Office of the Auditor General of Canada—Internal Audit Report
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Office of the Auditor General of Canada Internal Audit Report Classification and Compensation December 2004 Janet Jones, Director Internal Audit Subhas Roy, Author Barbara Atwill, Contributor Leo Major, ContributorOAG Internal Audit of Classification and Compensation Dec. 2004 Table of Contents 1.0 Executive Summary ........................................................................................................1 2.0 Introduction .....................................................................................................................2 2.1 Audit Mandate .......................................................................................................2 2.2 Background ...........................................................................................................2 3.0 About the Audit ...............................................................................................................2 3.1 Objectives and Scope ...........................................................................................2 3.2 Audit Approach and Lines of Inquiry .....................................................................3 4.0 Observations and Recommendations...........................................................................4 4.1 Management of the Function – Delegation of Authorities......................................4 4.2 Classification Activity ...
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| Publié par | Ustley |
| Nombre de lectures | 49 |
| Langue | English |
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Office of the Auditor General of Canada Internal Audit Report Classification and Compensation December 2004
Janet Jones, Director Internal Audit Subhas Roy, Author Barbara Atwill, Contributor Leo Major, Contributor
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OAG Internal Audit of Classification and Compensation
Dec. 2004
Table of Contents Executive Summary ........................................................................................................ 1 Introduction ..................................................................................................................... 2 2.1 Audit Mandate ....................................................................................................... 2 2.2 Background ........................................................................................................... 2 About the Audit ............................................................................................................... 2 3.1 Objectives and Scope ........................................................................................... 2 3.2 Audit Approach and Lines of Inquiry ..................................................................... 3 Observations and Recommendations........................................................................... 4 4.1 Management of the Function Delegation of Authorities...................................... 4 4.2 Classification Activity ............................................................................................. 5 4.3 Compensation and Benefits .................................................................................. 8 4.4 Human Resources Management Information System......................................... 10
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OAG Internal Audit of Classification and Compensation 1.0 Executive Summary Introduction Strategic Planning and Professional Practices group conducted an internal audit of classification and compensation according to the Office of the Auditor General’s annual internal audit plan, approved by the Auditor General and the Audit Committee for 2004-05. Conclusion In all material respects, the Office of the Auditor General’s classification and compensation activities are conducted with due regard for its policies, adequate controls, and great professionalism. Background The Auditor General Act establishes the Office as a separate employer and authorizes the Auditor General to prepare classification standards and exercise the powers of the Treasury Board for personnel management, including compensation. Audit Objectives and Scope The objective of this internal audit was to provide assurance to the Auditor General that the Office complies with its policies and that there are adequate controls to ensure due regard for these policies. The scope included the compensation and classification activities and processes of 2003-04. We tested a sample of classification and compensation actions. Opportunities for Improvement Some opportunities for improvement exist. These include: • Developing a formal instrument of delegation of Human Resources authorities; • Improving documentation to support classification decisions; • Improving guidance for salary upon appointment; and • Acquiring an up-to-date Human Resources Management Information System that is current with government human resources modernization tiatives ini . Management Response The audit identifies strengths and opportunities for improvement in the administration of compensation and classification activities, and as such has provided useful guidance. We agree with the recommendations. A plan is being developed for the acquisition of a new Human Resources Management System. We expect to be able to implement the required changes for the remainder of the recommendations over the next 12 months.
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OAG Internal Audit of Classification and Compensation 2.0 Introduction 2.1 Audit Mandate The internal audit of Classification and Compensation was conducted by the Strategic Planning and Professional Practices group in accordance with the Office of the Auditor General’s annual internal audit plan for 2004-05 that was approved by the Auditor General and the Audit Committee. 2.2 Background The Human Resources vision for the Office of the Auditor General recognizes the Office’s unique role as the federal institution charged with legislative audit responsibilities under the Auditor General Act, and its status as a separate employer. As noted in the Office’s Classification and Compensation Policy, the Act provides the Auditor General with the authority to prepare classification standards for persons employed in the Office and to exercise the powers of the Treasury Board with respect to personnel management including the determination of terms and conditions of employment, including compensation. 3.0 About the Audit 3.1 Objectives and Scope 3.1.1 Objectives The objective of this internal audit of classification and compensation was to provide assurance to the Auditor General that the Office is in compliance with its policies and that there are adequate controls to ensure due regard for these policies. 3.1.2 Scope The scope of work included all classification and compensation actions and processes relating to the 2003-04 fiscal year of which a sample was selected for audit. Some classification actions for 2002-03 were also included in the sample and some specific compensation areas covered three fiscal years.
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3.2 Audit Approach and Lines of Inquiry 3.2.1 Audit Approach Interviews were conducted with Human Resources managers, members of the Office’s Human Resources Committee and selected staff as users of the classification and pay systems. Selected Classification actions and a representative sample of pay actions comprising approximately 5% of the Office’s staff complement were examined. 3.2.2 Lines of Enquiry Classification A sample of 20 files was examined involving classification actions, creation of new positions or reviews of positions, and reclassification actions. For the Audit Professional Group (APG) and the management categories, file samples were selected from the 2003-04 year. The sample of files was examined for evidence of authorization of level, either a promotion or taken on strength (TOS) and the point rating if applicable. The examination also included a determination of whether the four factors of the Canadian Human Rights Act (CHRA) skills, effort, responsibilities, and working conditions are satisfied by the Competency Models. It considered as well whether a Statement of Duties requirement exists and if it is being met. Filing and documentation standards, including the use of position numbering were looked at to see if administrative requirements are adequately served. For the Audit Services Group (ASG), samples of different job categories for the 2002-03 and 2003-04 years were examined, including reclassifications. Completeness of file documentation was determined as far as job descriptions, authorizations, and point rating and to see if they meet administrative requirements. All exceptions were looked at for the ASG6A, ASG7A, and ASG8A categories to see if adequate approvals are on file. 3.2.3 Lines of Enquiry Compensation Tests of different types of pay transactions were conducted to determine whether the transactions have been processed accurately, in a timely manner and in accordance with relevant agreements, guidelines and policies. Enquiries included discussions with management, review of information provided, and detailed examination of pay data including pay files, pay cards and payroll registers. A sample of 25 files was examined. The sample of pay transactions include regular pay, overtime, retirement, performance pay, workforce adjustment, sick leave, annual leave cash-out, taken on strength (TOS), struck off strength (SOS), and leave without pay (LWOP). Specific compensation areas examined included use of management leave, sick leave management, overtime, and vacation leave. 3.2.4 Lines of Enquiry Human Resources Management Information System Examinations were undertaken to determine whether the human resources management information system (HRMIS) supports classification and compensation activities. We also looked at the extent of manual processing of data and whether improvements are needed.
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OAG Internal Audit of Classification and Compensation 4.0 Observations and Recommendations 4.1 Management of the Function Delegation of Authorities The Office of the Auditor General has authority under the Auditor General Act to effect classifications and re-classifications of its employees. The general authority to employ is set out in Section 15, while Section 16 allows the Auditor General to exercise the powers and perform most of the duties and functions of the Treasury Board relating to personnel management, including setting terms and conditions of employment. Section 17 provides for the preparation of classification standards but is silent as to who is to do the preparation. That raises the question as to who is the appropriate officer to carry out classification and compensation activities and how is the authority for these functions communicated within the Office? That also raises the more general question of how human resources authorities more broadly are communicated within the Office. By way of comparison, we investigated how delegations of human resources authorities are handled in a typical government department. Section 12.(3) of the Financial Administration Act deals with the delegation of authority for personnel management. It provides that a deputy head may "subject to and in accordance with the authorization, authorize one or more persons under their jurisdiction or any other person to exercise or perform any such power or function". Usually Government departments have a delegation of authority for Human Resources and a chart as a vehicle for communication. This is to clarify responsibilities and make them transparent throughout the organization. Also, many human resources authorities have financial implications (i.e. authorizing leave, overtime, etc). Classification delegation given to departments listed in Part 1 of Schedule 1 of the Public Service Staff Relations Act (PSSRA) carries with it conditions of delegation requirements under the TB Classification System and Delegation of Authority Policy. Requirements include departments having accredited classification specialists and internal monitoring mechanisms. Union agreements also usually require a delegation document to determine who hears grievances at what level (usually 3 levels with the DM or his/her designate being the 3rd level). Delegation is usually by level, although some positions have special authorities, for example, authority to fire or lay off staff. Human Resources authorities can include the determination of hours of work and overtime, granting of leave with pay or without pay, discipline, grievance and complaints procedures, recruitment and staffing authorities, classification, Official Languages, and Awards and Recognition. Specific areas of delegation related to classification can include: approval of organizational change and job content; effective dates of retroactive classification; classification of positions other than at the executive level; and authority to respond to classification grievances. Specific areas of delegation related to compensation can include: denial of annual increment; performance pay; and salary upon appointment from outside the Public Service.
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OAG Internal Audit of Classification and Compensation The Office has a formal delegation of financial authorities and relies on the Intranet to communicate these authorities to its staff but it has no similar instrument of delegation for Human Resources authorities. Recommendation 1: We recommend that the Auditor General issue a formal instrument of delegation of Human Resources authorities to OAG management covering classification, compensation and benefits and other areas related to Human Resources management in order to clarify the authorities delegated to each level and to underline the associated accountabilities related to management of staff. The instrument of delegation can be in the form of a chart or table used widely in the government and similar to the Office's delegation of financial authorities. Management Response Recommendation 1: - Agreed. We will issue such a delegation of HR authorities by December 2005. The Human Resources Principal will work with the responsible Assistant Auditor General to complete this task. 4.2 Classification Activity Classification activity within the Office is carried out by internal staff. The Senior Human Resources Advisor is new to classification and is working closely with the Director, Human Resources in carrying out classification responsibilities. Additionally, external consultants are engaged to write work descriptions and to prepare evaluations for positions. Their work is reviewed by the Director, Human Resources. We found excellent service attitudes conveyed by the Human Resources staff members. 4.2.1 Documentation in Support of Classification Decisions With some exceptions, files did not contain a uniform set of documents or evidence of approval such as signatures. We would have expected to find basic documentation such as signed and dated work descriptions, with an effective date of the action and a position evaluation. In the case of reclassifications, the previous and proposed work descriptions, signed and dated, an effective date of the proposed reclassification, a comparison of the changes in the proposed work description and the previous and final position evaluations would form the basic documentation we expected. An organization chart on file would be beneficial to situate the position. We have also provided suggestions to Human Resources management regarding options to change the employee position numbering scheme to better meet administrative requirements. 4.2.2 Classification Exceptions There are currently a few exceptions with the positions designated "A", covering the ASG6A, ASG7A and ASG8A positions. We believe that the "A" designator to a classification level is for compensatory purposes only and is not part of the classification evaluation process as there was no classification rationale on file. We understand that
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OAG Internal Audit of Classification and Compensation the "A" designator indicates that the individual is assigned duties beyond those normally assigned to persons at a certain level. As well, it allows the organization to recruit employees based upon market conditions. We are of the view that the lack of a classification rating does not permit an examination of the relativity of the positions with other positions in the Office. 4.2.3 Classification Policies Some Office policies currently available to employees on the Intranet are not up-to-date and/or are not being followed. These include Office policies titled “Recourse Mechanism for Employees (ASG), “Reclassification Guidelines (ASG) and “Guidelines on Work Descriptions (ASG). Certain provisions which are not up-to-date and/or being followed include the requirements that Classification decisions are made by classification committees, work descriptions are reviewed for currency and that changes to a proposal for reclassification of a position are documented. We have been advised that a review of OAG policies related to classification will be conducted starting this fiscal year. We understand that all positions classified in the Audit Services Group will be reviewed in the near term to ensure they are up-to-date. With the potential large number of positions to be updated and evaluated, it is essential that policies dealing with effective dates of positions, the policy regarding a recourse mechanism for employees in the Audit Services Group and as well reclassification guidelines be updated. 4.2.4 Classification Records We note that there are no general subject files related to classification within the registry to cover areas such as classification decisions related to recourse, classification monitoring/audit and training. With the planned review and update of all positions classified within the Audit Services Group, it is possible that employees may disagree with evaluation results of their updated work description. It is important that the outcome of the recourse is kept in a central file. As these decisions should be considered final and binding, it is important that they are available for review in evaluating positions within the Office to ensure relativity. 4.2.5 Job Descriptions The collective agreement for the Audit Services Group states that, "upon written request, an employee shall be provided with a complete and current statement of the duties and responsibilities of his or her position, including the classification level and, where applicable, the point rating allotted by factor to his or her position, and an organization chart depicting the position's place in the organization". We note that there are job descriptions as required by the collective agreement. In reviewing the job descriptions for this Group we noted that many of them are more than five years old and may need updating. The collective agreement for the Audit Professional Group states that, "upon written request, an employee shall be provided with a complete and current statement of the duties and responsibilities of his or her position, including the classification level and, where applicable, the point rating allotted by factor to his or her position, and an organization chart depicting the position's place in the organization". We believe that the Competency Model does not fulfill the obligation of a complete and current statement of Strategic Planning and Professional Practices 6
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OAG Internal Audit of Classification and Compensation the duties and responsibilities of the position because the model addresses “performance standards and expectations for all staff which in our opinion amount to personal characteristics of the incumbent rather than responsibilities of the position. 4.2.6 Canadian Human Rights Act - Classification Standards/Competency Models The Audit Services Group classification standard appears to be in conformance with the criteria outlined in the Canadian Human Rights Act (CHRA) for the evaluation of positions within the same establishment, i.e. Skill, Effort, Responsibility and Working Conditions. The ASG Standard specifically refers and relates to the CHRA criteria. In terms of the Competency Models, an in-depth study would be required to determine their conformance with the CHRA criteria because information in the Models has not been grouped to identify these four factors. If further study shows that these criteria are not specifically addressed, then staff interviews would be needed to establish if the criteria are met. Recommendation 2: We recommend that the Principal, Human Resources take measures as appropriate to strengthen the Office’s Classification function by: a. conducting a review of existing classification policies which are not up-to-date and/or not being followed; b. instituting procedures to ensure classification records contain all relevant documentation supporting decisions related to position classification; c. clarifying whether the intent of the "A" designator is solely for compensatory purposes; and d. ensuring compliance to collective agreements which require an up-to-date statement of duties and responsibilities. Management Responses - Recommendation 2: a. We commit to documenting our classification policies and practices by April 1 st 2005. Unfortunately the policies currently on our Intranet site were set up for the original creation of our classification system and have not been updated to reflect our current policies and practices. A Human Resources Manager has been designated the lead on this project. b. Agreed. Effective immediately. A Human Resources Officer will have this responsibility. c. Agreed. This will be added to the classification documentation. d. Agreed. All ASG staff are provided a copy of their job description upon request. It has been 5 years since we established the job classification system, we therefore have a number of jobs that need to be reviewed and rewritten. We will be establishing, by June 2005, a system which will prioritize the review of job descriptions that have changed by more than 20% and that are over 5 years old. In addition, we have once again begun the process of completing job descriptions, through the help of a consultant, for the AP, APL and new APX category. We had attempted this in 2002 but did not reach an agreement with the union on the descriptions.
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OAG Internal Audit of Classification and Compensation 4.3 Compensation and Benefits 4.3.1 A Competent Team The overall operation of the Compensation and Benefits unit is one to be admired. A review of the day to day operations revealed a dedicated and conscientious team. The experience and tact in dealing with complex and stressful situations was evident. Acceptable practices are implemented and most directives and guidelines are reviewed and updated as required and when time permits. The files and cases reviewed revealed a timely and accurate operation. The Compensation unit has a very good working relationship with their counterparts in the Comptroller’s Group. Authorization of pay actions is done without delay; supplementary cheques are received, payroll registers sent to Human Resources and cheques released to employees in an acceptable time frame. 4.3.2 Performance Pay We reviewed Performance Pay to determine conformity with established rules and processes. We reviewed letters on file advising incumbents of the dollar amount of the performance pay, and the detailed breakdown of the methodology used, meetings with Senior Staff, the rating system and final calculations. We advised HR management that all calculations were properly made, with subsequent pay action taken and supplementary cheques received in an acceptable time frame. 4.3.3 Overtime Worked by Non-management Employees In reviewing overtime worked by non-management employees, we noted that a total of 371 employees worked overtime in 2003-04 with total hours worked amounting to 26,450 hours. We concluded that, for the sample of files we reviewed, overtime worked and paid were according to the collective agreements. Overtime worked by managers is discussed separately in Section 4.3.7 below. 4.3.4 Salary Upon Appointment Pay files were generally well documented in support of compensation decisions. The only drawback in documentation was the lack of guidelines and supporting rationale for salary upon appointment. 4.3.5 Negative Annual Leave Balances Negative annual leave balances constitute a Debt Due to the Crown. Negative annual leave balances exist although we understand that managers can and should access their employees’ annual leave balances before approving the request. For the year ending 31 March 2004, some 30 employees had a negative leave balance. Of these, 15 are less than a day and five can be explained by specific circumstances, for example, employees on secondment who have annual leave credits at their home department. The remaining 10 balances are between one day and two weeks. The Report to the Human Resources Committee OAG Human Resources for the period ending 31 March 2004 indicates that this practice has been occurring since at least the fiscal year ending Strategic Planning and Professional Practices 8
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OAG Internal Audit of Classification and Compensation 31 March 2000. Of note is the fact that some employees carry over the negative balance from year to year. As well, several employees are currently on a leave of absence and have a negative annual leave balance. We are not aware of any policy, either OAG or Treasury Board, that allows the advance of annual leave balances beyond the normal annual entitlement of individuals. As well, maintaining negative annual leave balances imposes an additional administrative burden because these balances have to be recorded and tracked. In addition, there is a risk that negative balances may be overlooked when final calculations are done when an employee with a negative leave balance ends his or her employment. Moreover, future recovery action may not always be completely straightforward. 4.3.6 Annual Leave Carry-over The maximum leave carry over provisions in the Collective agreements allow for the carryover of a maximum 200 hours with the stipulation that exceptions are permitted “under special circumstances. The Terms and Conditions of Employment for the Management Group allow for the carryover of a maximum of 200 hours. 66 employees had over 220 hours of unused leave at the end of the fiscal year 2003/04. 17 of these 66 employees received waivers and maintained their unused leave balance. Of these 17, 14 had over 200 hours of leave carried over the previous year. In waiving the mandatory cash out provision, the organization is potentially incurring a greater debt than required. The leave was earned at one salary rate and will be cashed out at a higher rate, either when the employee requests a cash payment, sometime in the future (as per collective agreements and Terms and Conditions of employment), or upon termination of employment for whatever reason. In addition, 35 employees had between 200 and 220 hours of unutilized leave. It is Office practice to pay out leave balances of over 220 hours (as opposed to 200) therefore these employees received “informal waivers. An anomaly is created for the waivers between 200 and 220 hours. An employee who has, say, 221 hours of unused leave will have 21 hours paid out. An employee who has, say 219 hours, will not have his or her unused leave paid out. As per the collective agreements vacation leave should be taken in the year it is earned. This is for the welfare of the employee as well as for the health of the organization. This audit did not focus on occupational health and safety issues, however, management may want to further explore the impact of carrying over annual leave. For example, there may be a potential burn out of employees, and a negative effect on production and the health of employees. 4.3.7 Overtime Worked by Management Category Employees A total of 157 management category employees, almost all of the management category, worked overtime in 2003-04. Total hours worked amounted to 26,273 hours. Management employees are not paid for their overtime but may be granted Management Leave. As in the case of leave carry-over, management may want to further explore the occupational health issues associated with overtime. Strategic Planning and Professional Practices
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