Audit of management practices of missions - Madrid

November 2017

Executive summary

Global Affairs Canada manages Canada’s International Platform Branch — a global network of 179 Missions in 109 countries that supports the international work of Global Affairs Canada and 37 partner departments, agencies and co-locators^{Footnote 1}. Administrative activities that support the Department’s Missions require effective and efficient management practices to help ensure sound stewardship of resources.

Rationale for this audit

In 2015, the Department initiated an internal investigation into the Canadian Embassy in Haiti, and found that fraudulent schemes had been put in place by locally engaged staff that resulted in estimated government losses of $1.7 million. Given the findings in Haiti, the Deputy Minister of Foreign Affairs requested a series of management practices audits of selected Missions to determine whether similar issues could be taking place at other Canadian Missions abroad.

The Office of the Chief Audit Executive conducted a risk assessment to identify those Missions susceptible to higher levels of fraud risk and therefore were selected for audit. A first phase of Mission audits was initiated in 2016-17. As part of a second phase initiated in 2017-18, five more Missions that operate in higher fraud risk environments were selected for audit. Madrid was identified as a lower fraud risk Mission and was therefore selected for comparative purposes.

What was examined

The objective of this audit was to provide assurance that sound management practices and effective controls are in place to ensure good stewardship of resources at the Madrid Mission to support the achievement of Global Affairs Canada objectives. This audit examined the Mission’s management practices related to the Management and Consular Services Program with regard to oversight and monitoring, procurement, asset management, and human resources between April 2015 and August 2017.

What was found

The audit team found that monitoring of expenditures and forecasting activities are performed and discussed regularly by Mission management. The planning of property maintenance is well managed. Furthermore, it was found that vehicle usage, repairs and fuel consumption are regularly tracked. Moreover, the Mission had properly used its privileges by claiming the exemptions for the Spanish value-added tax on applicable expenditures.

The audit team noted some instances where the appropriate approach to procuring goods and services was not selected. For example, sole source procurement was done without proper justification and preferred vendors were used for recurring purchases without a contract. The audit team also found that financial oversight to confirm the quantity and quality of goods and services received was not always performed. Similarly, there was a lack of oversight and formal pre-approval with regards to overtime incurred by the locally engaged staff. Overtime costs claimed by the driver and program staff were found to be high for 2015-16 and 2016-17; however, the Mission’s overtime budget for the current fiscal year was reduced significantly.

Instances of a lack of effective controls were found surrounding petty cash, consular revenues and the Distressed Canadian Fund, a consular fund to aid Canadians in distress, which can create opportunities for misuse of funds. The audit team found that the items were adequately traced to the inventory lists; however, the lists did not always track the value, condition or quantity of the asset and it was not up to date.

Finally, one of the staffing actions reviewed, which was conducted in 2015, for a locally engaged staff was not conducted in a fair, open and transparent manner, and personnel files for locally engaged staff were not properly documented.

Conclusion

The audit concluded that sound management practices and effective controls are generally in place to ensure good stewardship of resources at the Madrid Mission to support the achievement of Global Affairs Canada objectives. Effective management controls are in place in the areas of planning and budgeting, and monitoring of vehicle usage. However, there is a lack of management oversight and monitoring in the areas of local procurement, asset management, and human resources and staffing of locally engaged staff.

Recommendations are detailed in Section 5 of this report.

Statement of Conformance

In my professional judgment as Chief Audit Executive, this audit was conducted in conformance with the Treasury Board Policy and Directive on Internal Audit, as supported by the results of the quality assurance and improvement program. Sufficient and appropriate audit procedures were conducted, and evidence gathered, to support the accuracy of the findings and conclusion in this report, and to provide an audit level of assurance. The findings and conclusion 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 and are only applicable to the entity examined and for the scope and time period covered by the audit.

1. Background

Global Affairs Canada (the Department) manages Canada’s diplomatic and consular relations, promotes international trade and leads Canada’s international development and humanitarian assistance programs. It also manages Canada’s International Platform Branch — a global network of 179 Missions in 109 countries that supports the international work of Global Affairs Canada and 37 partner departments, agencies and co-locators.^{Footnote 2} According to the 2016-17 Global Affairs Canada Departmental Results Report, $931 million was spent to operate and support the Missions. Administrative activities that support the Department’s Missions require effective and efficient management practices to help ensure sound stewardship of resources.

In 2015, the Department initiated an internal investigation into the Canadian Embassy in Haiti, and found that fraudulent schemes had been put in place by locally engaged staff that resulted in estimated government losses of $1.7 million. Given the findings in Haiti, the Deputy Minister of Foreign Affairs requested a series of management practice audits of selected Missions to determine whether similar issues could be taking place at other Canadian embassies abroad.

The Office of the Chief Audit Executive conducted a risk assessment to identify those Missions susceptible to higher levels of fraud risk and therefore, were selected for audit. The following factors were considered:

• complexity of the Mission in terms of the number and kinds of services provided;
• size of the Mission, including staff complement and footprint;
• the Mission’s budget for administrative services;
• the Mission hardship level^{Footnote 3};
• nature of the host country’s banking system;
• the Mission’s accounts payable profile;
• the Mission’s expenditure trends; and
• Transparency International’s rating of the host country’s corruption perception index.

As a result of this work, and in consultation with senior officials in the Department, a first phase of Mission audits was initiated in 2016-17 and five Missions that operate in higher fraud risk environments were selected for audit. These were: Abuja (Nigeria); Algiers (Algeria); Moscow (Russia); Nairobi (Kenya); and New Delhi (India). An additional Mission that operates in a lower fraud risk environment, Seoul (South Korea), was selected for audit for comparative purposes.

As part of a second phase of Mission audits initiated in 2017-18, five more Missions that operate in higher fraud risk environments were selected for audit. These were: Amman (Jordan); Cairo (Egypt); Jakarta (Indonesia); Kingston (Jamaica); and Sao Paulo (Brazil). An additional Mission that operates in a lower fraud risk environment, Madrid (Spain), was selected for comparative purposes.

The Embassy of Canada in Madrid

Madrid is the capital of Spain and is the country’s largest city. Spain is one of Canada’s most important like-minded allies in Europe and one of Canada’s strongest allies in the European Union on issues of significant importance to Canada, including the ratification of the Canada-European Union Comprehensive Economic and Trade Agreement (CETA). Spain is an important source of Foreign Direct Investment for Canada as well as a popular and stable destination for Canadian direct investment abroad. ^{Footnote 4} Further, Spain is one of the top destinations for Canadian travellers.^{Footnote 5} Spain is a reliable partner in promoting democratic values and human rights within a multilateral framework.^{Footnote 6}

The Embassy of Canada (the Mission) in Madrid (Spain) is a medium-sized mission comprised of six Canada-based staff (CBS) and 21 locally engaged staff (LES), for a total of 27 employees. The Mission composition includes the following programs: Management and Consular Services; Trade; Development; Foreign Policy and Diplomacy Service; and Security and Emergency Management. There are no representatives from federal partners in Madrid. The Mission is responsible for the Consulate in Barcelona (one CBS and four LES) and the Consulate headed by an Honorary Consul in Malaga (Spain). The Head of Mission (HOM) is accredited to Andorra.

Common Services

The Common Services section at the Canadian Mission in Madrid provides administrative support to the Mission’s programs and is responsible for all financial transactions and human resource activities. Accountability and responsibility for the Common Services section are held by the HOM. Up until July 2017, the Madrid Mission received administrative support from the Common Service Delivery Point (CSDP) in Rome. Subsequently, support was transferred to the CSDP in London which provides financial support to nine missions across Europe, including the Embassy of Canada in Madrid and the Consulate in Barcelona.

The Common Services section is managed by a Management and Consular Officer (MCO) at the FS-03 level. The Program consists of Finance, Human Resources, and Property and Material Management. The MCO is responsible for one CBS and eight LES in the Common Services and Consular Programs. The Mission’s Common Services, and Property and Material expenditures increased from 2013-14 to 2015-16 and decreased for 2016-17, as shown in Table 1 below.

Source: FAS Expenditures Report as at June 8, 2017

The Property and Material Management section is managed by an LE-08 Common Services Management Officer and supported by two LES staff. This section is responsible for the Chancery, the Official Residence (OR) and the Staff Quarters (SQs), as well as transportation using the Mission’s vehicles. The OR is the only Crown-owned property; the Chancery is leased to the Crown. Since the summer of 2016, all SQs in Madrid and Barcelona are under private-lease arrangements. Details on the Mission’s inventory of property and vehicles are shown in Table 2 below.

Source: Real Property: PRIME database; Vehicles: 2017 Mission Inventory

Consular Services

Spain is among the top countries visited by Canadians; it is the fifth most frequent European travel destination and the tenth worldwide.^{Footnote 7} Passport theft is an issue in Spain; it has the second highest number of stolen Canadian passports.^{Footnote 8} The Madrid Mission provides consular services and assistance to Canadians. The Consular section is managed by the MCO who is supported by an LE-09 Consular Officer, and two LE-06 Consular Assistants. The Consular section of the Consulate in Barcelona is supported by an LE-06 Consular Assistant who reports directly to Madrid. The Consulate headed by an Hononary Consul in Malaga also reports to the Madrid Mission. Both Consulates provide assistance in emergency situations and are managed by Madrid. The Consulate in Barcelona issues both temporary passports and emergency travel documents; the Consulate in Malaga only issues emergency travel documents. As part of this service, Madrid is responsible for collecting, safeguarding, recording and depositing consular fees in a timely manner.

Appendix A shows the organizational chart for the Management and Consular Services Program in the Madrid Mission.

2. Audit objective and scope

The objective of this audit was to provide assurance that sound management practices and effective controls are in place to ensure good stewardship of resources at the Madrid Mission to support the achievement of Global Affairs Canada objectives. The audit team examined management practices related to the Management and Consular Services Program at the Mission, specifically in the areas of human resources, local procurement, and asset management. Detailed audit criteria are listed in Appendix B.

Audit results were derived from the examination of documentation, data analytics of Mission expenditures and walk-throughs of key processes within common services, property and material management, and consular services. The audit team conducted work on-site at the Mission from July 31 to August 11, 2017. A review of a sample of contracts, expenditures, payroll transactions, overtime payments, and staffing actions was undertaken, and the inventory system was examined. Interviews were conducted with the HOM, CBS management and key LES within the Management and Consular Services Program, as well as staff at Headquarters (HQ) and the CSDPs in London and in Rome. The audit team performed on-site visits to the Official Residence, local vendors, the Mission’s bank and one privately-leased SQ. In addition, the audit team met with four like-minded Missions - Australia, Germany, Switzerland and United Kingdom - to gather information regarding their challenges and good practices.

3. Observations

This section sets out key findings and observations, divided into six general themes: accountability and oversight; planning and budgeting; monitoring; local procurement; asset management; and human resources and LES staffing.

3.1 Accountability and oversight

It was expected that Mission and HQ management would exercise effective oversight of the Mission’s activities and expenditures to ensure solid stewardship of mission resources. The audit examined roles and responsibilities of mission staff in the management of the Management and Consular Services Program.

Accountability in the Mission rests with the HOM who reports to the Assistant Deputy Minister of the Europe, Middle East and Maghreb (EGM) Branch at HQ. HQ has a role in supporting and enforcing HOM accountability, including the provision of Common and Consular Services. Specifically, the MCO reports to the HOM and is also accountable to the International Platform Branch (ACM). At the time of the audit, the HOM had been posted to Madrid for a year. During this time, the Mission transitioned its financial services from the CSDP in Rome to the CSDP in London. At the time of the audit, service expectations between the Madrid Mission and the CSDP in London were not yet formally established in a Service Level Agreement (SLA). The previous SLA signed with the former CSDP in Rome remained in place.

Two key oversight functions expected to be in place at Missions are the Committee on Mission Management (CMM) which oversees management and administrative matters, and the Contract Review Board (CRB) which oversees contracting practices. The audit team found that the CMM appropriately exercises its oversight function and meets regularly to discuss a range of issues, including budgets, planning, procurement, asset management and maintenance, and human resources.

A Mission CRB is in place in Madrid and is composed of three voting members: the MCO, the Political Program Manager and the CBS Trade Commissioner. Madrid is not integrated into the Regional CRB that is set up by the CSDP in London for its client missions, and neither is Barcelona. The Mission CRB members review and approve contract proposals for both the Madrid and Barcelona Missions. According to departmental Terms of Reference for the CRB, members should withdraw from reviewing contract proposals for their own program and should recuse themselves from voting. Similarly, any other matter in which the CRB member would have a conflict of interest should be declared to the Mission CRB Chairperson and the member should withdraw from reviewing the material. However, the audit team found that Mission CRB members still review and approve contract proposals that involve their own program. The Mission employs six CBS, [REDACTED] one of them was newly appointed to the Mission CRB in August 2017. This creates a risk for real or perceived conflicts of interest to arise.

The audit team noted that HOM and MCO accountabilities were documented through performance management agreements. However, the audit team found that LES roles and responsibilities are not clearly defined, communicated and understood. Roles and responsibilities outlined in job descriptions were outdated and did not reflect actual roles and responsibilities. As a result, key elements of oversight were unfulfilled, such as in the areas of asset management and human resources, as described in Sections 3.5 and 3.6 of this report. The audit team was told that the job descriptions for LES were to be updated after signing the Service Level Agreement with CSDP-London.

Further, the audit team observed that the Mission operated in a tense office environment resulting in poor staff morale. The audit team found evidence that Mission employees were unsatisfied with their workload and responsibilities, and observed difficulties with regard to internal communication. This is important because friction amongst staff, both CBS and LES, can lead to significant challenges. As the causal factors of fraud are pressure, opportunity and rationalization and given the weaknesses in controls identified in this report, it is essential to address the morale issue and restore a respectful workplace.

3.2 Planning and budgeting

The audit team expected that planning and budgeting would be based on needs and there would be a rationale for planned activities and forecasted expenditures. The Mission uses Strategia, the corporate integrated planning and reporting tool, for its integrated annual planning exercise, as well as FINSTAT (Financial Status Report) to assist them in forecasting the budget for both Madrid and Barcelona. These tools ensure that the Mission’s financial planning and budgeting align with departmental planning commitments. A more detailed breakdown of planned activities and expenditures is prepared to support day-to-day activities of the Mission, and forms the basis for the budget outlined in Strategia. This includes a detailed forecast for Common Services budget items. Moreover, procurement, contracting and property maintenance are all items discussed at CMM meetings.

The audit team found the planning and budgeting of property maintenance and procurement to be well managed. Given the privately-leased SQ model adopted in Madrid, there are limited property expenses and few items to be procured. Planned budgets and allocated resources for property maintenance were relatively stable for the past three years, as outlined in two departmental planning documents: Strategia; and the Mission Property Management Plan in which maintenance and repairs are identified. In addition, a calendar is prepared for property maintenance along with details on the allocation of work to property and material staff comprising internal and external resources. Also, the Mission plans and tracks services required by using a list of contracts that indicates start and end dates, contract value and renewal method.

The Mission has two vehicles for which individual usage and maintenance logs are maintained and completed on a monthly basis. Given the regular tracking and reasonable level of costs incurred as described in Section 3.3 of this report, not having a formal fleet management plan appears to be justified.

3.3 Monitoring

It was expected that monitoring activities would be performed to provide general information on Mission compliance with Government of Canada and Department specific policies and procedures.

Procurement

The audit team expected to find a monitoring and reporting process to support procurement activities in compliance with relevant policies and legislative requirements, and to achieve value for money.

The audit team found that Mission management is provided with a list of contracts that includes start and end date, contract value and renewal method, which helps to track and monitor information for procurement. The audit team sampled 33 procurement transactions, and found that financial monitoring executed by CBS requires improvement. While processes exist to confirm receipt of goods (specifically on-site confirmations and email or phoned-in notifications) and quality of services rendered (specifically an invoice stamp and signature confirming services rendered), a review of the sample demonstrated that these practices were not consistently applied. The confirmation of goods received and services rendered for 11 of the 33 procurement transactions was not completed on invoices or held on file.  Consequently, procurement procedures and policies were not always followed. At the time of the audit, mission management recognized these weaknesses. Since procurement monitoring is not strict, there is a risk of non-compliance with procurement procedures and an increased opportunity for misappropriation of funds.

In addition, the audit team found that, due to financial difficulties experienced by one contractor, the mission was paying its invoices directly to the bank rather than to the contractor, to ensure payment of employees’ salaries. Should the company continue to experience financial difficulties, the Mission risks interruption of essential services provided by this contractor. The audit team found no mitigation for this risk.

Overtime

The audit team expected to find overtime reports and trend analyses prepared by management, and processes in place to assess reasonability of overtime payments. One area of concern to the audit team was the monitoring of overtime. The audit team noted that monthly reports are produced to monitor the overtime budget, including overtime usage, and to inform Mission Management at CMM meetings. The audit team found that there is no formal pre-approval for LES overtime. Employees submit a timesheet after the fact and overtime is approved by CBS managers, sometimes months later.

In addition, the audit team found that the greatest amount of overtime was claimed by the HOM driver and by the Foreign Policy and Diplomacy Service and Trade Programs in 2015-2016. In 2016-17, the HOM driver earned overtime pay representing almost 20% of his salary, compared to 40% for 2015-16^{Footnote 9}. The audit team noted that because the current HOM only uses the driver for travel on official business for events outside Madrid, the driver incurs overtime as this often occurs after normal hours of work. The audit team noted, however, that the Mission’s budget for overtime was reduced since 2016-17 and therefore Mission staff overtime decreased accordingly.

Vehicle Usage

The audit team expected that monitoring and reporting of asset management activities take place to inform decision-making. The audit team noted a good practice in the Madrid Mission, the driver and contractor that use the Mission vehicles record their usage in a log. With regard to the monitoring of vehicles, it was found that there is ongoing review of vehicle logs to assess reasonability of usage in comparison to gas consumption. The review of usage logs for a sample of months for both vehicles demonstrated that usage (trips and kilometers), repairs, and fuel consumption are regularly tracked. The review of vehicle maintenance logs showed that repairs and maintenance work appears to be reasonable. Expenditures since 2014-2015 indicated that there were no significant spikes in usage and maintenance costs and they were reasonable in comparison to other Common Services expenditures.

In addition, the audit team noted that the Mission retains all documents, and monitors and oversees the processes to acquire and return diplomatic licence plates issued to CBS staff.

3.4 Local procurement

The audit team expected that procurement of goods and services would be in compliance with the Treasury Board Contracting Policy and would achieve the best value for money. The audit team examined the mechanisms and tools in place to procure goods and services at the Mission. A sample of 33 procurement transactions and contracts was reviewed by the audit team, including purchases made with acquisition cards, from April 2015 to July 2017.

Procurement and Contract Management

Until the end of July 2017, the Mission’s financial transactions were processed by the CSDP in Rome. At the time of the audit, the Mission had just transitioned to the CSDP in London (July 24, 2017). Segregation of duties related to procurement was appropriately carried out, as payment authority (Section 33 of the Financial Administration Act (FAA)) is under the responsibility of the CSDP, and procurement approval (Section 32 of the FAA) and certification of receipt of goods or services (Section 34 of the FAA) are under the Mission’s responsibility.

The audit team found that all contracts and transactions were linked to a plan or a needs assessment. However, some issues were found with regard to procurement administration. In some instances, the most appropriate approach to procuring goods or services was not chosen. This included sole source procurement without proper justification, and vendors used exclusively without a contract for recurring purchases. For example, the Mission used preferred vendors for language training, legal services and other services at the OR with no documented rationale rather than obtaining competitive quotes prior to initiating transactions. Not using the most appropriate contracting method may result in not receiving best value for money.

A review of ten local contracts revealed two instances of non-compliance with contracting regulations and policies. In these instances, contracts were signed after work started, and an invoice was submitted for work completed prior to the signature of the contract.

The audit team found that for 15 procurement transactions and purchases made with acquisition cards, no formal pre-approval was requested before initiating the purchase of the goods or services. The mission has indicated that it is not customary to request written evidence for procurement approval if there is no purchase order in place. A good practice identified in Madrid is that all vendors are paid electronically through bank transfers, which reduces the risk of loss.

Value-Added Tax

It was expected that the Madrid Mission would be operating in accordance with the procedures related to exemption and reimbursement of the Value-Added Tax (VAT) to ensure that it was not paid for exempted goods and services.

The Mission is exempted from the VAT by the Spanish Government for contracted services and for real estate properties (purchased or leased), including for services provided to the OR and the Chancery, and for construction work. The Mission is also refunded for the VAT for goods required for official use, office supplies and for utilities and services. This exemption of VAT was formalized in 2007 through a bilateral agreement between the Spanish and Canadian Governments.

The audit team reviewed a sample of purchases and contracted services subject to the VAT exemption or refund and found that the Mission properly used its privileges by claiming the VAT on applicable expenditures or by having it exempted from applicable invoices.

3.5 Asset management

To examine this area, the audit team focused on the management of inventory, property maintenance and disposal of assets, vehicles, petty cash and consular revenues.

Inventory Control and Disposal

The audit team expected that once an asset was purchased, it would be recorded, safeguarded, tracked through its lifecycle and disposed of in accordance with policies and procedures. The Mission has an inventory of properties that includes Crown-owned and leased buildings, as well as privately-leased buildings tracked in the Physical Resources Information – Mission Environment (PRIME). The Mission also has an inventory of vehicles, tracked in the Financial and Administration System (FAS) from purchase to disposal. Additionally, the Mission has six types of asset inventory repositories, such as information technology (IT) equipment, fine art, furniture and assets. The Mission also keeps an inventory of office supplies, but no repository exists for this type of asset.

The audit team found that the items at both the Chancery and the Official Residence were adequately traced to the inventory lists. Although the Mission does not use the corporate inventory tracking system, Radio Frequency Identification (RFID), the Chancery assets were tracked using Excel Spreadsheets. It was noted, however, that the spreadsheets did not always track the value, condition or quantity of the asset and were not up to date. It was also noted that inventory updates are performed infrequently. In addition, the items in storage at the Chancery were not adequately secured.

The audit team examined the disposal of two of the Mission’s vehicles and determined that the disposal process was performed in accordance with departmental policies and procedures. The audit team also examined the disposal of materiel assets. The disposal process performed by the Mission was in line with departmental policies and procedures. However, it was noted that unused assets were stored in the basement of the Official Residence rather than being disposed of. Moreover, for the disposal of other assets, the audit team found that while details were provided about the value and age of the items, there was little evidence about the disposal of items as the disposal was not documented in departmental forms, as required.

Fleet Management

The audit team expected that the Mission would manage its fleet in accordance with the Department’s Mission Fleet Management Guidelines. The audit team noted that the HOM uses a personal vehicle to drive to the Chancery, reducing the usage of the HOM dedicated vehicle. The audit team observed that controls are in place for vehicle fleet management, such as vehicle records and logs used to track and monitor maintenance and repairs, and vehicle usage and fuel consumption. Given that maintenance and service is conducted frequently and the low usage of vehicles by the Mission, the audit team found this practice reasonable.

Petty Cash

The audit team expected that the Mission would adequately safeguard cash assets in accordance with The Mission has [REDACTED] petty cash for the Common Services section [REDACTED]. Petty cash funds were well stored, reconciliations were performed by the Finance coordinator, and payments for reimbursement were found to be supported and approved by the appropriate person.

However, departmental procedures require that regular petty cash counts and random checks be performed by Mission management. While LES are responsible for [REDACTED] petty cash, the audit team noted that CBS did not carry out their monitoring function as they did not perform regular counts and random checks. While the CBS acknowledged this obligation, they expressed discomfort in performing these functions as they stated the LES petty cash custodians would feel undermined and this might aggravate the already tense work environment. The Mission is not currently adequately safeguarding petty cash.

In addition to petty cash, the Madrid Mission has another asset, the Distressed Canadian Fund, used for consular emergencies. [REDACTED] Madrid is also responsible for the Distressed Canadian Fund held in the Barcelona Mission. [REDACTED] The audit team noted that no counts and no random checks are performed in the Spain missions with regard to these funds. The audit team was informed that the funds from the Distressed Canadian Fund were used by a CBS in 2015 for a purpose other than that for which they were intended. They were borrowed over a weekend and returned the following week. The incident was reported to the MCO who then notified the HOM at the time. No corrective actions were taken with regard to cash management practices surrounding consular revenues since the incident was reported.

Consular Revenues

The audit team expected that fees collected for consular services would be properly accounted for, reconciled, safeguarded and deposited as required. The Madrid Mission collects consular fees for issuing passports and emergency travel documents, as well as for providing notarial services. The Mission also collects fees on behalf of Immigration, Refugees and Citizenship Canada (IRCC) for services, such as issuing citizenship certificates and for authentication of documents.

The audit team found a number of control weaknesses in the management of consular revenues. Although the cash register issues receipts, and copies of customer receipts for travel documents are kept, receipts for notarial fees were destroyed. In addition, notarial transactions are not recorded in the Consular Management and Operations System (COSMOS), making reconciliations difficult.

In Madrid, the majority of revenues are received by credit cards and postal money orders. Only a small amount of cash is collected. The Mission performed weekly transfers of fees collected and reconciliations using the transaction log completed on an ongoing basis, rather than transferring fees collected on a daily basis and completing a Daily Summary Report signed by the MCO to certify the amount collected. Although the Mission did not follow departmental procedures and given the small amount of cash collected, risks associated with cash handling are reduced.

Furthermore, the audit team observed the count of travel documents and reconciled them to the IRCC list. However, there is no mechanism in place to count or reconcile travel documents at the Barcelona Mission. While Barcelona receives consular travel documents from Madrid’s inventory, Barcelona sends its inventory directly to IRCC and does not provide this information to Madrid.

3.6 Human Resources and Locally Engaged Staff staffing

The audit team examined six staffing files to determine whether adequate human resource management practices and controls were in place. The auditors expected that staffing actions undertaken during the audit period would be in compliance with relevant policies and procedures, be conducted in a fair, open and transparent manner, and that staffing files would contain the required documentation.

The Mission is responsible for LES human resource staffing for both Madrid and Barcelona. Human resources needs are identified by program managers and communicated to the MCO or the HR coordinator. Discussions regarding staffing needs also occur at the CMM meetings. The audit team noted that HR planning activities are documented directly in Strategia rather than in a formal HR staffing plan. The Mission’s 2015-16 and 2016-2017 HR plans indicated that less than ten staffing actions took place in both Madrid and Barcelona, including emergency staffing. The audit team found this practice reasonable, given the low LES turnover and consequent limited HR staffing activities.

However, the review of documents showed that the Programs’ staffing needs are not included in the HR plans. An HR plan that forecasts the Programs’ human resources requirements and that includes other components, such as training and succession planning, could better inform decision-making by senior management to meet the Madrid and Barcelona Missions’ operational needs.

The audit team found that one of six staffing actions examined was not conducted in a fair, open and transparent manner. This staffing action, which was conducted in 2015, is related to the hiring of a locally engaged staff at the most senior level. In this case, the CSDP in London had advised the Mission of a candidate that did not meet the essential criteria. However, the Mission retained this candidate in the process. The Mission disregarded the advice and no justification was documented as to why they were included. This action compromised the fairness, openness and transparency of the process. As HR staffing is a sub-delegated authority, non-compliance can affect the hiring manager’s authority.

A sample of personnel files of key LES was reviewed to ensure retention of required documentation, such as job descriptions, performance agreements and any documentation related to disciplinary actions. The audit team found that the personnel files reviewed were not properly documented. Key mandatory documents were not found on personnel files, such as performance management agreements and training attendance.

4. Conclusion

The audit concluded that sound management practices and effective controls are generally in place to ensure good stewardship of resources at the Madrid Mission to support the achievement of Global Affairs Canada objectives. Effective management controls are in place in the areas of planning and budgeting, and monitoring of vehicle usage. However, there is a lack of management oversight and monitoring in the areas of local procurement, asset management, and human resources and staffing of locally engaged staff. The audit team verbally debriefed the HOM and the MCO after completion of work on-site.

5. Recommendations

Recommendations to the Madrid Mission:

1. The Head of Mission should ensure that responsibilities and accountabilities of Canada-based staff and locally engaged staff are clear and communicated, consequences of poor performance are reflected in performance appraisals, and corrective actions taken when required.
2. The Head of Mission should ensure the Mission joins the Regional Contract Review Board to ensure the oversight structure for the Mission’s contracting processes is objective and independent.
3. The Head of Mission should take concrete measures to promote a healthy and respectful workplace for CBS and LES.
4. The Head of Mission should strengthen oversight, control and monitoring practices related to common services to ensure:
   • procurement and contracting practices comply with regulations,
   • consular revenues and cash management practices comply with departmental policies and procedures;
   • proper management of the inventory and disposal of assets is conducted;
   • employees’ overtime is managed according to applicable policies and guidelines; and
   • corrective actions are taken when non-compliance is detected.
5. The Head of Mission should ensure a comprehensive human resources plan is prepared to better meet the needs of the Mission; and that due process is followed in staffing locally engaged staff positions, to ensure openness, transparency and fairness.

Recommendations to Headquarters:

1. The Assistant Deputy Minister, International Platform Branch, in collaboration with the Assistant Deputy Minister and Chief Financial Officer, Corporate Planning, Finance and Information Technology Branch, should ensure that Service Level Agreements are signed between the Mission and its assigned Common Service Delivery Point.
2. The Assistant Deputy Minister, Human Resources Branch, should be involved in the Mission’s staffing of senior locally engaged staff positions, to ensure openness, transparency and fairness.

Appendix A: Organizational chart for the management and consular services program

Appendix B: About the audit

Objective

The objective of this audit was to provide assurance that sound management practices and effective controls are in place to ensure good stewardship of resources at the Madrid Mission to support the achievement of Global Affairs Canada objectives.

Scope

The scope of the audit included those management practices and controls in place to support the Madrid Mission operations. More specifically, the scope included the following:

• Management practices at the Mission including the roles of staff in the Finance, Property and Material Management, and Human Resource sections as well as Consular Program;
• 2014-15 to 2017-18 expenditures of the Mission with a focus on items under the Common Services and Property budgets;
• Management of assets in Madrid with a focus on real property, vehicles, machinery and equipment, material inventory and cash; and
• Staffing processes relating to LES.

This audit focused on management practices of the Madrid mission, including the support it receives from its CSDP. The audit did not, however, include an assessment of the operations of the CSDP directly.

A sample of files and transactions were tested from activities that took place from 2015-16 to 2016-17, as shown in Table 3.

Criteria

Criteria were developed based on a detailed risk assessment.

Criterion 1: Adequate and effective oversight and accountability are in place to support stewardship of Mission resources.

• 1.1 Management exercises effective oversight of procurement, asset management and human resource activities.
• 1.2 Authorities and accountabilities for procurement, asset management and human resources are clear, communicated and understood.
• 1.3 Planning processes are in place for procurement, asset management and human resources, which consider needs, asset life cycle, and resources.
• 1.4 Monitoring and reporting of procurement, asset management and human resource activities take place to inform decision-making.

Criterion 2: Sound management practices and effective controls are in place to ensure stewardship of mission resources and compliance with relevant Government of Canada regulations and policies.

• 2.1 Effective controls are in place to ensure that procurement of goods and services comply with relevant policies and legislative requirements and achieve value for money.
• 2.2 Effective controls are in place to ensure that procurement expenditures are accurate, appropriate, and legitimate.
• 2.3 Inventory control and asset management practices are adequate and appropriate.
• 2.4 Cash is managed in accordance with relevant policies and legislative requirements.
• 2.5 LES staffing actions comply with relevant policies and legislative requirements, are fair, open and transparent.
• 2.6 LES salaries and overtime payments are accurate, complete and CBS overtime compensation is reasonable.

Approach and Methodology

In order to conclude on the above criteria, and based on identified and assessed key risks and internal controls associated with the related business processes, the audit methodology included, but was not limited to the following:

• Documentation review (budgets, business plans in Strategia, property management plans etc.);
• Walkthrough of key common services, property and material, and consular processes;
• Data analytics of Management and Consular Services Program expenditures;
• File testing (contracts and expenditures relating to Common Services, payroll, overtime costs and staffing actions);
• Interviews (Head of Mission, CBS management and key LES of Management and Consular Services Program, relevant employees at HQ, and two Common Service Delivery Points (CSDP));
• Inventory testing;
• Petty cash counts;
• On-site examination of Chancery, Official Residence and one Staff Quarters;
• Benchmarking with like-minded Missions;
• Visits to a sample of local vendors; and
• Visit to Mission’s bank.

Appendix C: Management action plan

Appendix D: Acronyms

ACM

International Platform Branch

CBS

Canada-based staff

CMM

Committee on Mission Management

CRB

Contract Review Board

CSDP

Common Service Delivery Point

FAA

Financial Administration Act

FAS

Finance and Administration System

HOM

Head of Mission

HQ

Headquarters

HR

Human Resources

IT

Information Technology

LES

Locally Engaged Staff

MCO

Management and Consular Officer

PRIME

Physical Resources Information - Mission Environment

SLA

Service Level Agreement

SQ

Staff Quarters