Financial Audit of the Copenhagen Mission

Foreign Affairs and International Trade Canada
Office of the Chief Audit Executive

May 2013

Executive Summary

A full financial audit of the Copenhagen Mission was carried out at the request of the Assistant Deputy Minister, Global Issues, Europe and the Middle East. This work was designed to carry out detailed control testing of financial and administrative processes and transactions. This was assessed as a high priority as allegations with respect to the financial management of the mission had been raised.

The audit was conducted by the Director, Internal Audit and a Forensic Accountant from Deloitte. On-site work was undertaken from October 31 to November 7, 2012. The Ambassador welcomed this audit work and provided full access to all staff and documentation.

What did we examine?

Based upon the preliminary findings of previous reviews, and in collaboration with the Ambassador, the audit focussed on the following administrative and financial procedures:

• Processing of financial transactions;
• Management of revenues collected;
• Petty Cash;
• Locally Engaged Staff (LES) Leave; and,
• Contracts related to the new Official Residence.

The Value Added Tax (VAT) was another area of concern for this mission. A subject matter expert was being brought in to the mission the week following the work of the audit team to resolve the issues. Therefore, this area was not included within the scope of the audit.

The audit addressed the fundamental questions of whether sufficient controls were in place and operating effectively in each of these areas.

What did we find?

The audit determined that while some necessary internal controls were in place and operating effectively, there were others that were not, thus exposing the mission to a higher degree of risk. Poor records management within the mission hindered the timely completion of the audit work. In the case of the Official Residence contracts, it prevented the auditors from completing the work. Specifically, the audit observed:

• Processing of Financial Transactions: Transactions were not always processed in accordance with the Financial Administration Act (FAA). There were numerous cases of inappropriate Section 33 and Section 34 approvals.
• Management of Revenues Collected: There was a consistent process in place for the handling of revenues. The audit work identified some strong controls working effectively and other expected controls that were not in place. Testing of revenues recorded as received (EXT 119), compared with deposits recorded (bank reconciliations) from April 2011 to July 2012 (most recent on file) indicated that all revenue had been deposited into the appropriate bank account.
• Petty Cash: The petty cash fund balanced when verified by the auditor. Key controls and processes, however, were not in place to provide assurance of this on a continuing basis.
• Locally Engaged Staff Leave: There was no consistent process used to manage and record LES leave within the mission. There were fundamental controls missing from the procedures. This resulted in uncertainty as to whether all leave taken was documented to ensure that leave balances were accurate.
• Contracts related to the new Official Residence: There were approximately 35 contracts related to upgrades, renovations, etc. of the new Official Residence. As of January 2013, audit work could not be completed as all required documentation was not available at the mission or at Headquarters. The total dollar value of these contracts is roughly $360,000. In February 2013, through exhaustive documentary review, senior officials of the Real Property Division confirmed, that, they had discovered that their own contracting official (who was not responsible for the Copenhagen file) had approved these contracts. Analysis of this situation raises concerns with respect to: contracting officials signing off on contracts that do not fall under their portfolio and then not advising the responsible contract official or their superior; oversight; accountability at Headquarters Real Property Division and in the Berlin office, roles and responsibilities; stewardship; and, records management.
• Bank Reconciliations were not completed on a regular basis nor submitted to Headquarters. The breakdown of this fundamental control should have been an immediate trigger for further, urgent action.

Recommendations

The audit makes recommendations throughout the report to strengthen controls in each of the areas assessed.

Conclusion

There are significant weaknesses with respect to the controls in place over financial and administrative matters in the mission. The Ambassador recognized the control weaknesses and, in some cases, had established priorities with his management team to begin to address them – this is encouraging.

With the establishment of Berlin as the Common Service Delivery Point for Copenhagen, it is expected that some of these control weaknesses will be rectified. At the time of the auditors on-site work however, there was still uncertainty in the Copenhagen Mission regarding financial and administrative processes between Copenhagen and Berlin. The auditors received a copy of the Annex A to the Service Level Agreement between the Regional Service Centre Europe – Middle East and Africa (RSCEMA), Berlin Common Service Delivery Point and Copenhagen which outlines the responsibilities for the various tasks. The effective date on the document is not indicated but it is to be reviewed and revised as necessary by March 31, 2013.

Statement of Assurance

In my professional judgment as Chief Audit Executive, sufficient and appropriate audit procedures have been conducted and evidence gathered to support a high level of assurance on the accuracy of the information in this report. The results are based on a comparison of the conditions, as they existed at the time, against pre-established audit criteria that were agreed upon with management. The results are applicable only to the processes examined. The evidence was gathered in compliance with Treasury Board Policy, Directives, and Standards on internal audit for the Government of Canada.

Original Signed By:
Yves Vaillancourt
Chief Audit Executive and Inspector General

1.0 Background

A full financial audit of the Copenhagen Mission was carried out as a result of recommendations from the Special Investigations Division and at the request of the Assistant Deputy Minister, Global Issues, Europe and the Middle East. This work was designed to carry out detailed control testing of financial and administrative processes and transactions. This was assessed as a high priority as allegations with respect to the financial management of the Mission had been raised.

The audit was conducted by the Director, Internal Audit and a Forensic Accountant from Deloitte. On-site work was undertaken from October 31 to November 7, 2012.

Mission Personnel

The Copenhagen Mission had recently undergone changes in personnel: the Ambassador was new to this post; the Mission Accountant position had been deleted and the accountant had left his position; and, the Canada-Based Mission Consular Officer had been replaced by a Locally Engaged Staff Mission Administration Officer (MAO). The Locally Engaged Staff primarily responsible for processing financial transactions and handling revenues had been in their positions for a significant period of time; they were, however, accustomed to having the guidance and direction of the Mission Accountant.

It is important to note that the Ambassador welcomed this audit work and provided full access to all staff and documentation.

Audit Focus

Based upon the preliminary findings of previous reviews, and in collaboration with the Ambassador, the audit focussed on the following administrative and financial procedures:

• Processing of financial transactions;
• Management of revenues collected;
• Petty Cash;
• Locally Engaged Staff (LES) Leave; and,
• Contracts related to the new Official Residence.

The Value Added Tax (VAT) was another area of concern for this mission. A subject matter expert was being brought in to the mission the week following the work of the audit team to resolve the issues. Therefore, this area was not included within the scope of the audit.

The audit addressed the fundamental questions of whether sufficient controls were in place and operating effectively in each of these areas. Specific focus was on providing assurance that revenue received within the mission for services rendered (Passport, Consular, Legal/Notary) were recorded and deposited correctly.

The processing of transactions and the handling of revenue in the mission is governed by:

Justice Canada

• Financial Administration Act (R.S., 1985, c. F-11)
• Receipt and Deposit of Public Money Regulation,1997 (SOR/98-128)
• Consular Fees (Specialized Services) Regulations (SOR/2003-30)
• Passport Services Fees Regulation (C.R.C., c. 719)

Treasury Board Secretariat

• Directive on Payment Requisitioning and Cheque Control
• Directive on Receipt, Deposit and Recording of Money

DFAIT Policies and Directives

• Receipt and deposit of money
• Recoverable Expenses, Revenue and Accounts Receivable
• Collecting Revenue and Issuing Official Receipts - Missions
• Bank Reconciliation
• Certification of Immigration Revenue Reconciliation

2.0 Observations and Recommendations

2.1 Processing of Financial Transactions

Transactions were not always processed in accordance with the Financial Administration Act (FAA). The processing of transactions with a clear lack of segregation of duties coupled with the lack of bank reconciliations increases the risk of inappropriate payments.

The auditors mined the overall Integrated Management System (IMS) transaction database to identify transactions of highest risk. This included:

1. Identifying the overall population of transactions from 2010-2011, 2011-2012 and 2012-2013 fiscal years.
2. Obtaining an understanding of the Embassy transactions through sorting of expenditures by the nature of expenditure, amount and date.

This resulted in 106 transactions selected for detailed review.

The auditors supplemented the analysis of the database transactions with a review of the monthly financial packages; this resulted in an additional 39 transactions selected for detailed review.

This detailed work included:

1. Determining appropriateness of approval (FAA sections 34 and 33)
2. Determining appropriateness of coding of expense
3. Identifying any other issues related to transaction

Overall, approximately 150 transactions processed from March 2011 and July 2012 were reviewed in detail.

There were numerous cases of inappropriate Section 33 and Section 34 approvals completed by multiple officers. The auditors identified control weaknesses in the following areas.

Bank Payment Approval: The bank payment approval system in place resulted in payments being issued to vendors without Section 34 approval (5 transactions) and/or Section 33 approval (11 transactions). The bank could not provide historical information that would identify who approved these transactions in its system; the bank only retains records for three months. There is no monthly record of approvals provided by the bank to the mission.These transactions include payments: for tuition of the Head of Mission’s child; to a spousal employee under Temporary Help Services; and, for Head of Mission driver overtime.

Direct or Indirect Vested Interest: Transactions (9 for a total dollar value of $8,575) were identified where the former Ambassador approved Section 33 or Section 34 on payments made to his wife’s nephew that was living in the Official Residence at the time of the payments.

Transactions (10 for a total dollar value of $10,263) were identified where the former Ambassador approved both Section 33 and Section 34 in relation to overtime for the Mission Driver and the Official Residence Chef.

The Mission Administration Officer (MAO) approved Locally Engaged Staff (LES) Salary which included her own (2 transactions for a dollar value (her portion) of $10,547).

Section 33 and Section 34 of the Financial Administration Act

There were numerous transactions where Section 33 and Section 34 were not carried out effectively.

• Section 33 and Section 34 approvals by the same person (14 transactions);
• Section 33 not signed (11 transactions) and not dated (2 transactions);
• Section 33 signed after the payment was processed by the bank (38 transactions);
• Section 34 not signed (5 transactions) and not dated (8 transactions).
• IMS data entry completed despite the fact that there is no Section 34/Section 33 approval.

Overtime was not always processed monthly. In the case of the Official Residence Chef, overtime was not processed on a regular basis. There were four transactions which included multiple months (1 for 6 months over two fiscal years).

Double Payments: Three double payments were identified by the Special Investigation Division. The audit team ran tests on the transaction database for same dollar value, same date, and same vendor. There were no other double payments identified.

Bank Reconciliations were not completed on a regular basis nor submitted to Headquarters (May, June, July 2012 were completed by HQ, August, September 2012 not included). The breakdown of this fundamental control should have been an immediate trigger for further, urgent action. This issue was not escalated to the Head of the Mission, the Chief Financial Officer Branch, and the responsible Assistant Deputy Minister.

These situations indicate that the controls in place at the time of the transactions were not sufficient to ensure integrity of the financial processes. The processing of transactions with a clear lack of segregation of duties as well as the lack of bank reconciliations increases the risk of inappropriate payments. Mission staff informed the auditors that the Common Service Delivery Point Office in Berlin is now carrying out Section 33 on payment transactions as well as completing the monthly bank reconciliations for the Copenhagen Mission beginning August of 2012.

Recommendations:

1. The Department should ensure that Copenhagen mission management have the proper training and knowledge for processing transactions that respect the requirements of Section 34 and Section 33 of the Financial Administration Act.
2. Processes should be implemented at the Copenhagen Mission to ensure that no transaction without appropriate Section 34 and Section 33 approvals is entered into the Departmental Financial System (IMS) or processed electronically through the local bank.
3. The Chief Financial Officer Branch should ensure that all missions are completing and submitting bank reconciliations on a monthly basis. Procedures should be developed and communicated to escalate any issues to the Head of Mission, the Geographic Assistant Deputy Minister as well as within the Finance branch.

2.2 Management of Revenues Collected

There is a consistent process in place for the handling of revenues in the Mission. The audit work identified some strong controls working effectively and other expected controls that were not in place. Testing of revenues received (EXT 119), compared with deposits recorded (bank reconciliations) from April 2011 to July 2012 (most recent on file) indicated that all revenues had been deposited into the appropriate bank account.

The process for handling of revenue received from clients involved staff in the following positions:

• Receptionist;
• Consular Officer;
• Property & Materiel Assistant; and,
• Mission Administration Officer.

The auditors walked through the process from the initial receipt of funds (both in-person and mail-in) to assess the controls in place. The monthly financial packages for revenues were then thoroughly reviewed to ensure that all money recorded had been deposited appropriately into the mission bank account.

The auditors found that the reconciliation of the EXT 119 with the Deposit Slips and the Bank Statements indicated that all money documented as received from clients was deposited into the bank account.

As well, the auditors assessed the process in place for the handling of revenues and identified the following control strengths and weaknesses.

Strengths

• The monthly revenue packages were prepared and organized in a manner which facilitated the review and allowed for anomalies to be easily identified. This was an excellent example of sound records management.
• The EXT 119 form is pre-coded to differentiate between the various sources of revenue. This control helps to reduce coding errors.
• There is a good reconciliation process in place between the official receipts issued to clients upon payment, the cash register receipts, the bank deposit slips and the EXT 119. This reconciliation is completed by the Consular Officer and the Property & Materiel Assistant on a regular basis.
• The transfer of cash from the Mission Consular Officer and the Property & Materiel Assistant (responsible for bank deposits) is well documented through the issuance of a formal transfer receipt signed by both parties.
• The Property & Materiel Assistant requests that the bank indicate the source of the revenue on the deposit slips to facilitate the completion of bank reconciliations.

Weaknesses

• Only one person opens the mail which sometimes contains cash. If there was a discrepancy between the amount expected and the amount received it would not be possible to determine whether the money had initially been in the envelope. This places the receptionist and/or Consular Officer at risk.
• There is no sign in the consular area (where clients are dealt with) to indicate that the client should expect to receive a receipt for the full amount paid. This would decrease the risk of the client paying cash, not receiving a receipt, the revenue not being recorded and the service not being received.
• The cash register is kept unlocked during the day. It is within the Consular Officer’s office which is accessible to all Mission staff. It is not accessible by the public. If cash were to go missing it would be very difficult to determine the person responsible. This places the Consular Officer at risk as the custodian of the cash.

The auditors are particularly concerned that there is no means to identify whether all revenues received for “legal services” in the mission are recorded and deposited. There is no input into the “COSMOS” system that would allow for a reconciliation of the services provided with the revenue recorded. It is possible therefore, that the funds are collected but not recorded. There was no indication that this was the case in Copenhagen but it does expose the Department to a higher degree of risk of malfeasance. The fees charged for specialized services such as legal, notary, fund transfers, etc. are all recorded within the same Departmental general ledger account (38600 named NVR- spec consular fees). The total Departmental revenue recorded for 2011-2012 was $3,543,551.

Recommendations:

4. The Mission should implement all necessary controls to ensure that revenue received from clients is protected, recorded and deposited appropriately.
5. The Chief Financial Officer Branch should review and assess the risk related to the inability to reconcile revenues collected for legal/notary fees. If feasible, a control should be implemented to allow this reconciliation to take place.

2.3 Petty Cash

The petty cash fund balanced when verified by the auditor. The cash count + the total value of receipts = 4,000DKK which was the proper amount for this mission. Key controls and processes, however, were not in place to provide assurance of this on a continuing basis.

The receptionist at the mission is the petty cash custodian. The auditors undertook a count of the petty cash with the receptionist and looked at the controls in place to safeguard the cash. The petty cash box was kept in a different location than the key to the box and the box was kept locked at all times. The following control weaknesses were identified:

• The Petty Cash Custodian started in 2007 and had not received training. She was not aware of necessary controls, did not know the maximum amount for petty cash or whether she was allowed to give advances from the fund. Importantly, she did not know when to request replenishment of the fund or to whom to give the request.
• The petty cash sheet had not been updated since May 2012 – several receipts were in the box but had not been recorded. The petty cash custodian indicated that she used to prepare it monthly but since the Mission Accountant left, it had not been done.  This does not allow her to know when the fund needs replenishing.
• The key is clearly marked petty cash and there is only one key for the office; it was very easy to find.
• Office management had never done a surprise cash count.

The Petty Cash Custodian relayed to the auditors that when she first started doing this job, there was a shortage of 200 DKK which she had to reimburse from her own pocket. While not a significant amount in the context of the Mission’s budget, it was a significant amount for this individual. This demonstrated to her the importance of sound controls.

Recommendations:

6. The Petty Cash Custodian should be provided with guidance/training on how to fulfill her responsibilities.
7. A member of the Mission management team should be assigned the responsibility for carrying out surprise petty cash counts on a regular basis. Any discrepancies should be immediately reported to the Head of Mission.

2.4 Locally Engaged Staff (LES) Leave

There was no consistent process used to manage and record Locally Engaged Staff (LES) leave within the mission. There were fundamental controls missing from the procedures. This resulted in uncertainty as to whether all leave taken had been documented to ensure that leave balances were accurate.

There were several different forms used to document leave, and in some cases management approval was sought and received via email. The documentation, overall, was not effective. The following control weaknesses were noted:

• The official DFAIT “Application for Leave” which documents the specific leave and is to be signed by the employee and authorized/approved by the supervisor was used for some, but not all, staff.
• The Copenhagen Mission created an “Attendance Record Card” which documents leave taken (by type) throughout the year and indicates the descending leave balance, had no signature blocks for either the employee or the supervisor. Therefore, there is no attestation by the employee or indication that the supervisor concurs with the reported leave taken.
• The newly created (email September 27, 2012) form for recording the leave of each employee indicates the balance carried over from the previous year and the entitlement for the current year for each of the five categories of leave (annual, credited OT, holiday, special, sick). There were no signature blocks for either the employee or the supervisor. Therefore, there is no attestation by the employee or indication that the supervisor concurs with the reported leave taken.
• Excel spreadsheet (untitled) is prepared by the Receptionist to capture the overall leave taken and balances for each employee based on the summary forms noted above which were not authorized by management.

The Department does not have a system in place to record and manage LES leave. As such, the Mission had instituted a process that they felt met their needs. The absence of managerial authorization within this process, however, increases the risk for abuse.

Recommendations:

8. The Mission Administration Officer should develop a process for the appropriate authorization and recording of LES leave. Responsible managers should apply this process for all staff.
9. The Chief Financial Officer Branch, in developing the LES Pay System, should ensure functionality for controlling leave is integrated into the system.

2.5 Contracts Related to the Official Residence

Audit work could not be completed as all required documentation was not available at the mission or at Headquarters. The total dollar value of these contracts is roughly $360,000. Analysis of this situation raises concerns with respect to: oversight; accountability, roles and responsibilities; stewardship; and, records management.

There were approximately 35 contracts related to upgrades, renovations, etc. of the new Official Residence. Contract files were not well organized and several key documents necessary for the audit could not be provided. The Copenhagen Mission provided the supporting documentation that they had readily available to the auditors during their visit.

Requests for the remaining documentation were made to both the Copenhagen Mission as well as to the Real Property Bureau of the International Platform Branch in Headquarters.

As of January 16, 2013, the documentation had not been received. The auditors carried out a review based upon the documentation available in Copenhagen up until January 2013. The following fundamental weaknesses were noted:

• Inability to demonstrate sound stewardship due to the lack of supporting documentation;
• Unclear delineation of accountability, roles and responsibilities between the Real Property Bureau at Headquarters, the Thames Valley Regional Service Centre and the Mission;
• Lack of understanding of the role of the Mission Contract Review Board;
• Materiel Management Module of IMS was not used. It is important to note that this is a priority for the Head of Mission and training had been planned for staff; and,
• Numerous contracts to manage detracted from the Mission Administration Officer’s ability to focus on other important financial and administrative matters.

These control weaknesses significantly increase the level of risk related to these contracts.

By late February 2013, the documentation related to these contracts was found. In reviewing these documents, the Real Property Bureau was unaware that their own contracting official had signed off on these contracts without the responsible contracting officer (for Copenhagen contracts) or more senior officials aware of this approval. This situation identified another control weakness in Real Property’s inability to confirm that their division had authorized this work.

Recommendations:

10. The Real Property Bureau should review its approval process for these contracts and investigate how authorities are distributed within its division. The Bureau should explain how corrective measures will address contract authorizations in the future including controls for the review and oversight.
11. The Chief Financial Officer Branch should clarify, document and communicate accountabilities, and roles and responsibilities for contracting in missions between Headquarters, Regional Service Centres and the mission. As well, the Assistant Deputy Minister of the International Platform Branch should address respective roles and responsibilities between the Real Property Branch, the Regional Service Centre and the Mission, on the management of the Official Residence.
12. The Department should ensure that all contracting files are established and maintained appropriately.

3.0 Assessment of Cause and Impact of Control Weaknesses

Cause

The review of the various financial and administrative processes in the mission indicated significant control weaknesses that expose the Department to the risk of malfeasance. During interviews with LES staff, it was often noted that they had not received appropriate training to carry out their responsibilities effectively. Given the situation, the auditors were impressed by the ability of the Consular Officer and the Property and Materiel Assistant to carry on with the processing of financial transactions in the absence of the Mission Accountant, clear guidance and training.

There was a fundamental lack of knowledge of key financial and administrative controls that should be in place.

• Changes in personnel: The deletion of the Mission Accountant position, the Canada-Based Staff Mission Consular Officer replaced by Locally Engaged Staff Mission Administration Officer, as well as the normal rotation of other Canada-Based Staff, necessitate changes in processes and controls. These staff changes were not planned and implemented to ensure a smooth transition.
• The Mission Administration Officer’s experience was in the field of real property and she was not well-versed in financial management. She had received approximately one week of training prior to being responsible for the financial and administrative duties within the mission. The workload in establishing and managing thirty-five contracts related to the new Official Residence minimized the amount of time that could be devoted to other important financial and administrative duties. This became a bigger issue following the departure of the Mission Consular Officer and the Accountant.
• Key processes were not documented (step-by-step guide) to permit the employees to follow well-designed procedures. In most cases, staff had not received training on areas for which they were now responsible; there was nobody within the mission to turn to for guidance and direction.
• Staff processing financial transactions were awaiting the IMS training that was to be conducted within the week that the auditors were on site. Unfortunately, system failures delayed the delivery of this on-line course.

Impact

These control weaknesses have a significant impact within the mission. Specifically:

• Integrity is called into question when there is no confidence that controls are in place and operating effectively. If cash were missing, it would be very difficult to determine the person responsible.
• The Department does not know if all revenues for legal services are recorded/ deposited into the appropriate bank accounts.
• Management has no assurance that all leave forms have been submitted for leave actually taken.
• Unable to demonstrate sound stewardship with respect to contracting.
• Difficult to assess performance of individuals if they have not received training for their position.

This situation was improving with support from the Berlin Common Service Delivery Point Office as well as the Thames Valley Regional Service Centre. Specialists had been called upon to assist the Mission Administration Officer with some key financial and administrative aspects. The Department provided an on-site, experienced Temporary Duty Mission Consular Officer to train and assist the Mission Administration Officer.  The Mission Administration Officer indicated that this was particularly beneficial.

4.0 Conclusion

There are significant weaknesses with respect to the controls in place over financial and administrative matters in the mission. The Ambassador recognized the control weaknesses and, in some cases, had established priorities with his management team to begin to address them – this is encouraging.

There are significant weaknesses with respect to authorization and tracking of contracting decisions and authorities given by the Real Property Bureau on mission-related renovations and refit contracts.

With the establishment of Berlin as the Common Service Delivery Point for Copenhagen, it is expected that some of these control weaknesses will be rectified. At the time of the auditors on-site work however, there was still uncertainty in the Copenhagen Mission regarding financial and administrative processes between Copenhagen and Berlin. The auditors received a copy of the Annex A to the Service Level Agreement between the Regional Service Centre Europe – Middle East and Africa (RSCEMA), Berlin Common Service Delivery Point and Copenhagen which outlines the responsibilities for the various tasks. The effective date on the document is not indicated but it is to be reviewed and revised as necessary by March 31, 2013.

Appendix A: Management Action Plan

Audit Recommendation 1

The Department should ensure that Copenhagen mission management have the proper training and knowledge for processing transactions that respect the requirements of Section 34 and Section 33 of the Financial Administration Act.

Management Action: This is expected to be resolved with the transition of Copenhagen Financial Operations to Berlin Common Service Delivery Point (CSDP).

Berlin who now approves Section 33 on all Copenhagen payments.

Mission should make sure that managers with Financial authority be trained accordingly if required.

Financial Operations – International (SMFF) will monitor the situation with Berlin.

The Canadian Foreign Service Institute (CFSI) has developed a basic budget training course that will be offered as a pilot and tested to the Copenhagen mission.

Area Responsible: Director, Financial Operations, Domestic and International / Head of Mission – Copenhagen

Expected Completion Date: Complete

Audit Recommendation 2

Processes should be implemented at the Copenhagen Mission to ensure that no transaction without appropriate Section 34 and Section 33 approvals is entered into the Departmental Financial System (IMS) or processed electronically through the local bank.

Management Action: This is resolved with the transition of Copenhagen Financial Operations to the Berlin Common Service Delivery Point (CSDP).

Berlin who now enters all Copenhagen payments in IMS and approves S33 accordingly.

Area Responsible: Not Applicable

Expected Completion Date: Complete

Audit Recommendation 3

The Chief Financial Officer Branch should ensure that all missions are completing and submitting bank reconciliations on a monthly basis. Procedures should be developed and communicated to escalate any issues to the Head of Mission, the Geographic Assistant Deputy Minister as well as within the Finance branch.

Management Action: A process for Bank reconciliation monitoring and escalation is in place.

Financial Operations, Domestic and International (SMF) has reminded finance officers of this responsibility and process.

Area Responsible: Director, Financial Operations, Domestic and International / Director General, Corporate Finance, Planning and Systems Bureau

Expected Completion Date: Complete

Audit Recommendation 4

The Mission should implement all necessary controls to ensure that revenue received from clients is protected, recorded and deposited appropriately.

Management Action: Consular Operations Bureau will review with appropriate Headquarters and mission authorities to ensure proper training, control procedures and signage are developed for the mission over the next 3-6 months and with follow-up to verify proper implementation.

Area Responsible: Director General, Consular Policy and Training / Director General, Consular Operations Bureau

Expected Completion Date: Complete

Audit Recommendation 5

The Chief Financial Officer Branch should review and assess the risk related to the inability to reconcile revenues collected for legal/notary fees. If feasible, a control should be implemented to allow this reconciliation to take place.

Management Action: SMF is aware of the risk related to Consular services.

Better tools are being developed to increase the controls over revenues collected at mission.

The Mission Online Payment System (MOPS) will allow clients to pay for Consular Services by Credit Card. All revenues collected using the MOPS will be deposited at the Receiver General, reconciled and recorded in IMS automatically. This will reduce significantly the amount of cash revenues handled at Missions.

Area Responsible: Director General, Corporate Finance, Planning and Systems Bureau

Expected Completion Date: Complete

Audit Recommendation 6

The Petty Cash Custodian should be provided with guidance/training on how to fulfill her responsibilities.

Management Action: SMF will provide Guidance and/or Training to the petty cash custodian accordingly.

The mission will monitor progress to ensure controls are in place.

Area Responsible: Director, Financial Operations, Domestic and International / Head of Mission - Copenhagen

Expected Completion Date: Complete

Audit Recommendation 7

A member of the Mission management team should be assigned the responsibility for carrying out surprise petty cash counts on a regular basis. Any discrepancies should be immediately reported to the Head of Mission.

Management Action: As per the policy the Mission Administration Officer (MAO) has the responsibility to carry out at least two surprise counts per year.

Area Responsible: Head of Mission - Copenhagen

Expected Completion Date: Complete

Audit Recommendation 8

The Mission Administration Officer (MAO) should develop a process for the appropriate authorization and recording of LES leave. Responsible managers should apply this process on leave for all staff.

Management Action: The Regional Service Centre in London will provide guidance to the MAO on implementing a process for authorization and recording of LES leave.

Area Responsible: Director General, Regional Service Centre, Europe, Middle East and Africa / Head of Mission - Copenhagen

Expected Completion Date: Complete

Audit Recommendation 9

The Chief Financial Officer Branch, in developing the LES Pay System, should ensure functionality for controlling leave is integrated into the system.

Management Action: The LES pay project is well underway and the first roll-out is for London, Dublin and three Baltic Missions. The scope on the project includes an integrated self-service leave management and approval system.

Area Responsible: Director General, Corporate Finance, Planning and Systems Bureau / Director, Mission Client Services

Expected Completion Date: April 2016

Audit Recommendation 10

The Real Property Bureau should review its approval process for these contracts and investigate how authorities are distributed within its division. The Bureau should explain how corrective measures will address contract authorizations in the future including controls for the review and oversight.

Management Action: The Real Property Bureau will review this contracting issue including the current contracting authorities within the bureau and take any necessary action.

Additional controls for review and oversight will be considered to address any gaps found in the process.

Area Responsible: Real Property Bureau

Expected Completion Date: Complete

Audit Recommendation 11

The Chief Financial Officer Branch should clarify, document and communicate accountabilities, and roles and responsibilities for contracting in missions between Headquarters, Regional service Centers and the mission. As well, the Assistant Deputy Minister of the International Platform Branch should address respective roles and responsibilities between the Real Property Branch, the Regional Service Centre and the Mission, on the management of the Official Residence.

Management Action: A regional Contract Review Board is being created through the RSC and will assist the mission in the development of procedures and oversight for contracting in missions.

The Director, Procurement Modernization Initiative (PMI) will continue work on strengthening CFO functional authority in order to clarify roles and strengthen the accountability structure and ensure it is enforced. A review is currently being undertaken to determine the best governance structure for procurement at DFAIT and the support needed. Implementation is expected to commence in early 2013-14. This work will include developing a DFAIT contracting framework and supporting policies to further clarify roles and accountabilities.

Area Responsible: ADM, International Platform Branch

Real Property Bureau

Assistant Deputy Minister, Corporate Finance and Operations

Director General, Client Relations and Mission Operations Bureau

Director, Procurement Modernization Initiative / Director, Contracting Policy, Monitoring and Operations

Expected Completion Date: Complete

Audit Recommendation 12

The Department should ensure that all contracting files are established and maintained appropriately

Management Action: The Director, Procurement Modernisation Initiative (PMI) will be reviewing and strengthening the overall monitoring and oversight framework. As part of this, a review of the departmental, regional and mission contract review boards will be done. Record management procedures to ensure consistent storage of all procurement records will be established.

Area Responsible: Director General, Corporate Procurement, Asset Management and National Accommodations

Director, Procurement Modernization Initiative / Director, Contracting Policy, Monitoring and Operations

Expected Completion Date: Complete