financial Management Governance, as this policy has only been in effect since April 1, 2009. However, other audits and reviews have been performed in recent years that cover elements of financial management governance. These include: the KPMG assessment of CBSA Financial Audit Readiness; the Review of the Controls Readiness of Audited Financial Statements; the internal audits of Cash Management, Section 33 and Section 34 of the FAA; and the Office of the Comptroller General Horizontal Audit of Delegation of Financial Authorities.
In summary, these previous reviews/audits noted that:
- Roles and responsibilities of individual positions and areas within the CBSA pertaining to financial statement audit readiness were in the process of being established but had not yet been fully defined;
- Management had committed to create, improve and maintain an efficient and effective control environment;
- The Comptrollership Branch had documented business processes and draft control frameworks, including monitoring processes; however, internal controls were at an early stage of development and a monitoring framework had not yet been developed to ensure that all key controls were documented and tested;
- There was a lack of compliance with cash management procedures, and weaknesses in supervision, segregation of duties, and safeguarding of monetary assets;
- Cash management policies and procedures were not always up-to-date, operations were not regularly reviewed for control deficiencies, and monitoring expectations and reporting requirements were not clearly communicated;
- A Capital Assets Control Framework had been drafted, however, it had not been reviewed for design or tested for operating effectiveness of controls; and
- Financial procedures were being followed and checklists were being used to ensure the validity of specimen signature cards (for Sections 32, 33 and 34 of the FAA).
The Audit of the Financial Management Framework (previously referred to as the Audit of Responsibility and Organization for Financial Management) was approved in October 2007 by the AC, as part of the CBSA Multi-Year Audit Plan 2007-2010.
The audit was conducted between April and November 2009. The Internal Audit and Program Evaluation Directorate (IAPED) developed the terms of reference and Ernst & Young conducted the audit on behalf of the IAPED.
1.2 Risk Assessment
To assist in audit planning and in determining potential priorities and areas of audit, a preliminary risk assessment identified the following key risks:
- Roles and responsibilities specific to financial management may not be clearly documented, communicated and/or aligned with the new TB Policy on Financial Management Governance.
- Senior management may not be receiving timely and accurate financial information for decision making around costing and the progress of the Agency in achieving its strategic objectives.
- Resource allocation may not be based on a robust risk-based model.
- Management may not be monitoring actual performance against planned results and adjusting courses of action in a timely manner.
- Financial management policies and procedures may not be established and/or consistently followed and monitored at Headquarters, regional offices and operational units.
- A clear and effective organizational structure, as it relates to financial management governance, may not be established and/or communicated to the appropriate levels.
1.3 Audit Objective and Scope
The objective of the audit was to assess the current state and adequacy of the financial management framework at the CBSA.
The audit scope included an assessment of the division of roles and responsibilities, the effectiveness of the organizational structure and the adequacy of the financial management governance framework throughout the CBSA, specifically the extent of compliance with the TB Policy on Financial Management Governance.[ 1 ]
The audit also assessed whether the financial management structure, guidance documents, and monitoring and reporting processes were adequate for the essential elements of a financial management framework, including financial planning/budgeting, financial policy development, financial accounting and reporting, accountability, monitoring and control, revenue and expenditure management, and asset management.
The audit scope included select Headquarters branches and regions to obtain representation from various organizations within the CBSA. Five Headquarters branches (Comptrollership, Operations, Innovation, Science and Technology, Admissibility, and Strategy and Coordination) and two regional offices (Quebec Region and NFTC) were selected for audit examination.
The audit scope did not include assessing compliance with the Treasury Board Policy on Internal Control, an evaluation of the effectiveness of the AC, controls testing, effectiveness of the financial reporting systems, or information technology, as those areas would be addressed as part of specific audits and not as part of an assessment of the overall framework in place for financial management governance.
1.4 Approach and Methodology
The audit approach included documentation review, interviews with key personnel, site visits, and examination of sampled policies, internal directives, procedures and financial reports.
The documents reviewed included TB policies and directives, CBSA policies and procedures and other relevant documentation on the essential elements of a financial management framework. Other relevant documentation obtained included:
- Monthly budget, variance and forecast analyses;
- Key financial representations (e.g. financial statements);
- Budget Review and Resource Committee (BRRC) meeting agenda;
- Enterprise Risk Profile;
- Asset certification summary; and
- AC meeting minutes.
The auditors also reviewed corporate and regional organizational reporting structures, governance committee mandates and meeting minutes.
Key personnel in the Comptrollership, Operations, Innovation, Science and Technology, Admissibility, and Strategy and Coordination branches were interviewed to develop an understanding of the financial management framework within the CBSA.
The auditors conducted site visits and interviews with selected NFTC and Quebec Region managers to gain an understanding of the financial management framework from a regional perspective.
A representative sample of Memoranda to Cabinet and Treasury Board Submissions filed between April and November 2009 were examined for evidence of the President and CFO review and approval of key financial management documents.
1.5 Audit Criteria
The audit lines of enquiry and audit criteria are described in Appendix C of this document.
1.6 Statement of Assurance
The audit engagement was planned and conducted in accordance with the Internal Auditing Standards for the Government of Canada.
2.0 Audit Opinion
A fair number of elements of a sound financial management framework are in place within the CBSA that provide a foundation for building stronger financial management across the Agency. However, there is a need to strengthen this framework to provide more robust financial governance and oversight, particularly in the area of CRF revenue management and accountability of regional finance organizations.
3.0 Findings, Recommendations and Action Plans
3.1 Financial Management Organization
Financial Management Governance Committees
The Agency has established governance committees with mandates and regularly scheduled meetings and reporting. The Budget Review and Resources Committee (BRRC) and the Agency's Audit Committee (AC) provide financial oversight and challenge functions.
According to the TB Policy on Financial Management Governance, a governance committee should be in place and functioning to assist the Agency in meeting its financial management objectives, including associated responsibility and accountability.
The audit found that the Agency has established two governance committees, the Budget Review and Resources Committee (BRRC) and the Agency's Audit Committee (AC) to oversee financial management.
The BRRC mandate is to provide strategic and financial oversight and this committee met regularly to discuss expenditure and variance reporting, forecasting and emerging financial pressures. The BRRC is comprised of the President, CFO and all branch vice-presidents. A recent meeting agenda identified strategic discussion topics including financial operating results, the investment plan and audit readiness initiatives.
The AC has been established to provide a financial oversight and challenge function for the Agency. It was observed that committee meetings were held to discuss audit reports, management responses and financial reports. Practices observed during the audit included the following:
- The Committee is comprised of a majority external members, strengthening its independence;
- The Committee met regularly, on a quarterly basis;
- The Chief Audit Executive is the Secretary of the Committee; and
- The CFO is present at each AC meeting.
Organizational Structure
A clear organizational structure was established and documented to meet policy requirements. However, the regional organizational model could be improved to support sound financial management oversight, challenge and monitoring functions.
The TB Policy on Financial Management Governance requires that the CFO's organization be structured to meet policy requirements.
The audit found that a clear organizational structure has been established and documented to meet policy requirements in the Comptrollership Branch and National Headquarters.
In accordance with theTB Policy on Financial Management Governance, the audit found that the CFO reports to the President of the Agency. To further develop a strong financial management framework, the Agency established branch comptrollers whose main duties included providing guidance, oversight and a challenge function within each branch. The branch comptrollers report directly to the Director of Resource Management, and not to their individual branches, thereby establishing an independent reporting relationship.
At Headquarters, the branch comptrollers are required to perform similar duties to those of the regional managers of Finance and report to the Director of Resource Management.
In the regions, the Comptrollership Branch does not have a direct reporting and accountability structure in place. The Manager of Finance reports to the Regional Director of Planning and Program Integration who then reports to the Regional Director General. The Regional Director General reports financial information to the VP of Operations who then reports the regional financial information at meetings of the BRRC. As a result of the regional financial reporting structure, communication of financial pressures, emerging risks, and revenue and expenditure reporting may not be adequately reported to the CFO organization.
During the audit site visit to the Quebec Region, the audit found that the regional financial resources consisted of one FI-04 (who performed financial management duties for both the Quebec Region and the NFTC), one FI-03 and two FI-02s. The interviewees indicated that there is a financial capacity shortage in the Quebec Region and possibly similar shortages in other regions.
It was also observed that although the CBSA regional organizational structure calls for one FI-04, two FI-03s, one FI-02 and one FI-01, these positions were not filled in certain regions. The Windsor region that accounts for approximately $4.8 billion in revenues is staffed with two FI-03s and one FI-02. This observation is consistent with the recent score card for the Management Accountability Framework (MAF) that indicates that 15-34% of FI positions are vacant across the Agency.[ 2 ]
The absence of a direct accountability relationship between the Comptrollership Branch and the regions and the shortage of regional financial capacity may weaken the Agency's financial analysis, reporting and challenge functions, and could impede efficient and effective communication between the Comptrollership Branch and the regions.
Recommendation
1. The Vice-President of the Comptrollership Branch (CFO) should strengthen the financial management reporting structure by establishing a direct, line or functional accountability relationship between the regions and the Comptrollership Branch. Further, financial management capacity should be aligned with the size, financial risk and complexity of each region to enable an effective financial challenge function.
Management Action Plan |
Completion Date |
|---|---|
CBSA is implementing a new functional model during the course of 2010-2011. Comptrollership Branch will work with the Office of Management Coordination and Development to make sure this recommendation is addressed as the functional model is developed. |
September 2010 |
| The new functional resource allocation model for the Stewardship Function will incorporate cost drivers, service standards, performance measures and risk assessment. | September 2011 |
3.2 Financial Guidance Documents
Financial Management Tools and Enablers
Financial policies and directives are in place and periodically reviewed and assessed by management; however, the costing methodology within the Agency was not subject to ongoing monitoring and review of the assumptions and cost drivers in place. In addition, limited direction was available, within the Agency, for individuals performing costing, budgeting, forecasting and variance analysis.
According to theTB Policy on Financial Management Governance, the CFO should maintain financial management services that meet the needs of the Agency and managers at every level. The Policy also states that the CFO is the key steward with respect to relevant legislation, regulations, policies and directives related to financial management. Financial policies, guidelines and procedures should be defined and communicated to stakeholders.
The audit observed that the Comptrollership Branch maintains a suite of Agency financial management policies and directives that are periodically reviewed and updated. The audit noted that CRF revenue management policies were not up-to-date, increasing the risk of inconsistencies between policy, practices and management direction and intention.
The Comptrollership Branch has also undertaken a number of initiatives to strengthen financial policies, procedures and tools in recent years. These include establishing the NFTC and standard processes for account verification and payment processing, developing the standard salary forecasting tool (Salary Management System) and developing costing templates for TB Submissions. As well, the Innovation, Science and Technology Branch has developed in-house training courses on budget management attended by various branch directors general, directors, managers and staff involved in budgeting.
The audit identified areas that lacked costing frameworks and training on standard tools and financial management procedures. These are further described as follows:
Costing Framework
The TB Guide to Costing states, “Departments should document all assumptions, processes, and calculations used to produce the cost information. These, along with the data sources, should be reviewed at least every two years to ensure continuing validity.”
The Comptrollership Branch has developed a standard reporting template, including a costing methodology, for TB Submissions that are reviewed and signed off by the CFO prior to submission. For existing programs and activities, TB requires that the CBSA undertake a review every two years. There is currently no ongoing monitoring or periodic assessment regarding the costing methodology's assumptions and cost drivers within the CBSA for existing programs and activities. In addition, there is a lack of defined roles and accountability amongst individuals performing costing functions in terms of ongoing review of performance, cost drivers, emerging risks, economic conditions, business fluctuations and their impact on resource management.
Training in Financial Management
In certain branches and regions, there is a lack of training, standard tools and enablers for individuals responsible for performing costing, budgeting, forecasting and variance analysis; however, training is provided on the preparation of Memoranda to Cabinet and TB Submissions, including discussion of preparing business cases based on supporting cost information.
The lack of a suite of financial management tools and enablers may affect the accuracy of costing and forecasting functions. Although certain branches have developed their own tools to supplement corporate processes, the use of non-standard tools and insufficient training may lead to inconsistent practices across the Agency.
Recommendations
2. The Vice-President of the Comptrollership Branch (CFO) should monitor and report on the Agency's costing model for existing programs and related procedures and guidance, for both preparers and internal users of costing information.
Management Action Plan |
Completion Date |
|---|---|
As part of the CBSA's Change Agenda reorganization, the Agency will be developing Resource Allocation Models for all programs over the next two years. These will be incorporated into costing models for all programs in the Agency. Procedures will be developed in conjunction with this process. |
|
| Initial Resource Allocation Models for Fiscal Year 2010-11 (covering 5% of Agency budget) |
May 2010 |
| Extensive Resource Allocation Models for Fiscal Year 2011-12 (covering 75% of Agency budget) |
April 2011 |
| Complete Resource Allocation Models for Fiscal Year 2012-13 (covering 100% of Agency budget) |
April 2012 |
3. The Vice-President of the Comptrollership Branch (CFO) should develop a training program and guidance documents targeting staff that perform costing, budgeting, forecasting and variance analysis.
Management Action Plan |
Completion Date |
|---|---|
Starting in the 2010-2011 fiscal year, a new costing unit and Director of Financial Analysis and Costing will be established within the Comptrollership Branch to address these matters. |
April 2010 |
| A training program and guidance documents will be developed in the coming fiscal year. | January 2011 |
Strategic Planning and Resource Allocation
Resource allocation and strategic planning are not always based on financial risk assessment, taking into consideration emerging risks and program changes.
According to the Policy on Financial Management Governance, the strategic planning process should give due consideration to financial risks, financial sustainability, governance, resource allocation and performance monitoring.
The Agency generally conducts strategic planning every three to five years. At the time of the audit, a strategic plan was in the process of being developed. An Enterprise Risk Profile was also developed in May 2009 to identify the Agency's highest risk areas, assign risk owners and develop mitigation plans. The primary, financial-related risks identified included CRF revenue management and reporting, and system and technology; however, management strategies to mitigate the risk around CRF revenue management and reporting had not been developed.
Resource allocation for the Agency is primarily based on historical information to staff high volume/risk operational areas. Ongoing risk assessment is not conducted to assess the emerging and changing risk profile of the Agency that would drive future resource allocation. As a result, high risk areas may be understaffed which could lead to increased operational weaknesses (e.g. security) and financial risks (e.g. CRF revenue collections).
Recommendation
4. The Vice-President of the Comptrollership Branch (CFO), in consultation with the VP of the Programs Branch, should consider including financial risk identification and resource modeling in the strategic planning process. This would include emerging risks and significant program changes, assigned risk owners, mitigation strategies, and periodic reviews conducted to monitor mitigation strategies and identify emerging financial and operational risks.
Management Action Plan |
Completion Date |
|---|---|
As part of the CBSA's Change Agenda, effective April 1, 2010, financial risk identification and resource modeling will be incorporated into the strategic planning process through the introduction of the functional Management Model. Under this new model, resource allocation will be based on assessment of risk and expected performance (including target service levels), rather than historical information. This model will be phased in, starting in 2010-11, and will be fully implemented by the beginning of the 2012-13 fiscal year. |
|
| Performance and risk measures in conjunction with initial Resource Allocation Models for Fiscal Year 2010-11 (5% of Agency budget) | May 2010 |
| Performance and risk measures in conjunction with extensive Resource Allocation Models for Fiscal Year 2011-12 (75% of Agency budget) | April 2011 |
| Performance and risk measures in conjunction with complete Resource Allocation Models for Fiscal Year 2012-13 (100% of Agency budget) | April 2012 |
Financial Policy Review, Interpretation and Communication
The Agency has protocols for the review of financial management policies and procedures; however, there were instances where policies and procedures were not consistently interpreted and/or communicated in a timely manner to stakeholders.
The Policy on Financial Management Governance calls for the CFO to review and provide an interpretation of financial management policies, directives and standards for the Government of Canada.
The audit observed that the Agency has protocols for reviewing policies and procedures. The CFO is responsible for reviewing and approving new or updated policies and procedural changes (e.g. updates to FAA procedures). As well, the Executive Management Committee reviews and approves non-procedural policy changes (e.g. extended travel and hospitality).
The Policy on Financial Management Governance also calls for the CFO to provide functional guidance, direction and advice to managers across the Agency on matters of financial management.
The audit found that the Director of Corporate Accounting and Financial Policy provides communiqués to management on policy and procedural changes and conducts conference calls with staff affected by changes. However, discussion with the Quebec Region indicated that communication with Headquarters Corporate Finance was infrequent and sporadic. As well, communication protocols between regional program areas and Headquarters were not structured and did not include timely information on operational and financial risks/pressures facing the regions.
Limited communication between Headquarters and the regions coupled with the organizational structure may increase the risk that policies, procedures and controls are not consistently applied in the regional offices, which could result in reporting inaccuracies and variances.
Recommendation
5. The Vice-President of the Comptrollership Branch (CFO) should establish structured and timely communication with regional financial management to provide consistent financial management policy interpretation, design and implementation.
Management Action Plan |
Completion Date |
|---|---|
Conference calls will be conducted with Headquarter (HQ) and Regional Finance staff to provide guidance and/or updates on changes to procedures/processes and financial management requirements related to:
These calls will also be a forum for sharing of ideas and to raise issues that are common to all Regions and HQ. Directors and senior finance staff in the Comptrollership Branch will lead the conference calls. |
Starting May 2010 and every month thereafter |
| As a result of the re-organization of HQ, the Financial Policy function will be amalgamated with the Financial Systems Division. Once this amalgamation has taken place, a work plan will be developed to revise/update departmental policies, (i.e. Policy Suite Renewal), as well as put in place a communication/training program to ensure staff across the Agency are up-to-date. The plan will be implemented during 2010/11. | May 2010 |
| The Finance Volume is updated periodically in Atlas (the intranet) with e-mail notification to finance staff at HQ and Regions. | On going |
| Year End Instructions are disseminated to finance staff across the Agency in February. This is complemented by conference calls with HQ and Regional finance staff. | February 2010 (most recent) and every year in February or March |
| The Forecasting Guide, which includes financial planning and reporting will be updated and disseminated to finance staff in HQ and Regions by June 2010. This guide will be reviewed and updated periodically prior to implementation of new procedures, and changes will be communicated to the Regions. | June 2010 |
3.3 Monitoring and Reporting
Financial Statement Reporting
Financial statement reporting procedures are in place, Agency expenditures were being regularly monitored and trends and forecasts were reported to the President on a weekly basis; however, the monthly expenditure reporting cycle to the BRRC and asset certifications were not completed in a timely manner.
According to the TB Policy on Financial Management Governance, the Deputy Head and CFO are responsible for financial statements, including the Statement of Management Responsibilities, as well as internal controls over financial reporting, and financial statement discussion and analysis.
The CBSA follows statutory reporting requirements to Parliament including preparation of annual financial statements, the Departmental Performance Report (DPR) and the Report on Plans and Priorities (RPP). A review of the most recent DPR and RPP indicated that there is limited analysis conducted of Agency CRF revenue. In contrast, Agency expenditures were analyzed in both the DPR and RPP.
Senior management has a number of procedures in place to monitor Agency expenditures. These include expenditure trend analysis (including salary and operating and maintenance expenses) presented to the President on a weekly basis.
A monthly variance package was provided by each region and branch for review by the branch comptrollers, associated director, director general and VP prior to submitting the information to the BRRC. On a monthly basis, the BRRC reviews actual expenditures-to-date against budgets and assesses forecasts and variance explanations by all branches. However, the reporting cycle (monitoring and reporting of expenditures) is lengthy with the CFO finalizing the statements on status of expenditures four weeks after period end. Members of the BRRC are provided this information six weeks after period-end close. The audit found that there was essentially no CRF revenue reporting at the BRRC level on a monthly basis. A standard practice for organizations similar in scope and scale to the Agency calls for reporting on revenues and expenditures within 15 days of period-end close.
In addition, it was noted that there was no consistent materiality threshold used by branches and regions to report variances, nor was there documented management discussion, analysis and action plans to address variances. As a result, members of the BRRC may not have received a consistent and complete view of the Agency's financial performance.
Without timely financial reporting and analysis, management's ability to effectively monitor the Agency's overall financial position and make financial decisions throughout the year may be limited.
The Agency has an asset certification process where all regions and branches are required to perform an annual asset certification. As of October 1, 2009, three branches had not submitted their annual asset certification for the fiscal year ended March 31, 2009.
Senior management did not enforce requirements for asset certifications, nor were the deadlines met to complete the annual asset certification. As a result, senior management did not receive the necessary assurance on the proper accounting for Agency assets.
Recommendation
6. The Vice-President of the Comptrollership Branch (CFO) should strengthen financial reporting processes, including asset certification reporting, providing guidance on variance reporting thresholds and improving the timeliness of reporting to the BRRC.
Management Action Plan |
Completion Date |
|---|---|
Asset Certification Reporting: More rigour will be implemented to ensure that all regions and branches meet deadlines in the asset certification process. |
Ongoing starting in 2010-2011 |
| Variance Reporting Thresholds: Materiality guidelines will be established. | June 2010 |
| Timeliness of Reporting: CBSA managers will sign off on their forecasts and these results will be tabled at the Comptrollership Standing Committee within 12 working days of this sign-off. | June 2010 |
3.4 Monitoring of CRF Revenue
Monitoring and sharing of Agency CRF revenue information and data were not systematically conducted and reported to senior management.
According to the TBPolicy on Financial Management Governance, the CFO is responsible for supporting the Deputy Head for overall stewardship responsibilities and for the integrity of the department's or Agency's overall financial management culture and capabilities. This would include monitoring and reporting on the Agency's CRF revenue management practices.
In 2008/09, the Agency collected over $22.7 billion in CRF revenues. A risk specific to revenue management and reporting was identified through the Agency's Enterprise Risk Management process. The Agency's focus is on reporting, tracking and oversight of expenditures totalling approximately $1.8 billion annually. Revenues that are not thoroughly reported or monitored throughout the year increase the risk of significant revenue leakage.
The audit found that the revenue management framework is not robust and that reporting and monitoring of key elements is limited (e.g. revenue type, quantity, locations, economic factors, and volumes). Without thorough analysis of revenue, significant variances may go undetected which would have a significant negative impact on Crown revenue. Also, there would be a possible increase of bad debt expense and loss of interest revenue.
At the regional level, officers at ports of entry responsible for revenue recording were not formally trained in cash management activities and were not performing cash management reviews in a consistent and timely manner (e.g. cash reconciliation, internal control). In addition, at certain ports of entry, there was a lack of consistent segregation of duties concerning revenue management activities. Without proper segregation of duties and oversight, the risk of revenue fraud, misstatement, misallocation and under-reporting increases.
Recommendation
7. The Vice-President of the Comptrollership Branch (CFO) should establish a revenue management framework that includes the identification of high risk areas, reporting and monitoring plans.
Management Action Plan |
Completion Date |
|---|---|
The Revenue Management Division is currently developing a draft revenue management framework that is expected to be completed by end of October 2010, at which time full consultation with the regions and HQ will take place. A final package is to be ready by December 2010 for senior management approval by December 2010, for implementation by March 2011. With the collection of the harmonized sales tax for Ontario and B.C., the CBSA will invest in the analysis of revenue management, reporting and monitoring. |
March 2011 |
Appendix A – Treasury Board Secretariat Policy Requirements
Table 1 - Policy on Responsibilities and Organization for Comptrollership |
|---|
Policy Objective To ensure that the division of responsibilities and the financial management organization in the federal government support comptrollership. Summarized Policy Requirements
|
Table 2 - Policy on Financial Management Governance (effective April 1, 2009) |
|
|---|---|
Policy Objective To strengthen public sector financial management and its leadership thereby contributing to appropriate stewardship of public resources, effective decision making, and efficient policy and program delivery. |
|
Summarized Policy Requirements |
|
Deputy Heads |
|
Departmental Audit Committees |
|
The Chief Financial Officer
|
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Senior Departmental Managers |
|
The Comptroller General of Canada |
|
Appendix B – Corporate Finance Divisions[ 3 ]
Corporate Accounting and Financial Policy Division
The Division is responsible for the development and implementation of the Agency's financial policies, procedures, controls and practices, and for providing advice to management on revenue and expenditure policies. It establishes and implements internal financial control mechanisms, and monitors financial processes and practices to ensure compliance with the Central Agencies' policies and directives.
HR, Finance and Administrative Systems Division (HRFASD)
HRFASD is a multidisciplinary team dealing with HR, Finance and Administration in the delivery of Enterprise Resource Planning solutions to the CBSA using the Corporate Administrative System (CAS). It also provides development and support services on non-CAS HR, Finance and Administrative system initiatives.
Resource Management Division
The Resource Management Division is responsible for the CBSA's financial strategies and related financial planning, budgeting, reporting and analysis functions.
Revenue Management Division
The Revenue Management Division is accountable for the direction of the Agency's corporate accounting and reporting, and the analysis of revenues and expenditures. It is also accountable for validating the integrity of revenue, expenditures, assets and liabilities in order to ensure compliance to Parliament for financial stewardship and probity.
Strategic Financial Planning and Oversight Division
This Division is responsible for developing and managing the strategic focus for the CBSA's long-term financial planning, and strengthening financial management in the Agency. The division was created to increase and strengthen program and financial analytical capacity related to program integrity and planning, and is responsible for providing an independent and objective review and scrutiny of all program change proposals, including managing the senior financial officer attestation process for all Memoranda to Cabinet and Treasury Board submissions.
Appendix C – Audit Criteria
Line of Enquiry |
Audit Criteria |
|---|---|
Financial management organization |
|
Financial guidance documents |
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Monitoring and reporting |
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Appendix D – List of Acronyms
- BMSU
- Branch Management Services Unit
- BRRC
- Budget Review & Resources Committee
- CBSA
- Canada Border Services Agency
- CAS
- Corporate Administrative System
- CFO
- Chief Financial Officer
- CRF
- Consolidated Revenue Fund
- AC
- Agency's Audit Committee
- DPR
- Departmental Performance Report
- FAA
- Financial Administration Act
- HQ
- Headquarters
- IAPED
- Internal Audit and Program Evaluation Directorate
- NFTC
- National Financial Transaction Centre
- RDG
- Regional Director General
- RMSU
- Regional Management Services Unit
- RPP
- Report on Plans and Priorities
- TB
- Treasury Board Secretariat
- VP
- Vice-President
Notes
- Appendix A, Table 2 provides a summary of the new policy requirements. [Return to text]
- Source: Bill C-51 – Economic Recovery Act (Stimulus) and Interim Financial Reporting in the Government of Canada, October 24, 2009. [Return to text]
- Source: CBSA Intranet Site, December 2009. [Return to text]
