Audit of Management Practices of Missions - Brazil Platform

Audit report
Office of the Chief Audit Executive
November 2023

Table of contents

• Executive summary
• 1. Background
• 2. Observations and recommendations
• 3. Conclusion
• Appendix A: About the audit
• Appendix B: Management Response and Action Plan

Executive summary

In accordance with Global Affairs Canada’s approved 2022-2024 Risk-Based Audit Plan, the Office of the Chief Audit Executive conducted an audit of Management Practices of Missions – Brazil Platform. These Missions include the Embassy of Canada to Brazil located in Brasilia and the Consulates General of Canada in Sao Paulo and Rio de Janeiro.

The objective of this audit was to assess whether sound management practices and effective controls were in place to ensure appropriate stewardship of resources at the missions in the Brazil Platform to support the achievement of Global Affairs Canada objectives.

Why it is important

Global Affairs Canada 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 its 2021-2022 Departmental Results Report, Global Affairs Canada spent $1,063M 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

The audit examined the management practices of the Management and Consular Services Program and other programs from April 2020 to March 31, 2023. Lines of enquiry included accountability and oversight, local procurement, management of assets (cash and non-cash), and human resources.

What was found

The audit concluded that sound management practices and effective internal controls were generally in place at the three missions in the Brazil Platform. Overall, the missions were complying with departmental policies and directives related to the management of procurement, real property, fleet, petty cash, locally engaged staff hiring processes, and overtime.

Various forums across the three missions promoted communication and collaboration. However, documenting a unified vision and expected functioning of the programs, including the tri-post communication channels, would help foster synergies across the missions. In addition, key mission committees were not always operating as expected with regular meetings, terms of reference and documented minutes. Finally, inventory management of attractive goods (equipment, appliances, and electronics) could be strengthened with the implementation of stronger tracking and control practices.    

Statement of Conformance

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, as supported by the results of the external quality assurance and improvement program.

Summary of Audit Findings

1. Background

The departmental 2022-2024 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 risk. The Brazil Platform, comprising the Embassy of Canada to Brazil in Brasilia and the Consulates General of Canada in Sao Paulo and Rio de Janeiro (Rio), was part of the selected missions. These audits are intended to provide senior management with assurance regarding the state of management practices in supporting prudent management and good stewardship of resources in select missions.

The Brazil Platform

The Brazil Platform has 164 staff comprising 32 Canada-based staff (CBS) and 132 locally engaged staff (LES). The Brasilia and Sao Paulo missions are full-service missions that include the following programs: Common Services, Trade, Foreign Policy and Diplomacy Service, Consular, and Readiness program. The Rio mission provides the same services but in a smaller capacity. There are also two trade offices in Porto Alegre and Recife that report to the Sao Paulo mission. The Rio mission oversees a trade office as well and an Honorary Consul position in Belo Horizonte, which is currently vacant. The Platform receives support from the Common Service Delivery Point in Washington, D.C. (CSDPWS), which provides financial, contracting and procurement, and human resource administration services.

There are three partner departments and two co-locators that carry-out programming at the missions, as shown in Table 1 below. In addition, mission operational expenditures, along with property and fleet details, are outlined in Tables 2 and 3, respectively below.

2. Observations and recommendations

2.1 Oversight and accountability

Audit criteria:

Adequate governance is in place to support proper stewardship of mission resources.

• Effective oversight is in place to support good stewardship of resources.
• Accountabilities, roles and responsibilities of mission management are established, clear, and communicated.

Observations are based on interviews with key staff and a review of terms and reference and meeting minutes of various committees and working groups.

Oversight at the platform level

The establishment of a Brazil Platform recognizes that a cooperative approach is needed among Brasilia, Sao Paulo and Rio missions to operate effectively individually as well as together. The three missions share responsibilities related to trade activities, foreign policy reporting, consular services, security activities, and functions pertaining to the common services program.

The audit noted that a number of platform forums at various levels take place to foster cross communication among missions, as described below.

Tri-Head of Mission (HOM) Call was established as one of the main mechanisms for collaboration as part of the Platform approach. It is chaired by the Brasilia HOM and takes place occasionally. It is important that this communication channel take place regularly to foster the sharing of information and provide guidance in order to set common direction and messaging across the Platform.

Tri-Post Meeting is an all CBS committee that is chaired by the Brasilia HOM. It is held about every two months to discuss the priorities of the Platform. CBS expressed varying views on its usefulness since the focus was more on day-to-day operational activities at the mission and therefore, less relevant to programs’ specific undertakings. It may be beneficial to define and communicate a clear purpose of this forum to promote synergies across programs.  

Brazil Communications Working Group is co-chaired by the Foreign Policy and Diplomacy Service program managers in Brasilia and Sao Paulo missions. It comprises representatives from programs that have external communication functions such as Trade, Foreign Policy and Diplomacy Services, and Consular. This working group meets monthly to collaborate and provide direction on Brazil Platform communication initiatives, activities, advocacy, official platform media, etc. There are terms of reference and documented minutes. This working group had been newly established and members indicated that it was working well overall since its conception.

Platform Trade Meeting is led by the Sao Paulo trade program manager on a monthly basis for all trade staff.  While the Brasilia mission, situated in the capital, sets the tone and direction on bilateral relationships, the Sao Paulo mission sets the strategic direction for the program, being located at the economic center of Brazil with over 19 million people. Certain members of this forum questioned whether the legacy division of responsibilities and territorial coverage in Brazil that were being practiced, were appropriate. The Platform Trade program would benefit from reviewing its structure and responsibilities to optimize the trade function in Brazil.   

Management and Consular Officer Working Group Meeting is a weekly forum to discuss matters such as the development of policies and input into the department’s annual planning exercise. Members indicated this meeting to be useful to share information about common processes and practices.

Human Resources (HR) Working Group is composed of all CBS and LES HR staff. It takes place monthly to standardize LES HR-related activities across the Platform. Members expressed the usefulness of this group to keep abreast of LES HR matters.   

Brazil Readiness Working Group is chaired by the Brasilia Readiness program manager and includes all members of the readiness program across the Platform. A bi-weekly meeting takes place with fixed agenda items. Members indicated that this forum was purposeful in order to collaborate on common security-related Platform documents and processes and promote streamlined practices. The readiness program officers also step in to replace each other during absences to provide support to across the Platform.

Information Technology (IT) Communication takes place through weekly meetings between the FSITP (foreign service IT professional) in Brasilia and the LES IT staff in Sao Paulo to share information and ask questions. The FSITP makes quarterly visits to the other missions and troubleshoots issues remotely when necessary, especially with the Rio mission, since there is no dedicated IT personnel. Overall, the missions indicated adequate support.  

Overall, a sufficient number of forums are in place and are generally working well. However, these tri-post communication channels take place on an ad hoc basis. Therefore, there are opportunities to improve the Platform’s structure by formalizing these forums and communicating a unified vision of the expectations and functionality across the Platform. This would leverage knowledge across various programs and help ensure the continuity of synergies, especially due to CBS rotations.  

Recommendation 1

The Brasilia Head of Mission, in collaboration with the Sao Paulo and Rio Heads of Mission, should document and communicate the following:

• A unified vision that sets the tone, expectations, and functionality within the Platform; and
• A list of forums at the Platform level, including its lead, purpose, and frequency.

Oversight at the mission level

The audit expected that key mission committees operate effectively to exercise oversight of procurement, asset management and human resource activities. 

A governance structure was in place at the Brasilia mission with several key committees such as the Committee on Mission Management, Mission Housing Committee, Locally Engaged Staff Management Consultation Board, Occupational Health and Safety Committee and Readiness Committee. The Brasilia Occupational Health and Safety Committee and Locally Engaged Staff Management Consultation Board did not have updated membership lists, were not taking place regularly, and did not always have documented minutes. However, LES indicated that, at Locally Engaged Staff Management Consultation Board meetings, although not all of their concerns raised could be addressed, their issues were acknowledged by mission senior management. Given that there is a Canada Club on the Brasilia mission compound, an Executive Committee has been identified. At the time of the audit, its constitution was in the process of being updated and the committee had not met since October 2022.

A similar governance structure was in place at Sao Paulo and Rio missions with multiple committees such as the Committee on Mission Management, Locally Engaged Staff Management Consultation Board, and Mission Housing Committee, except the Occupational Health and Safety and Readiness committees, which were not required at the Rio mission due to its small size. With the exception of the Locally Engaged Staff Management Consultation Board, these committees met regularly with the participation of at least one member of mission management. The LES in Sao Paulo and Rio missions expressed a lack of acknowledgement and attention to their concerns raised at the Locally Engaged Staff Management Consultation Board meetings. In addition, certain committees had no updated terms of reference or documented minutes.

The regular functioning of key mission committees is important to ensure oversight of operational functions such as finance and procurement, asset management, human resources, and security. In addition, formalized terms of reference support clarity of mandates among members while documented minutes support planning, information sharing, decision-making, and any follow-up actions.  

Recommendation 2

The Heads of Mission in the Brazil Platform should ensure that key mission committees have formal terms of reference and function as intended with respect to frequency and documented minutes.

Accountability, roles and responsibilities

Overall, the staff across the Platform understand their roles and responsibilities pertaining to procurement, asset management, security, health and safety, and HR. However, staff expressed a need for additional guidance to better carry out their responsibilities in the following areas of procurement and contracting processes, tracking furniture, appliances and maintenance equipment, and LES staffing processes. Even though there are directives and guidance for procurement and asset management, including inventory, available on internal departmental sites, staff were not always aware of these reference tools.

2.2 Local procurement

Audit criteria:

Effective controls are in place to ensure that procurement and payment of goods and services comply with relevant policies and legislative requirements and achieve value for money.

Observations are based on interviews and the examination of procurement processes, mechanisms, and tools, from initiation to payment. It also included a review of a sample of 55 procurement transactions and contracts between April 1, 2020 and March 31, 2023.

Observations:

Overall, procurement practices at all three missions were found to be managed effectively to support procurement activities in compliance with departmental policies and applicable legislative requirements.

The missions engage in the annual business planning exercise, which identifies upcoming procurement needs. Some procurement needs were not planned within this process and rather were initiated on an as-needed basis. Within the sample reviewed, instances were found in the Brasilia and Sao Paulo missions where documentation was not always retained to support transactions such as cleaning, temporary help, painting services, electronics and plants. Interviews confirmed that the lack of resources and the pandemic made it difficult for the mission to proactively plan, which the missions have started to rectify by using procurement plans.

Based on a sample of transactions reviewed at the Brasilia mission, no issues were identified in the areas of procurement approach and payment methods. There were also no notable issues identified in the small sample of Rio mission transactions, which has a lower volume of procurement compared to the other missions. However, an exception was noted for the Sao Paulo mission relating to two instances of split transactions on acquisition cards.

The audit found that Brasilia and Sao Paulo missions tended to rely on recurring vendors for services such as interpretation, cleaning, and repairs and maintenance. All three missions indicated that it was difficult to identify good quality and reliable vendors. Also, it was a challenge to establish long-term contracts due to inflationary costs. Within the sample reviewed, the Brasilia and Sao Paulo missions had instances where some vendors had multiple low-value transactions that, when combined, exceeded $5,000 annually, the threshold amount at which establishing a purchase order is required. Grouping services from the same vendors under a single purchase order or contract could help the missions avoid uncontrollable cost increases, leverage negotiations, and maximize value for money.

Brazil’s banking system is highly regulated, making it impossible for the CSDPWS to process payments from outside of Brazil. An example of a bank regulation is the Boleto, which is an official payment method regulated by the Central Bank of Brazil where vendors authorize their bank to issue and collect payments on their behalf. A Boleto has its own expiration date with compounding daily interest if the payment date is not respected. As a result, a LES position was established at the Sao Paulo mission that carries out both mission and CSDPWS functions to issue payments in accordance with local regulations as well as in a timely manner.

In general, controls related to procurement activities were in place and the minor discrepancies mentioned above were debriefed to mission management at the end of the audit team’s on-site work.

2.3 Asset management

Audit criteria:

Effective controls are in place to ensure that the management of assets (cash and non-cash items) complies with relevant policies and legislative requirements.

Observations are based on an examination of the management of the following cash assets (consular revenue petty cash accounts and standing advances) and non-cash assets (property, vehicles, fuel, and material management and inventory).

Observations:

Overall, controls are in place to adequately manage consular revenue, petty cash, standing advances, real property and fleet management. There are, however, opportunities to improve certain processes, including the management and tracking of assets.

Consular revenue

In all three missions, payments are collected via the Mission Online Payment System (MOPS), an online credit card payment system. The system generates receipts and sends them to clients by email. This automated process eliminates any risks associated with the handling of cash.

Petty cash and standing advance

The petty cash accounts at missions were adequately safeguarded. Although they were reconciled once or twice per year, no random counts were done, as required. The Sao Paulo and Rio missions have standing advances for drivers, which were kept in their personal bank accounts and reconciled at year-end.  

Real property

The real property portfolio at the three missions is actively managed to meet evolving needs. The missions maintain an up-to-date preventative maintenance schedule to plan for regular repairs and maintenance work. In addition, missions plan for minor fit ups or renovations based on inspections of staff quarters during the rotation period.

It was noted that the Brasilia mission’s physical structure and layout impeded the functionality of day-to-day operations in terms of a lack of meeting rooms and common spaces, and reliable IT infrastructure. In addition, significant physical security issues were noted as well as vacant land owned by the Crown.

The physical layout of the Sao Paulo mission, on the 16th and 20 th floors of an office tower, also highlighted certain deficiencies, such as a lack of all-staff meeting space, insufficient restrooms, and minimal interaction between staff on each floor, thereby preventing a cohesive working environment.

The Rio mission is located in an office building on the 13 th floor with a layout that encourages collaborative work, but has limited meeting space to accommodate all staff. The audit team also noted physical security concerns at this mission.

The real property and physical security bureaus at headquarters are aware of these constraints at the three missions and are working with the missions to address them.

Vehicle fleet

The vehicle fleet was managed effectively with respect to the ongoing maintenance and disposal of vehicles. Missions have a plan to budget and track upcoming maintenance and repairs of the vehicles. Each trip was recorded in vehicle logs, which were often reviewed by respective managers. However, the audit noted that the Brasilia and Sao Paulo missions did not have formal mechanisms in place to monitor and track vehicle fuel purchases and consumption to detect any misuse.

Material management and inventory

The Missions manage various types of inventories in its Chanceries, Official Residences and staff quarters. These assets include household furniture, appliances, electronic items, IT equipment, tires, maintenance parts, and other supplies. With respect to the lifecycle management of inventories, the audit team noted the following:

• Due to the vast compound of the Brasilia mission, storage areas are located away from the main Chancery. The furniture, maintenance equipment and tools in these storage areas were not tracked appropriately despite the mission having access to a departmental inventory management application, Sortly. The items in the storage areas were not kept in an organized manner, and not safeguarded. There was also limited tracking of inventory in staff quarters. IT assets that were kept on the premises of the mission were tracked and adequately safeguarded. 
• In Sao Paulo, the mission had a few storage rooms in the basement of the office building that were adequately safeguarded. An inventory list was kept and the audit team could identify most assets. However, there were piles of furniture and IT assets that were awaiting disposal and occupying storage space. In addition, IT assets stored on mission premises were not organized and inadequately safeguarded. The inventory of staff quarters was maintained and tracked appropriately. 
• The Rio mission is small and located on one floor in an office building with limited storage space. Therefore, minimal miscellaneous items and IT inventory are stored, which was found to be safeguarded and tracked using an excel document.

The level of inventory management varied across the missions. Stronger practices surrounding the oversight of inventory are needed at the Brasilia mission to prevent losses from theft, misplacement, duplicate purchases, and erosion. In addition, by not disposing of items in a timely manner, the Brasilia and Sao Paulo missions carry excess items that occupy storage space and risk selling items that no longer have a reasonable market value.   

Recommendation 3

To strengthen asset management practices,

• the Brasilia Head of Mission should record, track, safeguard and dispose of attractive items to facilitate inventory control and lifecycle management; and
• the Sao Paulo Head of Mission should dispose all excess items in a timely manner and safeguard its IT assets.

2.4 Human resources

Audit criteria:

Human resources processes and practices comply with applicable legislative requirements and policies.

Observations are based on a review of documentation for five LES staffing actions and three LES overtime transactions.

Observations:

In general, staffing and overtime processes were well managed. Based on a sample of five LES staffing actions across all three missions, actions were completed in compliance with relevant policies. Missions indicated that they experienced inconsistent advice and long response times from CSDPWS that resulted in delays in staffing processes.

A review of the overall LES overtime expenditure practices and oversight, as well as a sample of overtime transactions, found that LES overtime is effectively managed. The missions recently introduced monthly attendance forms for LES staff, which capture leave and overtime information. This is transposed into an excel tracking worksheet that supports each mission’s payroll computations.

3. Conclusion

The audit concluded that sound management practices and effective internal controls were generally in place within the three missions in the Brazil Platform. Overall, the missions were complying with departmental policies and directives related to the management of procurement, real property, fleet, petty cash, locally engaged staff hiring processes, and overtime.

Various forums across the three missions promoted communication and collaboration. However, documenting a unified vision and expected functioning of the programs, including the tri-post communication channels, would help foster synergies across missions. In addition, key mission committees were not always operating as expected with regular meetings, terms of reference and documented minutes. Finally, inventory management of attractive goods (equipment, appliances, and electronics) could be strengthened with the implementation of stronger tracking and control practices. 

Appendix A: About the audit

Audit objective and criteria

The objective of the audit was to assess whether sound management practices and effective controls are in place to ensure good stewardship of resources at the missions in the Brazil Platform in support of the achievement of Global Affairs Canada objectives.

The missions’ management practices were assessed against the following criteria:

Audit scope

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

• Management practices at the missions including the roles and responsibilities of key mission staff involved in managing operational resources across missions’ programs;
• Expenditures of the missions within the common service, property, security and other departmental programs’ operational budgets^{Footnote 1} from April 1, 2020, to March 31, 2023;
• Management of assets, including the physical security aspect, at the missions with a focus on real property, vehicles, machinery and equipment, and material inventory; and
• Staffing processes and overtime relating to locally engaged staff.

This audit focused on management practices of the three missions: Brasilia, Sao Paulo and Rio, including their oversight of trade offices. Since the Honorary Consul position was vacant, the management of this position was excluded from the audit. The scope also included a review of the support services that the missions receive from the Common Service Delivery Point (CSDP) located in Washington, D.C. The audit did not, however, include an assessment of the operations of the CSDP directly.

Approach and methodology

The audit was conducted in accordance with the Institute of Internal Auditors’ International Standards for the Professional Practice of Internal Audit and the Treasury Board Policy on Internal Audit. These Standards require the audit be planned and performed in such a way as to obtain reasonable assurance to achieve audit objectives.

In order to assess the above criteria and conclude on the audit objective, the audit methodology included, but was not limited to the following:

• Review applicable acts, policies, directives, and guidelines;
• Review and analyze relevant documents related to mission operations;
• Data analytics of mission expenditures
• Walkthrough of mission processes and systems, and identify key controls;
• Sample testing of transactions;
• Perform confirmation/reconciliation tests, such as inventory counts and receipt of contracted goods and services;
• Interviews with management and staff at missions and relevant employees at Headquarters and Common Service Delivery Point;
• On-site audit procedures performed at the missions from June 10 to 28, 2023;
• Visits to selected foreign missions in Brasilia for benchmarking; and
• Other relevant methods as deemed necessary.

Appendix B: Management Response and Action Plan