Audit of Management Practices of Missions - Dhaka

Audit report
Office of the Chief Audit Executive
June 2023

Table of contents

• Executive summary
• Background
• Observations
• Conclusion
• Appendix A: about the audit

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 the management practices at the High Commission of Canada in Dhaka, Bangladesh (the Mission). The objective of this audit was to determine whether sound management practices and effective controls were in place to ensure appropriate stewardship of resources at the Mission 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 to provide 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 2019 to September 2022. Lines of enquiry included accountability and oversight, planning and budgeting, local procurement, management of cash and non-cash assets, and human resources.

What was found

The audit concluded that the Mission was exercising sound management practices and effective controls to ensure the appropriate stewardship of resources. Specifically, the Mission had some very experienced managers in place to help ensure the Mission ran smoothly, and to help support less experienced program managers. Overall, the management practices related to staffing process and overtime, along with the effective management committees, accurate asset listings and the handling of procurement transactions were operating effectively and in accordance with applicable policies and procedures.

The audit did raise some areas for further consideration by management, specifically related to the safeguarding of its petty cash accounts and the disposal process and ongoing safeguarding of the various IT assets. The audit also raised areas opportunities to better plan for cyclical replacements of various assets, including air conditioners, through the inclusion of additional information within their asset tracking lists. Finally, the audit also raised future oversight challenges that may occur with the upcoming departures of some very experienced managers at the Mission. These concerns were raised with management during the on-site work and management committed to implement actions to address them

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.

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 High Commission of Canada in Dhaka, Bangladesh (the Mission) was one 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 High Commission of Canada in Dhaka, Bangladesh is a medium-sized mission with 54 staff: 16 Canada-based staff (CBS) and 38 locally engaged staff (LES). The Mission’s overall expenditures are approximately $4.5 Million per year. Table 1 shows the expenses per fund centre over the last three years.

Table 1 – Expenditures per fund centre

Source: Finance and Administration System: Expenditures Report
* Programs Include: Head of Mission, Trade, Foreign Policy and Diplomacy Services, Consular and Development

The Common Services section provides administrative and operational support to the Mission’s programs and is responsible for financial transactions and human resources activities. The property, materiel, and transportation section is responsible for the maintenance and inventory of the crown-owned Chancery, Official Residence, fifteen leased staff quarters and nine vehicles. The Mission receives financial, contracting and procurement service support from the Common Services Delivery Point (CSDP) in New Delhi, India. The Management and Consular Officer manages the Common Services Program with support from a Deputy Management and Consular Officer. The Mission is a hardship posting, and the local environment has an impact on the Mission's operations.

Observations

Accountability and Oversight

Audit Criteria:

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

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

Observations:

Accountabilities, roles and responsibilities

Accountability at the Mission rests with the Head of Mission, who reports to the Director General of South Asia Bureau under the Assistant Deputy Minister of the Asia Pacific Branch. At the time of the audit, the Head of Mission had been posted to the Dhaka Mission for approximately ten months, and the Management and Consular Officer for three years.

Overall, accountabilities and roles and responsibilities for both Canada-Based Staff and Locally Engaged Staff were found to be clear and understood. Through interviews conducted with key staff, the need to have additional training to advance their knowledge and ability to support the mission’s operations was raised. The pandemic and other travel issues, including challenges in obtaining visas to travel to the CSDP in Delhi, limited staffs’ ability to receive training in person. During this time, staff participated in online training, and the CSDP would provide additional direction as needed. However, the lack of in-person supports for certain functions, including IT, has had an impact on the staff’s ability to fully undertake their roles and responsibilities.

The audit team noted that the mission has difficulty in attracting Canadian Based Staff, and currently has some in management roles with limited management experience. Therefore, to compensate, certain managers take on additional oversight responsibilities for areas they are not directly responsible for. Some of the Mission’s experienced managers are rotating out this summer, and with that, the Mission will lose a significant amount of corporate knowledge and may impact its ability to support less experienced managers. Management would benefit to ensure that all managers obtain appropriate knowledge to undertake their roles to ensure that the good management of operations at the mission can continue.

Mission Committees

The Mission has established various governance and oversight committees, including the Committee on Mission Management and the Mission Housing Committee. The audit found that the committees were functioning per their respective mandates and had up-to-date Terms of References.

The Committee on Mission Management, which is chaired by the Head of Mission, and is comprised of program managers, oversees the Mission’s overall management. The Committee meets several times a month to discuss financial affairs, human resources activities, procurement, asset management and security matters. Program representatives present information to provide an understanding of important updates within each program and the actions needed.

The Mission Housing Committee is responsible to advise the Head of Mission about the provision, allocation and administration of staff quarters. The membership is comprised of a variety of Canada-Based Staff appointed by the Head of Mission. Through a review of committee discussions, it was found that the Housing Committee has regular communication and provides necessary information to assist the Head of Mission in making relevant decisions about staff quarters.

Planning and Budgeting

Overall, the audit team found ongoing planning and budgeting exercise were regularly taking place at the Mission. As is required for all missions, Dhaka uses Strategia, the corporate integrated planning and reporting tool, to manage the Mission’s budget and to outline planned activities for each expenditure area.

The Committee on Mission Management reviews the Financial Status (FINSTAT) reports and is provided with updates throughout the year. In addition, detailed discussions on programs’ budgets and on FINSTAT occur regularly between the Head of Mission and individual program managers during meetings.

To further assist its planning and budgeting process, the Mission maintains a detailed work plan for the preventive and routine maintenance of its properties, including staff quarters. The plan includes the type of maintenance and repair needed, the frequency and the expected costs. The Mission also has a five-year plan containing a list of major projects for crown owned properties and is communicated to headquarters.

Local Procurement

Audit Criteria:

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

Observations:

The observations are based on the examination of procurement processes, mechanisms, and tools, from initiation to payment, and include the review of a sample of 56 procurement transactions and contracts, dating from August 2019 to September 2022.

The audit team found that the Mission manages procurement well throughout the whole of the procurement cycle. With few exceptions in the initiation of procurement and contract management, procurement generally complies with policies and legislation. The Mission generally documents the rationale for all procurement activities, pursues the most appropriate procurement method, exercises the appropriate procurement authorities, and properly administers payments. Due to local market constraints, the Mission relies on recurrent vendors, a significant number of Canadian vendors and sole-source contracts.

The audit team did find some minor issues related to procurement. Specifically, these cases include:

• Certain occasions where the justification of using a sole-source contract was lacking;
• One instance where the mission did not implement a formal contract for a service, even though they paid a set fee each month through a direct billing;
• Two contracts where service had commenced prior to the start of the contract;
• Various instances where the selected GL code was found not to be the most appropriate.

More relevant, however, the audit did find some concerns with the certification of Section 34 of the FAA. The purpose of certifying Section 34 is to validate that the goods and services were received in accordance with the contract. The audit found that all transactions were certified Section 34 by an individual with the delegated authority to do so. However, in certain instances, the audit team could not confirm that the individual signing always had the appropriate knowledge or information to confirm that the goods and services were fully received in accordance with the specifics of the contract.

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 assets: vehicles, fuel, material and inventory, and cash.

Observations:

The Mission has demonstrated strong and effective controls in the management of vehicles, fuel and some cash accounts. However, greater oversight is required in other areas, such as petty cash, material management and inventory.

Fleet Vehicles and Fuel

Controls for the management of fleet assets, including the ongoing use and disposal of the vehicles, were in place and functioning as intended. The Mission has a preventive and routine maintenance schedule for its vehicles, an up-to-date transportation policy and uses trip logs to track each trip and record whether the trip was professional or personal. As it relates to fuel, drivers have an acquisition card specifically for these transactions. No areas of concern were noted in a reconciliation of fuel purchases and usage.

Material Management and Inventory

The Mission manages assets for its properties, including the Chancery, the Official Residence and the staff quarters. These assets include household furniture, appliances, electronics items, IT equipment, tires, maintenance parts, alcohol, and other supplies. The audit team validated the Mission’s asset management processes while on-site and found good controls in many areas including alcohol inventory and the overall tracking of assets. However, some specific areas for improvement were identified and are discussed below.

The audit team validated the listing of the assets at selected staff quarters and found that the information was accurately recorded. However, it was noted that information, as it exists, does not allow for effective lifecycle asset management or proper planning and budgeting. For instance, the inventory lists for the staff quarters did not include key details about the acquisition date and cost related to expensive items, such as air conditioners, that will require cyclical replacement.

In addition, the audit team reviewed the process to manage IT assets. As with all assets, the Mission maintains an up to date and accurate listing of all IT items, however issues were noted with the safeguarding and disposal of those assets. It was found that the assets are left in an unlocked office and easily accessible to the staff, and a significant number of IT assets, such as iPads, laptops and blackberries, are awaiting disposal. The mission disposed of very few IT assets over the last years, mainly due to the fact that the current IT Locally Engaged Staff officer did not receive training or outside support to dispose those assets.

Management of Cash

The mission uses cash for the Emergency Cash Parcel, standing advances for drivers, and petty cash accounts. The mission does not accept cash for consular services; therefore, cash management risks are decreased.

The Mission maintains one Emergency Cash Parcel (ECP) of US dollars. The Parcel is regularly verified by both the Head of Mission and the Deputy Management and Consular Officer,. The Mission also maintains six standing advances for incidental expenses when required to travel outside of the diplomatic zone where credit cards are not always accepted. These standing advances, and are regularly validated by the Deputy Management Consular Officer and relevant staff. Overall, there are no concerns related to the safeguarding and tracking of the standing advances.

The Mission maintains two petty cash accounts. Although there were no issues with individual transactions or its usage, there were issues related to safeguarding of one of the accounts. The departmental procedure allows for the petty cash replenishment to be deposited in the custodian’s personal account and then it has to be placed in the petty cash box on site. The custodian chose to keep a portion of the petty cash fund in his personal account because the full amount was not used and to limit the amount of cash kept on site. These concerns were raised with mission management and they committed to taking steps to remediate the issues.

Human resources

Audit Criteria:

Human resources processes and practices comply with applicable legislative requirements.

Observations:

A review of two of the three completed staffing actions within the audit scope period determined that they were conducted in a fair, open and transparent manner. Also, the four Locally Engaged Staff overtime transactions reviewed were pre-approved, and the amounts paid were warranted and reasonable.

The mission raised the difficulty and challenges in retaining Locally Engaged Staff mainly due to the globalization exercise and salary review, which were recently undertaken by Global Affairs Canada. These exercises are causing morale issues and loss of Locally Engaged Staff which could affect the Mission’s ability to staff key positions consequently impacting their operations.

Conclusion

The audit team concluded that the mission had, in general, implemented effective management practices and internal controls related to ensure the good stewardship of resources at the Mission.

Certain areas for improvement were noted by the audit team, specifically surrounding the management and safeguarding of the IT assets and petty cash. The audit also raised concerns with the certifying of Section 34 on specific payments in order to validate that the gods and services received were in accordance with the contract.

These identified issues were brought to the attention of management during the Mission visit, and management committed to take the necessary actions to mitigate the areas of concern.

Appendix A: about the audit

Audit Objective

The objective of the audit was to determine whether sound management practices and effective controls were in place to ensure good stewardship of resources at the Dhaka mission in support of the achievement of Global Affairs Canada objectives.

Audit Scope

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

• Management practices at the mission including the roles and responsibilities of mission staff involved in managing operational resources across mission programs;

• Expenditures of the mission within the common service, property, and other departmental programs’ operational budgets^{Footnote 1} from April 1, 2019, to September 30, 2022;

• Management of assets at the mission with a focus on real property, vehicles, machinery and equipment, material inventory, and cash; and
• Staffing processes and overtime transactions related to locally engaged staff.

This audit work focussed on management practices of the Dhaka mission. While the scope included a review of the support services that the mission receives from the CSDP in New Delhi, the audit did not include an assessment of the operations of the CSDP directly.

Audit Criteria

The Mission’s management practices were assessed against the following criteria:

Approach and methodology

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:

• On-site audit procedures performed at the Mission from November 27^th to December 8^th, 2022
• 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 CSDP)
• Inventory testing, and petty cash and emergency cash parcel counts
• On-site examination of the Official Residence, Chancery, storage facilities and a sample of staff quarters
• Visits to selected like-minded Missions
• Interviews and visits with a sample of local vendors

Summary of Audit Findings