Audit of Management Practices of Missions - Addis Ababa

Global Affairs Canada Office of the Chief Audit Executive

Tabling Date
June 2019

Acronyms and Symbols

ADM

Assistant Deputy Minister

CS

Common Services

CBS

Canada-based staff

CSDP

Common Service Delivery Point

CMM

Committee on Mission Management

DMCO

Deputy Management and Consular Officer

FAA

Financial Administration Act

FAS

Finance and Administration System

FINSTAT

Financial Status report

HOM

Head of Mission

HQ

Headquarters

LES

Locally Engaged Staff

LESMCB

Locally Engaged Staff – Management Consultation Board

MCO

Management and Consular Officer

PRIME

Physical Resources Information - Mission Environment

RCRB

Regional Contract Review Board

ToR

Terms of Reference

SQ

Staff Quarter

WGM

Sub-Saharan Africa Branch

Executive Summary

In accordance with Global Affairs Canada‘s approved 2018-2019 Risk-Based Audit Plan, the Office of the Chief Audit Executive conducted an audit of Management Practices of Missions – Addis Ababa.  The objective of this audit was to provide assurance that sound management practices and effective controls were in place to ensure good stewardship of resources at the Addis Ababa Mission to support the achievement of Global Affairs Canada objectives.

Why it is important

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 — a global network of 178 Missions in 110 countries that supports the international work of Global Affairs Canada and 37 partner departments, agencies and co-locators. According to the Global Affairs Canada Departmental Results Report 2017-2018, $969M was spent to operate and support the Missions by providing a variety of services. Therefore, proper controls and strong management practices are critical to ensure sound stewardship of resources.

What was examined

This audit examined the Mission’s management practices related to the Management and Consular Services Program and other programs at the Mission, with regard to planning and budgeting, oversight and monitoring, local procurement, asset management and human resources, between April 2016 and October 2018.

What was found

The audit concluded that sound management practices and effective controls are not in place to ensure good stewardship of resources at the Addis Ababa Mission to support the achievement of Global Affairs Canada objectives.

The audit team found that there were significant weaknesses in the management practices and controls in place to ensure sound stewardship of resources at the Addis Ababa Mission. There is a lack of management oversight and monitoring in the areas of local procurement, asset management, inventory management, and human resources. Multiple processes established by Headquarters relating to finance, procurement, contracting and human resources are not consistently followed and some key controls are not in place or not being followed.

Recommendations

• 1. The Head of Mission should strengthen key management oversight mechanisms, particularly the use of the Committee on Mission Management as a venue for discussion and decisions on key issues and priorities by the management team.
• 2. The Head of Mission should implement rigorous planning and budgeting processes at the Mission, such as a zero-based budgeting approach, to ensure budget requests and subsequent allocations align to actual current needs and plans.
• 3. The Head of Mission should implement monitoring practices over core operational activities designed to identify issues with the management of Mission procurement, finance, assets, and human resources, and to ensure compliance to departmental policies and procedures.
• 4. The Head of Mission should take measures to strengthen the Mission’s procurement process from initiation to payment by ensuring that:
  • Initiation of procurement transactions are based on Mission planning and needs, and are pre-approved;
  • Proper procurement mechanisms are in place and utilized according to departmental policies and procedures;
  • Invoices submitted for payment approval by staff include sufficient supporting documentation; and,
  • Mission management exercise the required due diligence to confirm goods are received and services rendered prior to approving for payment.
• 5. The Head of Mission should:
  • Consult with the real property group in Headquarters regarding the constructed Tukul and Canteen to ensure the integration of the structures into established property life cycle management, maintenance, and safety processes and procedures;
  • Implement a strong system of controls and monitoring over vehicle and generator fuel from purchase to consumption, with significant involvement from Common Services management;
  • Implement an inventory management tool for supplies and goods which actively tracks the location, movement, and condition of individual goods, as well as the utilization and balance of supplies kept in stock; and
  • Communicate proper petty cash account procedures across the Mission, and strengthen monitoring of these accounts.
• 6. The Head of Mission should take appropriate measures to enhance compliance of the Mission’s human resource activities with the Department’s directives and procedures, especially in the area of documenting and maintaining staffing and personnel files.

Statement of Conformance

In my professional judgment as Chief Audit Executive, this audit was conducted in conformance with the Institute of Internal Auditors' International Standards for the Professional Practice of Internal Auditing and 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 — a global network of 178 Missions in 110 countries that supports the international work of Global Affairs Canada and 37 partner departments, agencies and co-locators. According to the Global Affairs Canada Departmental Results Report 2017-2018, $969M was spent to operate and support the Missions. Therefore, administrative activities that support the Department’s Missions require effective and efficient management practices to help ensure sound stewardship of resources.

The departmental 2018-19 Risk-Based Audit Plan included a series of management practices audits of select missions. The selection of these missions was determined using a risk assessment to identify missions susceptible to higher levels of fraud risk, and one mission from a low-risk environment for comparison purposes. The Embassy of Canada (the Mission) in Addis Ababa was one of the selected missions. These audits are intended to provide senior management with assurance with regard to the state of management practices in supporting prudent management and good stewardship of resources in select Missions. 

The Embassy of Canada to Ethiopia

The Embassy of Canada in Addis Ababa (Ethiopia) is a medium-sized Mission comprising 56 staff (22 Canada-based staff (CBS) and 34 locally engaged staff (LES)). The mission is accredited to Ethiopia, Djibouti, and the African Union (AU). The Mission includes the following programs: Common Services and Consular; Development (bilateral and Pan-African); Foreign Policy and Diplomacy Service (FPDS; bilateral and AU); Trade; and Security & Emergency Management. There are two funded partner departments present at the Mission, National Defence and the Canadian Armed Forces, for which there is one CBS – in addition to the DND warrant officer deployed as a MPSS - and CBSA/Immigration, for which there is one LES. The Honorary Consul in Djibouti provides passport and consular services to Canadians abroad and manages the program of Bourses de la Francophonie for Djiboutian applicants.

As the national capital, Addis Ababa is the economic, political, and administrative hub of Ethiopia. The city has gained international significance as the headquarters of the African Union, United Nations Economic Commission for Africa (UN-ECA), and a regional office for a number of international organizations, including UNDP, UNESCO, and the European Economic Commission (EEC). Addis Ababa hosts over one hundred diplomatic missions and is often considered the capital of Africa. The Mission operates in a difficult environment, characterized by frequent civil unrest, terrorism concerns, local and regional security issues, a bureaucratic host government, the risk of corruption, and unreliable communications networks. Taking these factors into consideration, the Mission is designated as a hardship level V.

Common Services Program

The Common Services (CS) Program in the Addis Ababa Mission provides administrative and operational support to the Mission’s programs and partner department, and is responsible for financial transactions and human resources activities. Accountability and responsibility are held by the Head of Mission (HOM).

In 2015-16, the Mission’s financial operations were transferred to a Common Services Delivery Point (CSDP) in Pretoria (South Africa).  After the Pretoria CSDP was closed, financial operations for Addis Ababa were transferred again in September 2016 to the Common Service Delivery Point (CSDP) in Berlin (Germany) and in May 2018, the Mission was on-boarded to the CSDP for contracting services. CSDP Berlin provides financial and contracting and procurement services across twenty-five (25) Missions in Europe, the Middle East and Africa.  

The Common Services Program is managed by a Management and Consular Officer (MCO) at the FS-03 level. The MCO is supported by a Deputy Management and Consular Officer (DMCO) at the FS-02 level. Table 1 shows the Mission’s Common Services Program expenditures from 2014-15 to 2017-18. 

* For the purchase     of two vehicles.
Source: FAS Expenditures Report as of November 2, 2018

The property, materiel, and transportation section is overseen by the DMCO. This section is responsible for the maintenance of the Chancery, Official Residence, Staff Quarters (SQs), inventory, and a fleet of vehicles. Details on the Mission’s inventory of property and vehicles are shown in Table 2 below.

  Source: Real Property: PRIME database; Vehicles: 2018 Mission Inventory

Consular Program

The Addis Ababa Mission’s Consular Program provides consular services and assistance to Canadians, including passport, citizenship and notarial services. The Consular Program is overseen by the MCO, while the DMCO is responsible for the Program’s operational activities.  The DMCO is supported by a LE-07 Senior Consular Officer and a LE-05 Consular Assistant. The Mission is also responsible for the Honorary Consul in Djibouti, which provides representation and consular services to Canadians. As part of the Consular Program, the Mission is responsible for collecting, safeguarding, recording and depositing consular fees in a timely manner.

2. Observations and Recommendations

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.

2.1 Accountability and Oversight

It was expected that Mission and HQ management would exercise effective oversight of Mission activities and expenditures to ensure proper stewardship of Mission resources. The audit examined roles and responsibilities, as well as key oversight functions of the Mission management team and key Mission staff from the Common Services, Trade, Development, and FPDS Program. The audit team found that while Mission accountabilities were clearly articulated and communicated, there were gaps in exercising Mission oversight by management. The audit team also found an instance where the Mission undertook activities that were beyond its authority and accountability.

Accountability in the Addis Ababa Mission rests with the HOM, who reports to the Assistant Deputy Minister (ADM) of the Sub-Saharan Africa (WGM) branch. HQ has a role in supporting and enforcing HOM accountability. The former HOM was posted to the Mission from August 2015 to August 2018, and the present HOM joined the Mission in September 2018. The MCO and DMCO both arrived at the Mission in September 2017. Interviews conducted with Mission management and staff indicated that they understood the respective areas for which they are responsible. The audit team noted that human resources, procurement and asset management related responsibilities are articulated in the performance management agreements of the MCO and DMCO, the two CBS responsible for the management of the Common Services section of the Mission. In addition, the MCO had circulated an informational email across the Mission which delineated the specific areas of responsibility between the MCO and DMCO, and in November 2018 some Mission policies and guidance had been made accessible to Mission staff on the wiki.

It was expected that management would exercise effective oversight of procurement, assets management, and human resources activities, and that key oversight bodies would be in place and functioning at Mission. The audit team found that there is a governance structure in place at the Addis Ababa Mission, with a number of established committees, including the Committee on Mission Management (CMM), Housing Committee, and Locally Engaged Staff Management Consultation Board (LESMCB). However, the Terms of Reference for the CMM was only recently approved in October 2018. Based on a review of CMM minutes for the period of January 2016 to September 2018, and interviews with CMM participants, the audit found that while mission activities, such as HR and staffing, procurement and contracting, and financial planning were periodically discussed, some major management initiatives and activities, impacting mission operations, were not brought to CMM for discussion and decision. For example, a construction project undertaken by the Mission (discussed further on next paragraph), which required significant human and financial resources, was not put to the CMM for discussion and decision-making. By not using the CMM as a platform to inform management of key operational decisions, the Committee is not being effectively utilized to provide oversight and strategic direction. A Contract Review Board (CRB) at the Mission was in place and functioning until July 2017. However it was non-functional much of 2017-18 until May 2018, when the function was transitioned to the Regional CRB in Berlin. As a result, over this period the Mission did not benefit from the expected oversight and challenge function prior to entering in large contracts in order to protect the Department’s interests.

The audit team found that the Mission had engaged in a large construction project on Chancery grounds (“Tukul Project”) without proper authorizations and approval from Headquarters. Between 2016 and 2018, the Mission constructed large covered, pavilion-style outdoor structures, which required significant effort by Common Services management, as well as approximately $145K of funds, to complete. The decision to undertake this project was not put to the CMM for discussion, despite the impact on Mission operations and budget allocation. In addition, the Mission did not have the authority to undertake construction projects on Crown-owned property without engaging Headquarters for approval.  Accountability and responsibility for real property rests with the Real Property group in Headquarters, as the property owner. All efforts to change or improve real property must be done with approval from, and in consultation with Headquarters. By not consulting or informing Headquarters of the project as required, Mission management did not properly exercise and understand their accountabilities and authorities. As a result, this construction did not receive required oversight from Headquarters and has not been reported and recorded in the departmental real property portfolio.

Recommendation 1:

The Head of Mission should strengthen key management oversight mechanisms, particularly the use of the Committee on Mission Management as a venue for discussion and decisions on key issues and priorities by the management team.

2.2 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 audit team reviewed budget documentation, trend analysis, and conducted interviews with program managers and did not identify any concerns with the management of FPDS, Trade, and Development program O&M budgets. The audit team, however, found that adequate practices were not in place for Common Services to ensure proposed budgets were in line with forecasted expenditures and based on planned operational needs. 

Common Services’ planning and budgeting processes are mostly limited to those corporate processes required by Headquarters, including preparation of the Strategia business plan, the Mission Property Management Plans and Mission Maintenance Workplans, and the completion of FINSTAT reports (Financial Status Report) throughout the course of the year.

Common Services develops its budget based on expenditures from the previous year and makes adjustments for projected expenses for the upcoming fiscal year. However, there were no detailed planning processes in place for procurement, property management, fleet management, and material management, limiting the accuracy of its forecasts. In addition, the Mission has made many financial coding errors in the past, which reduces the accuracy of estimates based on historical expenditures. Mission management has made efforts to improve coding, by developing coding charts for Mission staff.

Further, the audit team noted that not all planned expenditures were outlined in the Strategia proposed budget and plans. Notably, the Mission undertook a construction project (“Tukul and Canteen” outdoor structures) which spanned from 2016 to 2018 and cost approximately $145,000 to construct and equip, however, this project was not mentioned in Strategia nor were budgets allocated to it. The Mission’s 2017-18 Strategia submissions noted concerns in meeting operational needs due to budget cuts, while it also allocated $69K in that year to this construction project from operational budgets.

The audit team found that planning and budgeting were discussed at CMM for the 2016-17 and 2017-18 fiscal years, however, only to a limited extent for 2018-19. Similarly, budget management was regularly discussed at CMM in 2016, but only occasionally discussed in 2017 and 2018. The MCO occasionally shared with CMM upcoming FINSTAT deadlines. The former HOM indicated weekly bilateral meetings occurred between the HOM and each program managers to discuss specific management issues, such as financial planning and budgeting. Based on expenditure analysis, spikes were noted in spending at the end of fiscal years, particularly for goods and equipment, and repairs and maintenance, which was indicative of inaccurate forecasts of actual budget requirements over the course of a full year.

In summary, the Mission’s planning and budgeting processes are weak, which limits Mission’s ability to manage its procurement, property, fleet and materiel based on ongoing operations needs and planned projects.

Recommendation 2:

The Head of Mission should implement rigorous planning and budgeting processes at the Mission, such as a zero-based budgeting approach, to ensure budget requests and subsequent allocations align to actual current needs and plans.

2.3 Monitoring

The audit team expected that monitoring activities would be performed to provide information for decision-making and ensure Mission compliance with policies and procedural requirements. The audit team found that expected monitoring and reporting activities were not in place to inform management regarding the performance of operational activities. 

The Mission has some monitoring activities in place for financial operations, including the review of reports of expenditures against budgets and FINSTAT status reports by Mission management.  The audit team did note gaps with the Mission’s monitoring of the monthly bank reconciliation process. Adjustments are frequently carried over for longer than permitted by departmental guidelines, with no explanation on file. For both of the Mission’s bank accounts, there were several adjustments dating back to 2015 and 2016 which had not been recorded in the financial system. The International Financial Operations division (SMFF) is aware of this issue and is working with the Mission and the CSDP to resolve it.

The audit team found that the Mission does not effectively monitor or report on procurement and asset management activities. No monitoring is done to ensure proper procurement methods are being used, if required contracts are in place, or if the level of vendor utilization is appropriate. As noted later in the report, the audit team found the Mission has not been following procurement policies and procedures, has not ensured proper procurement mechanisms are put in place, and has not been ensuring vendors are selected on a competitive basis.  Without strong monitoring of procurement activities, the Mission is not able to assess if procurement is properly supporting Mission operations and providing value for money. In addition, there are significant gaps in the monitoring of Mission assets, including property maintenance, vehicles, fuel, generators, petty cash, and goods and supplies. These asset management issues are discussed in detail later in the report.

From a Human Resources perspective, Mission management does monitor and report on LES leave balances, however, there was no systematic monitoring or reporting of LES overtime levels at the time of the audit. Without a monitoring process for overtime, there is a risk that inappropriate levels of overtime could go undetected, and that overtime budget may be exceeded. Mission management recently created an Excel-based tool to track overtime, to be used in the future.

The limited monitoring and reporting inhibits management’s ability to make informed decisions in terms of budget planning, purchasing and expenditures. The lack of sufficient monitoring also prevents the identification of problems and the possibility of corrective action, thereby increasing the risk of financial loss, misappropriation and misuse of assets.

Recommendation 3:

The Head of Mission should implement monitoring practices over core operational activities designed to identify issues with the management of Mission procurement, finance, assets, and human resources, and to ensure compliance to departmental policies and procedures.

2.4 Local Procurement

The audit team expected that the procurement for goods and services at the Mission would be administered and managed in accordance with applicable policies and directives. The audit team examined the processes, mechanisms, and tools used by the Mission for procuring goods and services, from initiation to payment. The audit team found significant gaps, including issues with the establishing of contracts, selected method of procuring, the initiation and management of contracting processes, the achievement of value for money, the certification of receipt of goods and services, and compliance with procurement policies.

Procurement and Contract Management

The audit team reviewed 27 procurement transactions with the expectation that contracts and purchase orders would be established and managed as per procurement policies and procedures to ensure fairness, transparency, and value for money. The audit team found that the Mission consistently did not establish formal contracts and purchase orders in the financial system when required. During the entire 2017-18 fiscal year the Mission only created one (1) contract or purchase order, despite a significant volume of procurement transactions that required it. In particular, the audit team found that the Mission did not have formal contracts in place for key reoccurring services, including shipping CBS personal effects during relocation, monthly generator maintenance, and property maintenance services. File testing found instances where the Mission did not raise a contract (call-up) for moving services, despite a Standing Offer Agreement being in place with the vendor which streamlines the contracting process. In addition, the Mission conducted a large construction project at the Chancery over 3 years, spending approximately $145,000 CAD to construct and equip, without following procurement policies and procedures. No formal purchase orders for materials or contracts for construction services were established in the departmental financial system, as required. Some evidence was provided that a small number of local paper contracts were established for this construction work, however, these represent small fraction of the overall cost.

Without fair and competitive service contracts, standing offers, supply arrangements, and purchase orders in place, it is difficult for management to formalize services and goods expectations, control costs, establish service frequency, and to ensure Mission is getting the best value and quality for money.

In addition, based on the review of the sample transactions, the audit team identified a number of control weaknesses and breakdown. These include:

• Expenditures on goods and services not linked to a purchasing plan or a needs assessment. In certain instances this has led to over-purchasing (e.g. cleaning supplies, stationary, and copy paper).
• Lack of competition when purchasing goods or initiating services as formal quotes were not often sought from multiple vendors. Justifications for using a sole source were not provided.
• Lack of quotes/estimates provided by chosen vendors in advance of work done in order to control costs and ensure value for money.
• Lack of formal pre-approval and/or pre-authorization at initiation stage of procuring a service or good.
• Signing of a contract after the contract period had passed and services invoiced.
• Multiple instances of essential supporting procurement documentation not being retained.

The audit team also found that the Mission procures goods and services on an ad hoc and ongoing basis using a few key vendors with whom they regularly do business. There is limited effort to enlarge the vendor pool. This ad hoc approach to selecting vendors leaves the Mission at significant risk of not receiving value for money due to non-competitive pricing and subpar quality. It also leaves the Mission exposed to risks of conflicts of interest and pressure for preferential treatment for certain vendors.

The audit team noted that CSDP Berlin began providing the Mission with administrative support over contracting activities in May 2018, and has been actively working with the Mission to establish required service contracts and to improve local procurement processes and procedures.

Receipt and Payment

The audit team expected that the Mission would have effective controls in place to ensure procurement expenditures are accurate, appropriate, and legitimate.

The audit team found that, while all invoices examined were approved under section 34 of the Financial Administration Act (FAA) to certify goods were received or services rendered and that payment can be issued, there was a general lack of sufficient information and documentation to support this approval. In addition to a lack of information, instances were noted where management did not apply sufficient due diligence or follow-up when approving invoices that were not accompanied by supporting documentation.  An instance was identified where section 34 approval was done, and a payment made, in advance of services being rendered. In another instance payment was issued for US$84,448 in shipping costs billed to the Mission without justification or sufficient supporting documentation. Despite multiple attempts, the audit team was not able to obtain the supporting documentation requested directly from the supplier.

The audit team also found weaknesses with the method of payment employed at the Mission. Most payments are made through cheque, as electronic payments are difficult given the current banking system and are often not accepted by vendors. In addition, the Mission does not have departmental acquisition credit cards for procuring smaller value goods. The Mission therefore relies heavily on cheques and petty cash payments. Based on the review of procurement payment transactions, the audit team identified the following issues:

• Payments for services issued after month-long delays (Including: generator maintenance, petty cash reimbursements for temporary worker cash wages, standing advance claims);
• Petty cash transactions exceeding the transaction limit of $200 CAD;
• Standing cash advances improperly used as petty cash accounts;
• Standing advance established for a contractor, which is against policy (only GAC staff can have standing advance);
• Claim documentation which did not support the transaction. For example, confirmation of receipt of goods, or services rendered, often not available for petty cash purchases (such as signed timesheets to support reimbursements for temporary worker cash wages);
• Reliance on Personal Declarations rather than official receipts;
• An instance where Crown funds were used as an advance to purchase items for resale at profit, where the proceeds were donated to charity. While this was done for a good cause, this represents improper use of Crown funds.

The lack of due diligence in approving invoices (section 34 of the FAA), combined with a lack of properly tracking received goods and service rendered and weakness in the management of inventories (as described later in this report) can result in loss of funds through overbilling, non-receipt of goods, or inferior goods being provided. The absence of pre-approving purchases can lead to improper purchases.

Weaknesses in controls over payment methods can put the Mission at increased risk of inappropriate and/or illegitimate payments being issued.

Recommendation 4:

The Head of Mission should take measures to strengthen the Mission’s procurement process from initiation to payment by ensuring that:

• Initiation of procurement transactions are based on Mission planning and needs, and are pre-approved;
• Proper procurement mechanisms are in place and utilized according the departmental policies and procedures;
• Invoices submitted for payment approval by staff include sufficient supporting documentation; and,
• Mission management exercise the required due diligence to confirm goods are received and services rendered prior to approving for payment.

2.5 Asset Management

The audit team expected that adequate controls would be in place to ensure effective management of Mission assets.  In order to assess the state of these controls, the audit examined the management of the following assets: property; vehicles; generators; inventory; petty cash; and consular revenues.  The audit found weaknesses and control gaps in the management of assets, leading to significant risk of inappropriate use of assets and of financial loss.

Property Management

The Mission owns the Chancery building and grounds, and leases 22 Staff Quarters (SQs) and the Official Residence (OR). The audit team conducted interviews with Mission staff, review of documentation, analysis of Mission data, review of a sample of property-related expenditure transactions, inspection of a sample of SQs, the OR, and of Chancery buildings and grounds. Based on these audit procedures, the audit team identified issues with regards to management of real property at the Mission, including gaps in compliance with department authorities, policies, processes and directives.

Chancery:

The Chancery and grounds are Crown-owned properties. Structures include the main Chancery building (over 50 years old), a large out-building (containing an exercise room, locker room, lounge, kitchen, and workshop), the Tukul and Canteen structures (pavilion-style event structure and outdoor kitchen), and numerous shipping storage containers (used to store inventory of goods and supplies). The Chancery grounds are expansive and include trees, lawn, plants, and large gardens. There is also an actively maintained clay tennis court and a soccer field on the grounds.

The Mission has LES cleaners, gardeners, and handymen on staff to maintain the Chancery and grounds. Additional contractor services are used to address property repairs and grounds maintenance needs. As noted earlier in the report, formal contracts are not put in place for these services.

From 2015 to 2018, a major project to improve the physical security of the Addis chancery was undertaken, as part of the department’s Critical Infrastructure Protection Program (CIPP). This security upgrade project included significant improvements to the exterior perimeter walls of the chancery as well as the instalment of new security lighting and entrance gates. The project’s completion was initially planned for July 2016 but was delayed for two years. Mission management indicated that, although the CIPP project was largely managed by HQ, its extended duration impacted Mission operations and delayed other capital projects for the Chancery.

Based on a review of the Strategia and property, interviews with Mission management and staff, and a visit of the building, the Chancery has some significant maintenance and infrastructure issues. These include: inadequate electrical systems; plumbing and septic issues; ceiling leaks; broken and crumbling pavement on parts of driveway/parking lot; paint needing to be refreshed; and limited amount of SIGNET network connections in key workspace areas which does not allow for maximizing desk space and accommodate growing staff.

The audit team noted that many of infrastructure issues have persisted over multiple years, and the mission has been actively working with headquarters to have capital projects initiated to address the issues. Many projects have been delayed for reasons outside of the mission’s control, as they have been dependent on the completion of other ongoing projects (such as the CIPP project), or on project prioritization by headquarters.  

Ongoing maintenance challenges of the Chancery and grounds have included plumbing repairs, painting required, furniture replacement, HVAC repairs, carpet cleaning/replacement, and grounds repairs and maintenance. While management indicated that significant work was done over the last year to improve plumbing, and clean up the Chancery grounds, many maintenance issues persist. Continued attention by the mission, along with ongoing engagement with Headquarters, is essential in addressing these deficiencies in the upkeep of the Chancery. Otherwise they will continue to have a negative impact on the operational effectiveness of staff and may limit Mission growth.

Tukul and Canteen construction project:

Between 2016 and 2018 the Mission constructed on the Chancery grounds two large thatched roofed pavilion-style structures, referred to as the “Tukul” and “Canteen”. The intent of these structures was to provide event space and a kitchen for official visits and gatherings, special occasions, and social events. It was also intended to act as additional meeting space for staff, as conference rooms were very limited inside the Chancery building.

Construction and renovation projects initiated at Missions are guided by a number of policies, procedures and requirements. One such requirement, as articulated by the GAC Property Management Manual, stipulates that Missions are required to seek Headquarters approval for construction and/or renovation projects. The property group within Headquarters, as the property owner, has authority and accountability of Crown property and all improvement projects must be done in consultation with them.  This group has key responsibilities in ensuring construction projects are properly managed and delivered in compliance with Canadian laws, regulations, and standards. In particular, these responsibilities include ensuring projects undergo an Environmental Assessment, as per requirements in the Environmental Assessment Act, are designed and constructed according to appropriate building codes and in consideration of sustainable development principles, and are regularly inspected. The audit team expected that this type of construction project would not only comply with the above noted requirements, but also follow departmental procedures, and be supported by strong project management practices and control.

Based on interviews with Mission management, reviews of available documentation, and analysis of project-related expenditures, the audit team found significant issues with the initiation and management of this project. In terms of initiation, the project was never raised in any Mission planning and budgeting documentation, such as the Strategia or the Mission Property Maintenance Plan, despite being identified by the then Head of Mission as a priority. In addition, the Mission never informed the Real Property group in Headquarters to receive approval and advisory support for the project, which is required as per departmental property management policy. The audit team was informed that the decision to circumvent Headquarters was taken to avoid non-approval and delays. From a project management perspective, the construction project was never managed formally as a project. No defined scope of work, detailed project plan and timeline, or a dedicated budget could be provided to the audit team. Between 2016 and 2018 the Mission diverted approximately $145K from the Common Services and Property section budgets to build and equip the Tukul and Canteen. This was funding provided to the Mission to procure goods and services in support of Mission operations and the maintenance of owned and leased properties, and was not allocated to deliver a construction project. Furthermore, most transactions were miscoded to repairs and maintenance and property services, rather than being properly identified as construction expenditures. In addition, formal construction/service contracts or purchase orders were not established in the departmental financial system as required by departmental policy, despite significant spending with multiple vendors. While some evidence was provided for a small number of local paper contracts for this construction work, it represented a small fraction of overall spending. In one instance, a copy of a contract with a $6000 value was provided, with a vendor who was paid over $20K over the course of construction.  Finally, minimal tracking, reporting, monitoring, and forecasting of project activities and expenditures was provided to management, and it did not accurately reflect expenditures made and anticipated costs.

The Tukul/Canteen project had issues not only in its initiation and management, but also on the impact this initiative had on other areas of Mission operations. Over the course of the three years of Tukul/Canteen construction, the Mission was experiencing numerous maintenance and property upkeep issues in the Chancery building and staff quarters, including; plumbing problems, ceiling leaks, HVAC repairs, furniture in disrepair, and carpet requiring replacement. Many of these maintenance needs could have greatly benefited had the $145K that was allocated to the Tukul/Canteen remained available for building maintenance and furniture repair activities. These structures will also require ongoing life cycle and maintenance resources which will compound the strain on already limited property maintenance funding. In addition to the significant financial resources, interviewees indicated that a significant amount of MCO time and efforts was also dedicated to the project, and away from core operational responsibilities. As noted throughout the report, the audit team has found, during this period, considerable gaps in the management of procurement, asset management, planning, budgeting and monitoring. These are all core activities of overall Mission management, and Common Services in particular.

Staff Quarters and Official Residence:

The audit team visited three (3) SQs and the Official Residence to review recent repair work, and to verify inventory of contents. While all these properties are leased, the Mission does take on much of the maintenance and minor repair projects. The audit team found no issues with recent minor repair and maintenance activities. It was noted that the required “point-in-time” list of contents for most SQs had not been done for the most recent rotation, although the lists from the previous rotation were generally accurate (additional details found in the inventory section below).

Fleet Management

It was expected that the Mission would manage its fleet in accordance with the Department’s Mission Fleet Management Guidelines and have a Mission transportation policy outlining proper conduct and management of the Mission fleet. The Mission has such a policy, approved by CMM in September 2018, which details appropriate use of Mission vehicles.

The audit team found that Monthly Vehicle logs are maintained for each vehicle, which includes trip logs signed by passengers, monthly Km driven calculations, some gas purchase receipts, and maintenance and repair records. It was, however, noted that the logs are all done by hand rather than maintained electronically in a spreadsheet, making it more difficult to analysis previous maintenance frequency, and forecast for the coming year. Based on Mission expenditure analysis, and available evidence, the audit team did not identify any concerns regarding the frequency of vehicle maintenance or the volume of vehicle part purchases.

A review of vehicle fuel purchases identified significant tracking and monitoring control gaps, as well as highly irregular purchasing activity on vehicle fuel cards. The Mission makes large bulk fuel purchases a number of times per year, which are duty-free, based on approval by the Ethiopian Ministry of Foreign Affairs. The bulk purchases are made with two fuel companies, one that provides credits on fuel cards and another that provides fuel coupons for the value purchased.   The most significant issues are in the management of the vehicle fuel cards.

Mission management conducts little active monitoring of the amounts being credited to cards after a bulk purchase, or on individual fuel purchase transactions.  In particular, the Mission had not been receiving and reviewing fuel card statements that are available from the fuel company. These statements can be used to verify that purchased credit has been correctly applied to the fuel cards, and that fuel purchases on those cards are correct, appropriate, and for Mission purposes. While onsite, the audit team acquired these statements directly from the fuel company and reviewed them to reconcile the bulk fuel purchases to credits applied, and reviewed fuel card purchase transactions. The statement period spanned from April 2017 to November 2018. This review identified significant abnormalities with both credits and fuel purchases. Specifically the audit team found:

• Credits applied to the fuel cards could not be reconciled to the amount of bulk purchase payments made to the gas company. The credits on the statements did not reconcile with what amounts Mission staff reported was credited to each card.
• Large credits were diverted from official vehicle fuel cards in use by the Mission, to a different unknown card which was not included in the list of fuel cards in use by the Mission.
• The above-mentioned “mystery” fuel card had a significant volume of fuel purchases over the 19-month period, often multiple times per day. The value of those purchases was approximately $12,000 CAD.
• Large volumes of irregular purchases on official vehicle fuel cards, including duplicate transactions (identical purchases made at same time and place), purchases of volumes of gas well in excess of vehicles gas tank capacity, and a large volume of purchases on a vehicle gas card after that vehicle was taken off the road (cards are designed to only be used for a specific vehicle).

Based on the analysis of the statements, between April 2017 and November 2018 approximately $34,000 CAD in fuel purchases were made on these vehicle fuel cards, and of that amount, the audit team identified $18,000 (47%) in questionable transactions. Due to lack of monitoring of fuel cards, the Mission is at significant risk of the misappropriation of funds and fuel. As a result of these findings, information was shared with the Department’s Inspection, Integrity and Values and Ethics Bureau for further work. 

Generator Management

The Mission owns 24 large electricity generators used to power properties during the frequent power outages in Addis Ababa. [REDACTED]. The audit team expected that the Mission actively track and maintain these assets to ensure proper use and functioning throughout their life cycle, as well as have controls in place to manage and monitor the large quantity of diesel fuel required to run the generators. The audit team found significant gaps in how the Mission manages the maintenance of generators, how generators are tracked, and how generator fuel is tracked and monitored.

The regular monthly maintenance of all the generators is done by a vendor, who performs basic maintenance and inspection on the equipment, and makes recommendations for repairs as needed. The same vendor has been used for a number of years, and the Mission does not have an active contract in place for this reoccurring service, as required. In addition, the Mission has not sought additional quotes from other vendors to ensure they are receiving a competitive price, and achieving value for money. The Mission uses the same vendor for all generator repairs, which the vendor himself has recommended. Multiple quotes from other vendors have not been sought for these repairs. This vendor continues to be engaged for maintenance and repairs despite concerns expressed by Mission staff that replaced parts were being marked-up in price by a very large margin.

The audit found that the Mission had not ensured proper monitoring of these assets. A backup generator was found not to have been in Mission’s care and control for approximately 3 years, as it was in the possession of the generator maintenance/repair vendor under the pretenses that it was under repair.  . Mission staff indicated that this generator was originally left with the vendor while they decided to have it repaired or disposed, but then stayed there as no decision was taken. The generator stayed in the vendor’s possession until the audit site visit, at which time audit team members went with the vendor to view this asset. The generator was found to be at the vendors metal fabrication shop (unrelated to his generator business). During the audit site visit the generator was returned to the possession of the Mission, and installed at an SQ which had been powered by a rented generator at a cost of approximately $112 per day.

The audit also found significant control gaps in the management and monitoring of generators diesel fuel. Mission staff maintain reserve fuel for generators at the SQs, OR and Chancery with the use of 200-litre barrels of spare fuel. When the generator fuel tanks get low, fuel is pumped in out of these barrels by security guards and Mission staff onsite. SQs are stocked with two barrels or fuel jerry cans, the Chancery has ten (10) barrels, and the OR has five (5). Fuel levels at SQs are to be monitored by security personnel, who inform Mission staff when barrels are empty. Full barrels are then to be delivered by Mission staff to SQs and the OR.  A hand-written log book is used to track the number of barrels delivered. Generator fuel is purchased in bulk by filling a large 2000 litre tank at a local service station. The tank is on a trailer, which is towed by a Mission vehicle to a petrol service station. Payment is done using a gas card (using same process as fleet vehicle fuel) which is used exclusively for the purpose of filling this tank. Based on a walkthrough of fuel management processes, and a review of fuel-related transactions, tracking logs and documentation, the audit team found [REDACTED] gaps in the management, tracking, and monitoring of the generator maintenance program, the acquisition and dispersal of generator fuel, and tracking of the generators themselves, put the Mission at risk to uncontrolled maintenance and repair costs, potential loss of assets, and the misappropriation of funds and fuel. As a result of these findings, information was shared with the Department’s Inspection, Integrity and Values and Ethics Bureau for further work. 

Inventory Control and Disposal

It was expected that once an asset was purchased, it would be recorded, safeguarded, tracked through its life cycle and disposed of in accordance with the Department’s Materiel Management Manual. Based on walkthrough of Mission’s inventory practices, an inspection of onsite storage areas, and reconciling a sample of procured goods against inventory records, the audit found significant control gaps in the management of inventories.

The audit team found that a large volume of goods, equipment and supplies (household furniture, equipment, large and small appliances, electronic items) is held in multiple storage containers on Chancery ground, however, no up-to-date and actively maintained inventory lists are in place for these items. The audit team noted that at the time of the audit, most SQ content lists of furniture and equipment had not been updated since the last rotation period, although the previous lists remained generally accurate. In multiple instances the Mission was unable to provide sufficient information to track and identify a sample of recently purchased goods and equipment. The Mission was also not actively using an inventory management system, was not tracking items using a unique identifier (e.g. inventory number, bar code), and was not capturing sufficient life cycle details (for example, year of purchase, make, model and condition) to help manage purchasing cycles. The general lack of processes, procedures and rigour with regards to inventory management puts the Mission at risk of misappropriation of assets, and poor asset life cycle management. It was noted that the Mission had an ongoing inventory project in place intended to improve SQ inventories, and to capture accurate life cycle data for those items.  In addition, the need for a formal corporate inventory system was raised to HQ in a previous Mission audits, and an HQ action plan is in place to address this.

The audit team also examined one instance of the disposal of assets to determine if it was performed in accordance with departmental policies and procedures.  A sale of surplus materials in 2016 was reviewed and was found to have gaps in its management and compliance with policies and procedures. The audit team found that there was no Disposal Report for this activity, no HOM approval, and no status report on the condition of assets disposed, which are all key requirements for this process. In addition, it was found that some of the cash proceeds of the sale were not accounted for by the Mission. One receipt for an amount of 60,606 ETB (around CAD$3,000) was issued for the proceeds from the disposal of certain assets, but there is no record of it deposited with the rest of the other cash receipts.

The breakdown of established departmental procedures governing the disposal of assets, and the management of cash receivables, leaves the Mission at risk of inappropriate sales of assets and loss of funds.

Petty Cash

It was expected that petty cash would be managed in accordance with relevant policies and procedures requirements. The audit team found that [REDACTED] the Mission's petty cash accounts were adequately safeguarded, accounted for, and reconciled. There is, however, a lack of segregation of duties with regards to one of the petty cash custodians who had additional accounts payable duties, which is contrary to petty cash procedures. A lack of segregation of duties exposes the Mission to greater risk of transaction errors or unauthorized or inappropriate transactions. In addition, the audit team found that reconciliations of the petty cash are not consistently done on a quarterly basis and surprise counts were not performed. As noted in the procurement section, the team also found several issues during the petty-cash transaction testing, including instances of transactions exceeding petty cash limit, a standing advance improperly used as petty cash, reliance on Personal Declarations rather than official receipts, claim documentation which did not support the transaction, and goods bought which could not be confirmed as received.

Consular Revenues

The Mission collects fees for issuing passports and travel documents, as well as for providing notarial services. The audit team found that consular cash revenues are managed in accordance with relevant policies and legislative requirements. Specifically, revenues are collected, safeguarded, accounted for, reconciled, and deposited as required. In addition, Mission management indicated that it will soon no longer be accepting payments in cash, which would simplify cash management at the Mission.

Recommendation 5:

The Head of Mission should:

• Consult with the real property group in Headquarters regarding the constructed Tukul and Canteen to ensure the integration of the structures into established property life cycle management, maintenance, and safety processes and procedures;
• Implement a strong system of controls and monitoring over vehicle and generator fuel from purchase to consumption, with significant involvement from Common Services management;
• Implement an inventory management tool for supplies and goods which actively tracks the location, movement, and condition of individual goods, as well as the utilization and balance of supplies kept in stock; and
• Communicate proper petty cash account procedures across the Mission, and strengthen monitoring of these accounts.

2.6 Human Resources and LES Staffing

The audit team expected that Mission Human Resource activities would be managed effectively to ensure operational needs are met, and that transactions are appropriate and compliant with policies and procedures. The audit team assessed  whether  HR staffing plans were in place and addressed needs; LES staffing actions were appropriately approved, fair, open and transparent; LES personnel files were well documented; and LES salary and overtime payments were  accurate and reasonable. The audit team found gaps in the management HR practices, including some activities that were not managed in accordance with departmental policies and procedures.

Human Resources Planning

Mission HR planning activities for 2016-17 and 2017-18 were documented directly in the Strategia business plan, rather than a separate staffing plan.  However, these plans did not consistently align with actual HR actions, although the Mission has conducted a number of competitions in the past three years, to fill vacant positions. Interviewees noted that the Mission has been experiencing significant levels of turnover at key LES positions, and that staffing processes tend to move very slowly. This necessitates long periods of LES staff in acting appointments above their substantive positions. Notably, the key position of Property Manager had not been filled on a permanent basis for 10 months at the time of the audit site visit.

LES Staffing

The audit team examined four (4) LES staffing files to determine whether they were in compliance with relevant policies and procedures, conducted in a fair, open and transparent manner, and that staffing files contained the required documentation.

Due to a lack of documentation on file, the audit team could not determine whether the four staffing actions complied with relevant departmental regulations. For all four staffing actions reviewed, important documentation was missing, such as the advertisement of the competition and the Statement of Merit Criteria. For three out of four files, information on the hiring board members and the hiring board's recommendation to hire were also missing. In the absence of this required information, the audit was unable to confirm that staffing actions were conducted in a fair, open, and transparent manner.

LES Salary and Overtime

Based on a review of salary and overtime transactions, the audit found that LES employees at the Mission are generally being paid using the appropriate rates as indicated in their salary scale. However, the audit team found numerous clerical errors in the payroll files for 2016 and 2017.  Often, the employee's salary step was not updated when there was an incremental salary increase. In some cases, pay types were not properly segregated - for example, overtime being lumped in with salary back pay. Not updating the Level & Step information and lumping overtime with back pay make it difficult to ensure that the LES is receiving the correct salary. The audit team noted improvement in the accuracy of the payroll data in 2018.

The audit team also found that there is a process in place at the Mission for LES overtime and that mission management had developed a policy for overtime in October 2017. However, the audit team reviewed a sample of transactions and found that overtime is not consistently pre-approved. Based on the sample reviewed, overtime hours worked appear warranted and reasonable. Interviews indicated that Mission staff were recently reminded to get pre-approval for overtime and to attach it to their overtime time sheet.

Personnel Files

Regarding the management of LES personnel files, a sample of five (5) files was reviewed to ensure the retention of required documentation, such as job descriptions, performance agreements and any documentation related to values and ethics and disciplinary actions. The audit team found that personnel files were incomplete and missing key documentation, such as proof of education and training as well as gaps in the consistent documentation of performance appraisals. Incomplete personnel files can have a significant impact on salary administration, performance feedback, promotions, and disciplinary action of employees.

Recommendation 6:

The Head of Mission should take appropriate measures to enhance compliance of the Mission’s human resource activities with the Department’s directives and procedures, especially in the area of documenting and maintaining staffing and personnel files.

3. Conclusion

The audit concluded that there were significant weaknesses in the management practices and controls in place to ensure sound stewardship of resources at the Mission. There is a lack of management oversight and monitoring in the areas of local procurement, asset management, inventory management, and human resources. Multiple processes established by Headquarters relating to finance, procurement, contracting and human resources are not consistently followed and some key controls are not in place or not being followed.

As a result of the audit findings, information was shared with the Department’s Inspection, Integrity and Values and Ethics Bureau for further work. 

The audit team verbally debriefed the HOM, the MCO and DMCO after completion of work onsite.

Appendix A:  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 Addis 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 Addis Ababa Mission operations. Specifically, the audit examined processes related to the management of consular revenues, procurement and asset management (including property, vehicles, cash and materials). Human resource processes relating to LES staffing actions, LES payroll and overtime were also examined.

The most up-to-date documentation available as of October 2018 was reviewed. In addition, Mission expenditures and data for property and vehicle fleet were examined from 2015-16 to 2018-19. A sample of files and transactions were tested from activities that took place from 2015-16 to 2018-19, as presented in Table 3.

Criteria

The criteria were developed following the completion of a detailed risk assessment and considered the audit criteria related to the Management Accountability Framework developed by the Office of Comptroller General of the Treasury Board Secretariat. The audit criteria were discussed and agreed upon with the auditees. The detailed criteria are presented as follows.

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:

• Onsite audit procedures performed at the Mission from November 5th to 16th, 2018
• Documentation review (budgets, business plans in Strategia, property management plans etc.)
• Walkthrough of procurement processes, property and materiel, and consular processes.
• Data analytics of Mission expenditures
• File testing (Mission contracts and expenditures, payroll, overtime costs and staffing actions)
• Interviews (Head of Mission, CBS management and key LES staff, and relevant employees at HQ and Common Service Delivery Point)
• Inventory testing and petty cash counts
• Onsite examination of Chancery, storage facilities and a sample of staff quarters
• Comparisons with like-minded Missions
• Visits to a sample of local vendors and visit to Mission bank

Appendix B: Management Action Plan