Audit of Business Management Offices

Final report

Global Affairs Canada
Office of the Chief Audit Executive

Tabling Date
December 2019

Acronyms and Symbols

BMO

Business Management Office

CFSS

Centre for Corporate Services Learning

FAS

Financial and Administration System

FINSTAT

Financial status

FMA

Financial Management Advisor

HRMS

Human Resources Management System

P2P

Procure to Pay

SMD

Financial Operations

SFT

Salary Forecasting Tool

SRT

Salary Reconciliation Tool

Executive summary

The BMO model was implemented in 2014 following the amalgamation of the former department of Foreign Affairs and International Trade, and the Canadian International Development Agency. Under the model, twelve Business Management Offices (BMOs) were set up to provide departmental Branches with a variety of business management services.

Modernization of the BMO model is underway and is intended to provide consistent business services and bring greater clarity to the BMO’s roles and responsibilities through consolidation. In fact, senior management has decided to reduce the number of BMOs from twelve to four.

The objective of the audit was to provide assurance that the BMOs support the departmental mandate through the provision of standardized, consistent and efficient business management services to Branches in the areas of contract, financial and human resources management.

Why it is important

The BMOs are an important piece of the amalgamation infrastructure. Since 2014, with a team of 190 employees, the BMOs have been providing business management advice and services to sixteen Branches of the Department on finances, human resources, contracting, corporate planning and reporting and administration.

What was examined

The audit examined the decentralized BMO services related to finance, human resources and contracting with regard to governance and oversight, meeting operational needs and training and tools. More details about the audit objective, scope and criteria are presented in Appendix A.

What was found

The audit concluded that the BMO model has supported the Departmental mandate through the provision of requested services in the areas of contract, financial and human resources management.

However, many challenges were identified in current BMOs’ business processes concerning efficiency, standardization and consistency of services provided to clients.

The audit team found that limited strategic direction was provided to the BMOs by the Corporate Management Committee, which was mandated to provide oversight over the BMO structural model and play a challenge function. Furthermore, senior management exercised minimum oversight over the BMOs. In addition, the level of monitoring effort at the operational level varies across the BMOs and results were not communicated to the Corporate Management Committee.

BMO roles and responsibilities were not defined, communicated and understood in a consistent and clear manner by all stakeholders, which has caused duplication of efforts and service gaps in some areas between the BMOs and functional specialists.

The audit team found that services provided by BMOs are easy to access, and clients’ service requests are generally executed in a timely manner by the BMOs. However, clients’ operational needs were not always well understood by the BMOs and there was no formal process in place to obtain feedback from BMOs’ clients and functional partners for the purpose of improving services. Although efforts have been made to standardize and automate processes, the audit team found that processes were not consistently followed by BMO staff, and more processes could be developed and automated to improve quality and timeliness of services rendered. Furthermore, there are insufficient measures to assess the quality and timeliness of the BMOs’ services which limits the ability of management to make adjustment to improve services. Although BMOs identified best practices and lessons learned, there was no formal mechanism for sharing them among BMOs.

A Training Roadmap exists for BMOs and their annual learning plans are generally aligned with it. Additional and advanced training were identified by BMO employees, which would help them to better support their clients and corporate needs.

Recommendations

1. The Chief Financial Officer should ensure that the BMOs’ roles and responsibilities in the areas of contract, financial and human resources management are consistently and clearly defined and communicated to BMOs, their clients and functional partners; and should regularly report to the Corporate Management Committee allowing it to exercise its oversight and provide adequate direction.
2. The Chief Financial Officer should increase the level of monitoring effort on BMOs’ activities to ensure that the quality and timeliness of BMOs’ services are achieved to support the Branches’ operations, and that monitoring results are presented to the Corporate Management Committee.
3. The Chief Financial Officer should put measures in place to enable further standardization and automation of BMO processes in order to gain greater process consistency, effectiveness and efficiency.

Statement of Conformance

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 was 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

The current departmental model for resource management was established to align with the Treasury Board Policy on Financial Management Governance, applicable at that time. The BMO model was implemented in 2014 following the amalgamation of the former department of Foreign Affairs and International Trade and the Canadian International Development Agency.

Under the current decentralized model, there are twelve BMOs with a total of 190 employees. Each BMO reports to and provides departmental Branches with a variety of business management services, including the provision of guidance on resource management, salary forecasting, provision of financial coding, payment of invoices, contracting support (under $25,000), temporary help services, branch planning support, coordination of branch input into corporate reporting exercises, Headquarters organizational chart updates, creation of actions relating to human resources, assistance in the budget planning process and reference level update, and input into the monthly financial status (FINSTAT) reporting process.

Each BMO reports to an Assistant Deputy Minister, while providing services to one or more Branches. Led by one Director, most of the BMOs are comprised of one or two Senior Coordinators, one to five Team Leaders and administrative support staff at various levels.

The BMOs work in partnership with Financial Management Advisors (FMAs), Human Resources functional advisors, client branch strategic units and client branch managers to ensure sound management of financial and human resources, in compliance with Treasury Board and departmental policies, procedures and directives as shown in Annex B (BMOs’ Business Process Flowchart).

Modernization of the BMOs

Modernization of the BMOs is underway, with one pilot launched during Fall 2017. The end goal is to have four BMOs in place. Specifically, the Corporate, Programs and Geos Branches’ BMOs would report to the Financial Operations (SMD) Director General, and the BMO serving Ministers and Deputy Ministers would report to the Corporate Secretary.

The modernization of the BMO model is meant to generate business value by providing:

• standard services and levels of services across all Branches;
• common and streamlined business processes;
• optimal time and effort spent on administrative processes;
• clear roles and responsibilities to address duplication of effort and redundancies; and
• opportunities for mobilizing resources to enhance advisory functions.

It is expected that a more centralized approach will facilitate the coordination of process changes and improvements, and generate greater consistency in reporting and forecasting, as well as greater data integrity to enable improved analysis of financial information.

2. Observations and Recommendations

This section sets out key findings and observations, divided into two general themes addressing: governance structure and monitoring, and processes and measures in place to meet operational needs.

2.1 Governance Structure and Oversight

It was expected that an effective governance structure would be in place to oversee the implementation of the BMO model. The audit team examined the key oversight function over the BMO model, the roles and responsibilities of key stakeholders and the monitoring of BMOs’ activities. The audit team found that limited strategic and operational direction was provided to BMOs. The audit team also found that BMOs’ roles and responsibilities were not clearly understood by all key stakeholders and that there were gaps in exercising monitoring of the BMOs by management.

Strategic Direction and Oversight

The minutes of the Corporate Management Committee (CMC) meeting in January 2015 indicated that CMC was mandated to provide oversight of the BMO’s structural model and to play a challenge function. At that time, the Committee members recognized the need to identify overlap in services provided by the BMOs, to document roles and responsibilities and to provide greater clarity of the resources required from the BMOs. The audit team reviewed all of the CMC’s minutes since January 2015 and found no other discussions related to the performance of the BMO model and on the results of monitoring activities over the BMOs’ operations. Yet, in 2018, the Executive Board approved the modernization of the BMO model and the associated organizational changes and expected benefits. The interviews and the survey conducted by the audit team indicated that the changes to come with the BMO modernization have not been clearly communicated to all stakeholders.

The lack of proper oversight over the BMO model limits the ability of the Department to assess whether the model is achieving its objectives and supports the Departmental mandate. In addition, limited strategic and operational direction, and guidance for the BMO model may cause inconsistencies between BMOs’ services and processes.

BMO Roles and Responsibilities

It was expected that the Department would have clearly defined and communicated the BMO model, including roles and responsibilities. The audit team examined various internal sources describing roles and responsibilities of the BMOs and functional specialists, and found that the BMO’s roles and responsibilities were not defined, communicated and understood in a consistent and clear manner by all stakeholders .

The audit team reviewed the BMOs’ roles and responsibilities in the areas of contract, financial and human resources management in various internal sources such as the Intranet, generic work descriptions associated with various levels of position of BMO employees and functional advisors, and in several processes defined in Modus. A description of the BMOs, FMAs and Fund Centre Managers’ roles and responsibilities was developed and shared with BMOs and FMAs. A business process inventory of detailed BMO tasks in relation to finance, human resources and contracting was also created by SMD.

Having BMO roles and responsibilities defined in different documents makes it more difficult to communicate and has caused confusions among BMO employees, functional advisors and clients in terms of their respective roles and responsibilities.

Although the audit interviews indicated that the BMOs directors and officers generally understood their roles and responsibilities, and the processes used for implementing requested services, the BMOs’ clients and their functional partners were not always clear on the specific tasks BMOs could perform. As a consequence, the BMOs received requests that were unrelated to their services (e.g. service requests for office space or related to grants and contributions) or beyond BMO’s basic subject matter knowledge and experience (e.g. service requests related to salary discrepancies resulting from Phoenix issues) or duplicated efforts occurred between the BMOs and the FMAs (e.g. both BMO and FMA are meeting with clients for monthly and year-end FINSTAT reports and requiring same information) or services were performed by the FMAs rather than by BMO employees. This lack of clarity in the roles and responsibilities results in inefficiencies, which may impact achievement of BMO objectives.

Monitoring of BMO Activities

It was expected that monitoring of BMO activities would be in place to ensure they add value to the business operations and programs through the provision of quality services to the BMOs’ respective Branches. The audit team examined the monitoring done by the Payment Services Division (SMFP) and the BMO Directors and Team Leaders, and found that the level of monitoring effort varies and that results of monitoring were not communicated to CMC.

The departmental Payment Services Division (SMFP) performs account verification on payment transactions and provides error reports on data entries to the BMOs to assist in improving quality of the services and identifying training needs of employees. In addition, meetings between BMO Directors and Team Leaders generally take place to discuss priorities, work load, vacancies and staffing; to provide punctual control over the BMO activities; and to address issues as they arise.

However, day-to-day monitoring by BMO Directors and Team Leaders was inconsistent across the BMOs, with some providing good oversight and quality control over their respective teams, and others performing very little. The monitoring effort is dependent of the competency and experience of the BMO employee with regard to finance, human resources and contracting. In addition, CMC was not provided with the results from these monitoring initiatives.

The lack of monitoring and reporting on BMO services limits the ability of senior management to assess the effectiveness of services rendered.

Recommendation 1:

The Chief Financial Officer should ensure that the BMOs’ roles and responsibilities in the areas of contract, financial and human resources management are consistently and clearly defined and communicated to BMOs, their clients and functional partners; and should regularly report to the Corporate Management Committee allowing it to exercise its oversight and provide adequate direction.

Recommendation 2:

The Chief Financial Officer should increase the level of monitoring effort on BMOs’ activities to ensure that the quality and timeliness of BMOs’ services are achieved to support the Branches’ operations, and that monitoring results are presented to the Corporate Management Committee.

2.2 Meeting Operational Needs

It was expected that the Department’s operational needs would be met in a consistent manner across all BMOs, which helps to achieve operational efficiencies. The audit team examined whether BMOs have a good understanding of client operational needs and expectations; whether BMOs provide services in a consistent manner through standardized and automated procedures, and whether BMOs have measures in place to ensure the quality and timeliness of their services, including sharing good practices and lessons learned among them. The audit team found that services provided by the BMOs were easy to access and clients’ service requests were generally executed by the BMO. Areas for improvement were identified to increase the efficiency and quality of the services.

Understanding Clients’ Operational Needs and Expectations

The audit team expected that BMOs would have a good understanding of their client’s needs and expectations. The audit team conducted an anonymous survey and interviewed a sample of BMO’s clients and functional specialists in finance, HR and contracting. The audit team found that clients’ needs and expectations are generally met.

The service requests are typically sent by clients through emails. Occasionally, service requests are made through meetings between BMO employees and clients as needed. The results of interviews and the survey showed that clients were moderately satisfied with the services provided by BMOs in terms of ease of access and their execution, and acknowledged that the BMOs have added value to the Branches. However, BMOs indicated that sometimes the requests were not well communicated by the clients (e.g. as there was no naming convention or formal templates to make a request, BMOs may not have been able to clearly identify the client’s needs). As a result, client requests may not be fulfilled as expected, which may cause some delays due to additional clarification.

Standardized and Automated Procedures

The audit team expected that BMO’s services would be provided in a consistent manner supported by standardized and automated procedures when applicable. The audit team examined the departmental web application Modus that hosts some of the business processes and related tools that employees need to do their work and stay informed of departmental practices. The audit team found that several business processes used by BMO were found in Modus. However, results of interviews with BMO employees and clients indicated that processes were not consistently followed by BMO staff and more processes could be standardized and automated to improve the quality and timeliness of services rendered.

The Department has systems and tools in place which facilitate process standardization such as the Financial and Administration System (FAS), the Human Resources Management System (HRMS) and some corporate tools, such as the FINSTAT integrated planning report, the Salary Forecasting Tool (SFT), the Procurement and Material Management Toolbox, the Procure to Pay (P2P) tool^{Footnote 1} and Shop@DFATD, the Department automated system to order goods and services. The audit team reviewed the processes used by BMOs to perform requested services and found that several standardized business processes using these systems and tools were followed as expected. However, instances were also identified where standardized processes were not respected. For example, the FINSTAT process, which was recently standardized, does not require the BMOs to meet face-to-face with the clients each month, but some BMOs continue to meet in person monthly at the request of clients.

Although efforts were being made for services to be provided through standardized and automated procedures, the audit team found that more procedures could be standardized and automated. For example, the use of the Salary Reconciliation Tool (SRT) could have been standardized. This tool was created to harmonize among the BMOs the calculation of salary irregularities due to Phoenix. Through the process review, the audit team found that one employee uses other means than SRT to calculate salary irregularities. Other inconsistencies were also identified in the calculation of salary forecasts. For example, some BMO’s employees input an assignment end date for mobile or rotational employees, while others don’t, which may result in salary forecasts being overstated. Additionally, inconsistent practices by functional specialists have also created challenges to the BMOs.

Additional opportunities for automation were identified, which would generate greater process efficiency and provide value to the Department. For example, there is no interface that would automatically update the SFT when a staffing action is recorded in the HRMS. As well, there was no automatic control in P2P to avoid invoices to be submitted twice for payment, which would avoid duplicate payments.

In summary, the lack of standardization of some BMOs’ procedures, the inconsistencies in the application of the procedures that have been standardized, and not automating further some of the BMOs’ processes represent loss of opportunities to enhance efficiency and effectiveness of services rendered by the BMOs.

Quality and Timeliness of the Services

The audit team expected that measures would be in place to ensure the quality and timeliness of the services provided by the BMOs. The audit team examined the management practices in place and found that expected measures were insufficient to ensure the quality and timeliness of the services provided by the BMOs, which limits the ability of management to make adjustment to improve services.

The BMO employees interviewed indicated that the quality of their services rests with the team leader and the officers reporting to them. Quality review conducted by the BMOs resulted in the identification of errors such as in the salary coding, preparation of the FINSTAT reports, contracting and salary forecasting (e.g. wrong pay increase date and pay rates, and inconsistency with recent staffing actions such as departure and arrival). Once the errors are identified, BMOs indicated that the team leaders request them to make the necessary corrections. Employees interviewed also indicated that errors may be due to a lack of knowledge and training, or the lack of sufficient time to complete the tasks and/or staff turnover.

Another measure in place to help improve quality of BMO’s services is the SMFP error report provided to the BMOs following account verification. Errors presented in this report include late payment of invoices, incorrect date of receipt of invoices, lack of documentation substantiating the payment, and invoices processed twice for payment. Based on interviews with the BMO management team, only some BMOs use the error reports to identify areas where additional training or instructions may be needed.

To ensure that services are provided by the BMOs with sufficient and up-to-date knowledge through appropriate training, the audit team reviewed the BMO training roadmap that was intended to be used for all BMOs’ employees. It includes courses in relation to services performed by the BMOs, such as budgeting, forecasting, procurement, and the FAS and HRMS systems. BMO employees interviewed indicated that additional training could benefit them in areas such as contracting, human resources management, management skills, Phoenix-related tasks and the FINSTAT process. The audit team examined some employee learning plans and noted that training activities were generally aligned with the BMO training roadmap.

A key measure to ensure quality and timeliness of services is the establishment of service standards. Service standards help clarify expectations for clients and the BMOs, drive service improvement, and contribute to results-based management. The audit team found that in order to deliver timely and responsive services that are both reliable and accessible to all clients, common service standards were developed in April 2018 that define a timeframe for completion of several BMO services. While the intent was for all BMOs to communicate the service standards to their clients, the audit team found that not all BMOs had done so. In addition, there was no system in place to track service time in support of the service standards. As a result, management could not measure whether BMO’s services would meet targeted service standards.

Another key measure to improve the quality of the services is through the sharing of good practices and lessons learned. The audit team found that there was no formal mechanism for sharing good practices and lessons learned among BMO officers. Two BMO groups were created in the departmental collaboration tool Agora to encourage exchange of ideas, knowledge and information but uptake has been limited. Some BMOs shared good practices and lessons learned at the team level and some had informal meetings with functional advisors to promote information sharing. Some BMO directors inquired about lessons learned but sharing of the good practices and lessons learned was not part of their routine agenda. The lack of a formal mechanism to share best practices and lessons learned may lead to a loss of opportunity for improving the quality and services rendered by the BMO community.

The audit team expected that the BMOs’ management would have put in place, after fulfilling a client request, a process to obtain feedback from their clients and functional partners for the purpose of driving service improvement. However, the audit team did not find such a process.

The audit interviews and client satisfaction survey showed that services provided by BMOs were mostly timely from clients’ perspectives. However, there can be delays in the preparation of the over/under-payment salary reconciliation, which is a time-consuming exercise, as well as in contracting due to the lack of expertise.

Recommendation 3:

The Chief Financial Officer should put measures in place to enable further standardization and automation of BMO processes in order to gain greater process consistency, effectiveness and efficiency.

3. Conclusion

The audit concluded that the BMO model has supported the Departmental mandate through the provision of requested services in the areas of contract, financial and human resources management.

However, many challenges were identified in current BMOs’ business processes concerning efficiency, standardization and consistency of services provided to clients.

These audit recommendations are designed to increase the chance of successful implementation of the consolidated BMO model. While this new model presents potential benefits, it is equally important to note that it also presents the following three key risks:

1. Reduced direct access to BMO services for branch managers;
2. Reduced understanding of branch business needs; and
3. Increased challenges to prioritize competing service requests.

Appendix A: About the Audit

Objective

The objective of the audit was to provide assurance that the BMOs support the departmental mandate through the provision of standardized, consistent and efficient business management services to Branches in the areas of contract, financial and human resources management.

Scope

The audit examined the governance structure, monitoring activities, processes and measures in place to meet operational needs, as well as the training, tools and expertise made available to the BMOs.

The BMO bureaus MINL–DCD and USS–DBMO were excluded from the scope of the audit due to their unique work environment, as well as the special nature of the activities and clients to whom they provide services.

The audit covered the BMOs activities for the period from April 1, 2017 to January 15, 2019.

Criteria

Criteria were developed based on a detailed risk assessment as detailed below.

Methodology

The 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. These standards require that the audit be planned and performed in such a way as to obtain reasonable assurance that the audit objective is achieved. In order to conclude on the audit objectives, the following methods were used to gather evidence:

• Policy and documentation review and analysis;
• Client satisfaction questionnaire;
• Process review and mapping;
• Interviews with departmental officials;
• Information analysis and consolidation; and
• Other tests as deemed necessary.

Appendix B: Business Management Office – Business Process Flowchart

Text version

Appendix B: Business Management Office – Business Process Flowchart

Source: VBD Compilation from Departmental Processes and Documents

The flowchart illustrates four key Business Management Office (BMO) processes related to finance, human resources, contracting (under $25K) and reporting. The roles of the client, BMO, Financial Management Advisor (FMA), human resources, contracting and corporate finance in relation to these four processes are illustrated in the flowchart.

Finance:

The process starts with either the client or corporate finance making a request for a service related to finance. If the service request is addressed to the BMO and can be directly executed, the BMO executes the request, and the process ends with the client or corporate finance receiving the service that they have requested. If the BMO cannot execute the request because it needs advice, advice can be provided by the FMA. With the advice provided by the FMA, the BMO executes the service request, and the process ends with the client or corporate finance receiving the service that they have requested. If the BMO cannot execute the request because it is the responsibility of the FMA, the FMA executes the request and the process ends with the client or corporate finance receiving the service that they have requested. The FMA can also request and receive a service from the BMO. Finally, corporate finance can make a request for a service related to finance to the FMA. If the service request can be executed directly by the FMA, the FMA executes the request, and the process ends with corporate finance receiving the requested service. If the FMA cannot execute the request because it is the responsibility of the BMO, the BMO executes the request and the process ends with corporate finance receiving the requested service.

Human resources:

The process starts with the client making a request for a service regarding human resources to the BMO. If the service request can be executed directly by the BMO, the BMO executes the request, and the process ends with the client receiving the requested service. If the BMO cannot execute the request because it needs advice, advice can be provided by human resources. With the advice provided by human resources, the BMO executes the service request, and the process ends with the client receiving the requested service. If the BMO cannot execute the request because it is the responsibility of human resources, human resources execute the request and the process ends with the client receiving the requested service. Human resources can also request and receive a service from the BMO.

Contracting (under $25K):

The process starts with the client making a request for a service regarding contracting (under $25K) to the BMO. If the service request can be executed directly by the BMO, the BMO executes the request, and the process ends with the client receiving the requested service. If the BMO cannot execute the request because it needs advice, advice can be provided by contracting. With the advice provided by contracting, the BMO executes the service request, and the process ends with the client receiving the requested service.

Reporting: 

The process starts with either the client or corporate finance making a request to the BMO for a service related to reporting. If the service request can be executed directly by the BMO, the BMO executes the request, and the process ends with the client or corporate finance receiving the service that they requested. If the BMO cannot execute the request because it needs input, input can be provided by the FMA or human resources. With the input provided by the FMA or human resources, the BMO executes the service request, and the process ends with the client or corporate finance receiving the service that they have requested.

Appendix C: Management Action Plan