Report on the Audit of Travel, Hospitality and Conferences – February 2014

1. Introduction

1.1 Background

5. The Department of Justice employs approximately 5,000 people in the National Capital Region (NCR) and in six regional offices. In addition, other individuals who are associated with the work of the Department are required to travel on government business, both within Canada and abroad.

6. Departmental employees can participate in events hosted by other organizations. The department also hosts conferences and other events, and provides hospitality to federal employees when:

  • Employees are required to participate in operations, business meetings, training or similar events that extend beyond normal working hours. This includes situations where employees are required to work through normal break and meal periods; and,
  • Employees are required to be part of an event or to participate in a government hosted conference, which includes participants that are not employees of the Government of Canada and for whom hospitality will be provided as matter of courtesy, diplomacy, or protocol.

7. THC departmental activities are guided by a number of authorities, as listed in Appendix A. This includes Treasury Board Secretariat (TBS) directives, guidelines and templates, as well as the National Joint Council Travel Directive which sets the rates of reimbursement of travel costs. TBS authorities are supplemented by Department of Justice procedures for event planning, hospitality and conferences.

8. TBS issued a Directive on Travel, Hospitality, Conference and Event Expenditures in August 2013.  However, the current audit assessed departmental compliance against the previous version in effect since January 2011 and amended in October 2012, entitled Directive on the Management of Expenditures on Travel, Hospitality, and Conferences.

9. Both versions of the TBS directives place emphasis on increased planning and control of THC and have been accompanied by increased constraints on THC budgets and expenditures across Government. The Department has reduced its spending on THC from $13.8M in 2009-10 to $7.1M in 2013-14.

10. The Department of Justice launched a Departmental Consolidation Project for accounts payable which resulted in the creation of an Eastern hub in Ottawa on February 4, 2013, and a Western hub in Edmonton on March 4, 2013. As a result, departmental accounts payable staff was reduced by 50 percent. Financial services staff that processed THC transactions in the two regions included in the audit scope (Prairie and Quebec) were reduced by more than half. These regional employees were also the local experts for travel training and procedures, as well as hospitality and conferences.

11. The Department of Justice utilizes the Shared Travel Services (STS) travel management system delivered by Public Works and Government Services Canada (PWGSC), which includes the following:

  • The Travel AcXess Voyage Portal - the gateway for employees and travel arrangers to research and book travel online while tracking expenses from input to reimbursement.
  • The On-line Booking Tool (OBT) - a self-service travel research and reservation application where travelers and travel arrangers make reservations for air, car and accommodations over a secure network.
  • The travel Expense Management Tool (EMT) - an application that automates the submission, approval and tracking of travel requests and expense reports.

1.2 Audit Objectives and Scope

12. The objectives of this audit were to provide assurance that there were effective controls in place for THC, and that these activities were appropriately managed in the Department of Justice consistent with TBS directives and other applicable authoritative requirements.

13. The scope of the audit included THC transactions and controls in place in the Department of Justice from April 1, 2012, to July 31, 2013. Local travel expenses such as taxis were excluded.

14. Actual expenditures and the number of transactions for the period of the audit scope, as obtained from the departmental financial system, are:

  • travel $8.15M and 8121 transactions;
  • hospitality $167K and 505 transactions; and,
  • conferences $443Kand 650 transactions.

1.3 Risk Assessment

15. A risk assessment and fraud risk assessment were conducted to determine priorities and to focus audit activity. Consequently, the audit was planned and carried out to address general risks, as detailed below:

  • Risk that responsibilities and accountability for THC expenditures are not clearly defined and/or are not effectively communicated to all levels of the organization;
  • Risk that departmental THC policies and procedures are not consistent with TBS and National Joint Council policies and directives and/or do not provide adequate direction for the management of THC;
  • Risk that THC expenditures are not adequately planned and economies are not realized;
  • Risk that unauthorized THC expenditures are incurred;
  • Risk that use of available resources for the effective and efficient procurement and processing of THC expenditures is not maximized;
  • Risk of insufficient and/or ineffective communication and training related to THC expenditures and systems; and,
  • Risk of inadequate monitoring of THC expenditures related to compliance, efficiency and effectiveness, and that sufficient, accurate and timely information is not gathered and made available for decision-making purposes and to meet reporting requirements.

1.4 Audit Criteria

16. Seven audit criteria (see Appendix B) were developed to address the audit objectives taking into consideration the identified risks. The criteria were based on the Financial Administration Act (FAA) and guidance from TBS including: Audit Criteria related to the Management Accountability Framework - a Tool for Internal Auditors; Directive on Delegation of Financial Authorities for Disbursements; and, the Directive on the Management of Expenditures on Travel, Hospitality and Conferences. Management was in agreement with the criteria.

1.5 Approach and Methodology

17. The audit was conducted in accordance with the requirements of the Treasury Board Policy on Internal Audit and followed the Internal Auditing Standards for the Government of Canada. This included a planning phase to identify key risks and to develop audit criteria. A methodology and detailed program were developed and carried out during the conduct phase of the audit to address the criteria and conclude on the audit objectives. This included:

  • Documentation reviews that included but were not limited to, a review of departmental policy instruments including policies, guidelines, bulletins and procedures, as communicated on the departmental intranet (JUSnet) or by other means (e.g. emails);
  • Interviews and discussions with senior financial officers and other senior officials in the NCR and regional offices. The list of interviewees can be found in Appendix E;
  • Focus groups with Responsibility Centre Managers, travel arrangers and travelers;
  • Compliance review of a judgmental sample of 105 THC transactions and data analysis of the entire transaction population for the scope of the audit;

18. The results of the audit approach and methodology described above were reviewed, analyzed and interpreted by the audit team. Professional judgment was exercised, leading to conclusions as to the extent to which each criterion was met, and to an overall audit conclusion addressing the audit objectives.

19. A summary of the results of the transaction testing is presented in Appendix G.

1.6 Identified Strengths

20. The audit identified the following practices and controls in place that reflect compliance with government policy and departmental requirements. These practices serve to mitigate risks and facilitate operational activities related to the management of THC expenditures.

21. Departmental financial planning and variance management is carried out through monthly Financial Situation Reports. In addition, budgeted amounts for THC are managed through expenditure limits (caps) that are carefully monitored in NCR and the regions. The results of budget monitoring are presented regularly to the Department of Justice Management Committee. (Criteria 3 and 7)

22. The travel system has built-in features that mitigate risk such as the use of the standard rates specified by the National Joint Council Travel Directive. Alert flags are raised if the number of days or the dollar amount for a travel event is exceeded. Also, the roles of the travel arranger and travel approver are standardized to a significant extent by the travel system.  (Criteria 1, 4, and 5)

23. In Ottawa, three training courses are provided per month on the travel system by the departmental training coordinator which includes training on/for:

  • The Expense Management Tool / On-line Booking tool;
  • Expense Management Tool international travel; and,
  • Travel verifiers (recommenders) and approvers. (Criterion 6)

24. The Department of Justice Supporting Notes to the Delegation of Authority includes departmental travel authority restrictions and approval authorities for hospitality and conferences. (Criterion 6)

25. Comprehensive departmental Procedures for the Extension of and Claim for Hospitality were in place for the period of the audit. In addition, there are well-designed forms which are easy to understand and complete. This policy instrument was developed in response to a 2006 internal audit. (Criterion 6)

26. Departmental Procedures for Announcing Conferences and Approving Attendance Requests were in place for the period of the audit. There was also a departmental conference coordinator who collated the forms called for by these Procedures for approval by the designated Assistant Deputy Minister. (Criterion 6)

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