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AUDIT OF KEY FINANCIAL PROCESSES AT

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20 pages
AUDIT OF KEY FINANCIAL PROCESSES AT THE GASPÉ FIELD UNIT Prepared by: Samson & Associates FINAL REPORT OCTOBER 2006 Report tabled and approved by the A&E Committee ©Her Majesty the Queen in Right of Canada, represented by the Chief Executive Officer of Parks Canada, 2006 Catalogue No. : R60-3/2-13-2007E-PDF ISBN : 978-0-662-45809-8 TABLE OF CONTENTS EXECUTIVE SUMMARY ................................................................................................ 4 1. BACKGROUND ...................................................................................................... 8 2. OBJECTIVES AND SCOPE.................................................................................... 8 3. METHODOLOGY ................................................................................................... 8 4. ASSURANCE STATEMENT.................................................................................. 9 5. CONCLUSION......................................................................................................... 9 6. OBSERVATIONS AND RECOMMENDATIONS............................................... 10 6.1. Management Control Framework........................................................................... 10 6.2. Revenues.............................. ...
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          AUDIT OF KEY FINANCIAL PROCESSES AT THE GASPÉ FIELD UNIT          Prepared by:  Samson & Associates    FINAL REPORT         OCTOBER 2006
        Report tabled and approved by the A&E Committee      
                                           © Her Majesty the Queen in Right of Canada, represented by  the Chief Executive Officer of Parks Canada, 2006  Catalogue No. : R60-3/2-13-2007E-PDF  ISBN : 978-0-662-45809-8  
  TABLE OF CONTENTS   EXECUTIVE SUMMARY ................................................................................................ 4 1. BACKGROUND ...................................................................................................... 8 2. OBJECTIVES AND SCOPE .................................................................................... 8 3. METHODOLOGY ................................................................................................... 8 4. ASSURANCE STATEMENT .................................................................................. 9 5. CONCLUSION......................................................................................................... 9 6. OBSERVATIONS AND RECOMMENDATIONS............................................... 10 6.1. Management Control Framework ........................................................................... 10 6.2. Revenues ................................................................................................................. 11 6.3. Contracting.............................................................................................................. 14 6.4. Acquisition Cards.................................................................................................... 16 6.5. Travel ...................................................................................................................... 17 6.6. Financial Coding..................................................................................................... 18 6.7. Payments to Suppliers............................................................................................. 18 6.8. Stores Inventory and Safeguard of High Risk Valuable Small Items..................... 19       Report tabled and approved at the A&E Committee meeting on March 26, 2007     
 EXECUTIVE SUMMARY Background Parks Canada Agency (PCA) conducts cyclical audits of field units, service centres and the national office to review key financial, administrative and management practices. The audits focus is on compliance with Treasury Board Secretariat (TBS) and PCA policies and practices. Field units are groupings of national parks, national historic sites and national marine conservation areas that are usually in proximity to one another. Their proximity allows them to share management and administrative resources.  The audit of the Gaspé Field Unit (GFU) was conducted as part of these cyclical audits. The GFU includes Forillon National Park, the historic sites of the Battle of the Restigouche and Pointe-au-Père Lighthouse. Administrative and financial management of the GFU is located in Gaspé with some local administration activities in Restigouche.  Objectives and Scope The objectives of this audit were to confirm whether due diligence is being exercised in key management processes and to provide assurance to senior management that processes and controls in place at GFU are adequate to mitigate the risk of non-compliance to TBS and PCA policies and practices.  The scope of the audit included the review of the management control framework (MCF) over financial management and the following key financial process areas:   Revenues; ƒ ƒ  Contracting; ƒ  Use of Acquisition Cards;  Expenditures for Travel; ƒ ƒ  Financial Coding; ƒ  Payments to Suppliers; and ƒ  Stores Inventory and Safeguarding of High Risk Valuable Small Items.  The scope of the audit covered processes in place and transactions entered into between April 1, 2005 and August 31, 2006.  Statement of Assurance In our opinion, sufficient audit work has been performed and the necessary evidence has been gathered to support the conclusions contained in this report. Our observations and recommendations have been made in accordance with the Audit Reporting Rating System used by Parks Canada.   
Revenues
 Conclusion Overall, we found that due diligence is being exercised in the management processes and that systems and controls in place to monitor revenues, contracting, payments to suppliers, acquisition cards, travel expenses, and financial coding are adequate. However, we have identified areas where improvements should be made.   The following table illustrates the rating summary for the GFU.    FINANCIAL PROCESS RATING  Management Control YELLOW Some controls are in place and functioning. Framework However, major issues were noted and need to be addressed. These issues could impact on the achievement or not of program/operational objectives. YELLOW Some controls are in place and functioning. However, major issues were noted and need to be addressed. These issues could impact on the achievement or not of program/operational objectives. YELLOW Some controls are in place and functioning. However, major issues were noted and need to be addressed. These issues could impact on the achievement or not of program/operational objectives. BLUE Many of the controls are functioning as intended. However, some minor changes are necessary to make the control environment more effective and efficient. BLUE Many of the controls are functioning as intended. However, some minor changes are necessary to make the control environment more effective and efficient. GREEN Controls are functioning as intended and no additional actions are necessary at this time. GREEN Controls are functioning as intended and no additional actions are necessary at this time.
Contracting 
Acquisition Cards
Travel
Financial Coding Payment to Suppliers
Stores Inventory & BLUE Many of the controls are functioning as intended. Safeguard of High Risk However, some minor changes are necessary to Valuable Small Items make the control environment more effective and efficient. We have made the following recommendations to the Field Unit Superintendent:  Management Control Framework  Recommendation # 1: The Field Unit Superintendent should ensure that controls are in place to ensure that the Finance and Administration Manager don’t exercise the section 34 authority and the section 33 authority on the same transaction to respect a proper segregation of duties.  Recommendation # 2:  The back-up of the server made at the administration office should be stored off-site and the GFU should implement back-up procedures for the computerized revenue systems at the Parks kiosks.   Revenues  Recommendation # 3: The GFU should stop preparing the manual Excel worksheets currently used as invoices to enter the revenue and deposit information into SAP. This procedure is cumbersome and has a high risk of error. The GFU should print monthly revenue summary reports from the NR and POS systems and use these reports as invoices to enter the revenue and deposit information.  Recommendation # 4: We recommend that the GFU consider upgrading to a more recent POS system, such as the one currently being deployed by Parks Canada across Canada. A new system should allow for better reporting and integration with SAP.  Recommendations  to  Head  Office   Recommendation # 5: The usage of two revenue systems, POS and NR, complicates the data collection and reconciliation process for revenues. We recommend that Parks Canada assess the possibility of using only one system, possibly the NR, to manage all types of revenue transactions.  Contracting  Recommendation # 6:  The GFU should ensure that, whenever possible, at least three quotes be obtained prior to making a purchase, in order to obtain the best possible price.  Recommendation # 7: The GFU should review the reasons sole source contracts can be used (Parks Canada contracting policies) with their staff and only issue a sole source contract if the specified circumstances meet the appropriate criteria.  
  Acquisition Cards  Recommendation # 8: We recommend that the GFU reviews its acquisition cards limits to modify it according to the employees purchasing levels to reduce the risk of abuse.   Travel  Recommendation # 9:  The GFU should ensure that accommodation claimed follows Treasury Boards approved suppliers and the government rate is obtained. In addition, Finance should ensure that the per diems are consistent with the times of departure and return.   Financial Coding  None.   Payments to Suppliers  None.   Stores Inventory and Safeguard of High Risk Valuable Small Items  Recommendation # 10:  The GFU should consider a physical count to update its inventory lists in order to have accurate information to input in the system when implemented.    
1. BACKGROUND Parks Canada Agency (PCA) conducts cyclical audits of field units, service centres and the national office to review key financial, administrative and management practices. The audits focus is on compliance with Treasury Board Secretariat (TBS) and PCA policies and practices. Field units are groupings of national parks, national historic sites and national marine conservation areas that are usually in proximity to one another. Their proximity allows them to share management and administrative resources.  The audit of the Gaspé Field Unit (GFU) was conducted as part of these cyclical audits. The GFU includes Forillon National Park, the historic sites of the Battle of the Restigouche and Pointe-au-Père Lighthouse. Administrative and financial management of the GFU is located in Gaspé with some local administration activities in Restigouche.  2. OBJECTIVES AND SCOPE The objectives of this audit were to confirm whether due diligence is being exercised in key management processes and to provide assurance to senior management that processes and controls in place at GFU are adequate to mitigate the risk of non-compliance to TBS and PCA policies and practices.  The scope of the audit included the review of the management control framework (MCF) over financial management and the following key financial process areas:  ƒ  Revenues; ƒ Contracting;  ƒ  Use of Acquisition Cards; ƒ  Expenditures for Travel; ƒ  Financial Coding; ƒ  Payments to Suppliers; and ƒ  Stores Inventory and Safeguarding of High Risk Valuable Small Items.  The scope of the audit covered processes in place and transactions entered into between April 1, 2005 and August 31, 2006.  3. METHODOLOGY The audit included a visit to the GFU during the period of September 11-15, 2006 and included the following activities:  ƒ  interviews with GFU management and personnel who are responsible for all the areas being reviewed; ƒ  review of relevant documentation provided by Parks Canada National Office and the GFU, including the GFU Business Plan for 2005-2006, the GFU delegated
signing authorities chart, policies and guidelines concerning the management control framework, revenues, contracting, payments to suppliers, acquisition cards, travel expenses and financial coding; and ƒ  an on-site examination of a sample of transactions in each of the key areas covered by the assignment.  At the conclusion of the fieldwork, a debriefing of our preliminary observations was made to GFU’s Finance Manager and the Superintendent of the field Unit.  Our observations and recommendations have been made in accordance with the Audit Reporting Rating System described below:  Audit reporting rating system Unsatisfactory Controls are not functioning or are nonexistent. Immediate RED management actions need to be taken to correct the situation. Significant Controls in place are weak. Several major issues were noted Improvements that could jeopardize the accomplishment of ORANGE Needed program/operational objectives. Immediate management actions need to be taken to address the control deficiencies noted. Moderate Some controls are in place and functioning. However, major ssed. These issues YELLOW INmeperdoevde ments  icsosuuleds  iwmepraec tn ootne tdh ae nadc nhieeevde tmo ebnet  aodr dnroet of program/operational objectives. Minor Many of the controls are functioning as intended. However, BLUE Improvements some minor changes are necessary to make the control Needed environment more effective and efficient. Con GREEN trolled Controls are functioning as intended and no additional actions are necessary at this time.  4. ASSURANCE STATEMENT In our opinion, sufficient audit work has been performed and the necessary evidence has been gathered to support the conclusions contained in this report.  5. CONCLUSION Overall, we found that due diligence is being exercised with respect to the management processes and that systems and controls in place to monitor revenues, contracting, payments to suppliers, acquisition cards, travel expenses, and financial coding are adequate. However, we have identified areas where improvements should be made. These improvements are summarized below through our recommendations .
 6. OBSERVATIONS AND RECOMMENDATIONS 6.1.  Management Control Framework  Moderate Some controls are in place and functioning. However, YELLOW Improvements major issues were noted and need to be addressed. These  Needed issues could impact on the achievement or not of program/operational objectives.  Observations Planning and Budgeting The GFU prepares a five year business plan that includes an annual operating plan with a detailed budget. The financial components of these plans are prepared by the Manager of Finance and Administration and reviewed by the management team composed of the Field Unit Superintendent and the other managers. The results are compared to the budget on a monthly basis and reviewed at the management team meetings.  Training The GFU practices are consistent with TBS and PCA policies and guidelines. The Manager of Finance and Administration, the teams in the various locations and the Contract and Material Management Officer are aware of the policies and guidelines and have them documented in each of the sub-unit offices for reference. Our audit revealed only minor weaknesses in the application of these policies and guidelines. Generally, finance policies and practices training is provided when deemed necessary. Contracting training will be held later this year for all employees with contracting authority. Formal training is provided to all seasonal employees at the beginning of the year.  Controlling and Monitoring Practices The Manager of Finance and Administration produces a monthly financial statement for each Service Manager. Variances from budget are discussed and measures are taken to avoid a deficit. The roles and responsibilities of the staff is clearly defined, performance reviews are generally performed and documented. The job descriptions have been reviewed in the past year by the National Office. When reviewing the various financial authorities, we found that the Manager of Finance and Administration has spending authority (section 34) and payment authority (section 33). This situation creates a segregation of duty concern as this person could authorize an expense, as well as approve its payment, which creates the risk of fraud. This is the case when expenditures are initiated within a cost centre for which they have responsibility. We have discussed this matter with the FU Superintendent and the Manager of Finance and Administration and they confirmed that section 34 was not exercised, in practice, for Finance and Administration expenditures. In those cases, the section 34 authority is performed by another employee from their department.  
Risk Management The FU Superintendent is responsible for the overall management of risk. The Park has its own safety plans. However, there is no formal disaster recovery plan for the GFU. It has a server running in its administration office. Back-up of data is performed daily but stored on-site in a safe. No back-up of data is performed for the computerized revenue systems at each of the Parks kiosks.  Recommendations  1.  The Field Unit Superintendent should ensure that controls are in place to ensure that the Finance and Administration Manager doesn’t exercise the section 34 authority and the section 33 authority on the same transaction in order to to respect a proper segregation of duties.  Management response Agreement:  The Administrative Officer’s financial delegation was amended on October 2, 2006. Purchases related to the budget of the Manager of Finance require that section 34 of the FAA be signed on by the Field Unit Superintendent upon submission of the documents.   2.  The back-up of the server made at the administration office should be stored off-site and the GFU should implement back-up procedures for the computerized revenue systems at the Parks kiosks.  Management response  Agreement : As of September 27, 2006, we have kept a back-up in another building. We pick up the cassette every week to make a new back-up.  In the summer of 2007, we are going to reinstate the systems and procedures to have a back-up of McIntosh points of sale.   6.2.  Revenues  Moderate Some controls are in place and functioning. However, YELLOW Improvements  imssaujor issuleds  iwmeprae ctn ootne dt haen adc nhieeevd etmo ebnet  aodr dnreost soefd . These  Needed es cou program/operational objectives.  Observations  In fiscal year 2005-06, the GFU generated just over $1 million in revenue and is expected to reach the same level in fiscal year 2006-07. For the period from April 1, 2006 to August 31, 2006, they have $849K in revenue. The GFU has approximately 150,000 visitors per year. Here is a summary of the different types of revenue for the current period and the previous year: