Report on the Audit of Travel, Hospitality and Conferences – February 2014
2. Findings, Recommendations and Management Responses
2.1 Policy Instruments
- Audit Criterion 2
- Department of Justice guidelines, procedures and related authorities for the management of THC expenditures are clearly defined, and are consistent with TBS and National Joint Council directives and the FAA.
- Key Finding:
- There are opportunities to improve the departmental policy instruments for travel and conferences.
27. Section 6.7 of the TBS Directive on the Management of Expenditures on Travel, Hospitality and Conferences (2012) states that the Chief Financial Officer is responsible for “putting in place and sustaining effective departmental processes, procedures and controls necessary to meet the requirements of the directive.” In the 2013 version of this directive, further emphasis is placed on establishing “robust departmental frameworks and plans, policies, financial management systems.”
28. The Department of Justice has a different approach for managing each category of THC and has developed policy instruments. For hospitality, comprehensive departmental policy instruments are in place. There are opportunities to improve departmental policy instruments for travel and conferences.
29. Travel information on the departmental intranet includes links to relevant TBS directives and guidelines. Information is provided on a number of related departmental policy instruments, mostly related to the use of the Travel AcXess Voyage system. In addition, there is information on to the following topics, some of which could have been more clear as outlined below:
- The departmental guidance on accommodation stipulates requirements for the use of hotels that are in the Accommodation and Car Rental Directory. There are instructions on required justifications and approvals in cases when a hotel is used that is not in the directory. However, there are no instructions pertaining to instances when employees stay in hotels listed in the directory at a rate higher than the listed rate. If travelers are required to justify selecting a hotel rate that is higher than the listed rate and managers are required to approve such justifications in advance, unnecessary expenses may be avoided.
- The National Joint Council Travel Directive defines Blanket Travel Authority as, “authorization for travel which is continuous or repetitive in nature, with no variation in the specific terms and conditions of trips and where it is not practical or administratively efficient to obtain prior approval from the employer for each individual trip”. Extensive use of the Blanket Travel Authorities was observed in the Department of Justice: 406 were identified for 2013/14, 157 of which were in one region. Of those travelers with Blanket Travel Authorities, 312 (77%) travelled during the 16 months of the audit scope, however only 134 (33%) travelled more than four times. The overuse of Blanket Travel Authorities increases the risk of unjustified travel expenses.
- In the review of travel transactions, there were flight changes en route without evidence of Responsibility Centre Manager pre-approval or justification on file to support this change. Instructions would be beneficial for travelers and the financial staff processing and verifying travel claims.
30. The Department of Justice has Procedures for Announcing Conferences and Approving Attendance Requests since 2004. While only two of the employees interviewed were aware of this policy instrument, all were familiar with the approval process requirements in the procedure. The procedure was reportedly promulgated across the Department by email and then posted on the departmental intranet; however, this document was not available on the departmental intranet.
31. The conference approval process described above has been replaced by new Procedures to Submit the Annual Event Plan, effective October 1, 2013; however, as of December 16, 2013, the departmental intranet stated there was no departmental policy on conferences. Interviews with departmental travelers, Responsibility Centre Managers and finance personnel suggest that there is confusion related to conference approvals and definitions.
32. The Finance and Procurement Branch recognized that additional policy instruments are required to support recent departmental event planning procedures and for reporting on conferences. In addition, certain areas of travel procedures could be clarified, including the use of directories, Blanket Travel Authorities, travel changes and international travel. (See recommendation 4).
2.2. Roles and Responsibilities
- Audit Criterion 1:
- Roles, responsibilities and accountabilities for the management of THC expenditures are clearly defined.
- Key Finding:
- There is uncertainty with respect to roles and responsibilities for THC in both NCR and the regional offices.
33. Section 6.8 of the TBS Directive on the Management of Expenditures on Travel, Hospitality and Conferences (2012) states that the Chief Financial Officer is responsible for “ensuring that delegated financial authorities and associated responsibilities relative to THC are clearly communicated and adhered to by managers.”
34. The consolidation initiative resulted in the creation of two hubs located in Ottawa (Eastern hub) and Edmonton (Western hub) to process accounts payable transactions across the department. The Eastern hub serves the NCR, Quebec and Atlantic regions and the Western hub serves the Ontario, Prairie, British Columbia and Northern regions. Since accounts payable processing is performed by the hubs, the regional finance groups continue to be responsible for the functions carried out prior to consolidation with the exception of accounts payable.
35. In response to accounts payable consolidation and to clarify financial responsibilities, the Finance and Procurement Branch reported that training was provided for Section 34. This reported training targeted administrators in the Quebec Region and in the Prairie Region (Edmonton Office) in July 2013 and November 2013 respectively. Additionally, the Finance and Procurement Branch developed a draft document entitled Residual Functions-Post Implementation of Consolidated Accounts Payable for Regional Finance Offices that is currently being refined. However, statements of roles and responsibilities for travel, hospitality and conferences were unavailable in the regions when visited by the audit team.
36. The residual functions table excludes specific assignment of responsibilities related to travel system training and support. It is unclear if the regional finance personnel are expected to be super users to train other users of the travel system. Clarifying training responsibilities will be critical in the short term as a new Government of Canada travel system is scheduled to be implemented for April 7, 2014, and training will be a key component of system implementation.
37. Regional senior management have commented on the reduced level of service provided for THC, which has resulted in, for example, travelers waiting up to six weeks to receive reimbursements.
38. The Department currently does not have a designated office of primary interest for hospitality that would be responsible for the overall effectiveness of the hospitality policy and procedures across the Department of Justice. Before the consolidation of accounts payable, the Manager Financial Policy, Procedures and Training was responsible for hospitality procedures. The Procedures to Submit the Annual Event Plan is the responsibility of the Director Accounting Operations. The latter procedures do not assign overall responsibility for hospitality.
39. During the period of the audit, there was a departmental conference coordinator who collated the forms as called for by the 2004 Justice Canada Procedures for Announcing Conferences and Approving Attendance Requests, for approval by the designated Assistant Deputy Minister. The responsibilities for this function have since been transferred to the Director Accounting Operations in conjunction with the Procedures to Submit the Annual Event Plan, but the coordinator position was not transferred. The overall responsibility for conferences in the Department of Justice has not been assigned at this time.
Clarifying Roles and Responsibilities
40. Overall, employees in the regions are uncertain about their THC responsibilities. Similarly, there is uncertainty regarding the roles and responsibilities of the Finance and Procurement Branch for THC.
Recommendation and Management Response
1. The Deputy Chief Financial Officer should clarify roles and responsibilities for travel, hospitality and conferences across the Department. (Medium Risk)
Agreed. The Deputy Chief Financial Officer will develop a statement of roles and responsibilities for travel, hospitality and conferences across the Department, which will include Finance and Procurement Branch employees, as well as departmental employees. Target Completion Date: December 31, 2014.
2.3 Financial Process and Approvals
- Audit Criterion 4
- THC expenditures are pre-authorized, incurred and accounted for; spending and payment authorities are exercised in accordance with the FAA and Department of Justice authorities.
- Key Finding:
- The Section 34 approval process and the Section 33 verification process were not effective for the period of the audit resulting in a high error rate of 30%.
41. To assess the approval and verification process, a judgmental sample of 105 files was drawn: 60 travel transactions, 21 hospitality transactions, and 24 conference transactions. The sample of transactions were by year and for risk factors such as value, type, location, international travel, business class travel and travel processed outside of the travel system. Transaction files were reviewed for several factors, including: advance approval; compliance with the FAA, TBS and departmental policy instruments; and, consideration of travel alternatives.
42. Out of the total sample of 105 transaction files, 32 had one or more errors. This represents a 30% error rate. Please see Appendix G for a breakdown of results by transaction type and Appendix F for an explanation of the factors which were considered as errors. There is an opportunity to improve departmental practices for Section 34 approval and Section 33 verification to prevent and detect THC transactional errors. The following are examples of the types of errors found in the transactions reviewed:
- Missing justification for changes to travel plans or to support events;
- Transactions certified for Sections 32, 33 or 34 of the FAA by officials without delegated signing authority;
- Claiming ineligible expenses; and,
- Missing Deputy Minister or Assistant Deputy Minister approval for hospitality or conference transactions when required.
Control of THC Expenditures
43. The 30% error rate demonstrates weaknesses in the THC control framework and has resulted in non-compliance with the FAA and THC authorities. These control gaps expose the Department to the risk that unauthorized THC expenditures are incurred. Focus groups for Responsibility Centre Manager performing Section 34 have indicated a need for greater training in this regard.
Recommendations and Management Responses
2. The Deputy Chief Financial Officer should improve training for Sections 34 and 33 delegated authorities for travel, hospitality and conferences. (Medium Risk)
- Section 34: The Finance and Procurement Branch is currently developing an overall financial training program for managers and administrators. The training program will include specific elements related to exercising Section 34 and related account verification, with emphasis on travel, hospitality and conferences. The Director Financial Management Services is leading the development of this training program. The training will be delivered by a Financial Management Advisor and Regional Directors of Finance commencing in the first quarter of 2014-15. The Finance and Procurement Branch has also completed training for Section 34 targeting administrators in the Quebec Region and in the Prairie Region (Edmonton Office) in July 2013 and November 2013 respectively.
- Section 33: The Finance and Procurement Branch has completed training for Section 33 for its Accounts Payable Specialists and Financial Officers within the two hubs. The Director Accounting Operations has delivered training to the Ottawa hub most recently in September 2013 and to the Edmonton hub in November 2013.
Target Completion Date: June 30, 2014.
2.4 Monitoring and Reporting
- Audit Criterion 7
- A monitoring and reporting regime ensures accurate and timely reporting of THC information to meet management and organizational needs.
- Key Finding:
- There is limited monitoring and reporting of THC across the Department.
44. Section 7.1 of the TBS Directive on the Management of Expenditures on Travel, Hospitality and Conferences (2012) requires Chief Financial Officers to support their deputy heads by “overseeing the implementation and monitoring of this directive in their departments; bringing to the deputy head's attention any significant difficulties, gaps in performance or compliance issues and developing proposals to address them; and, reporting significant performance or compliance issues to the Office of the Comptroller General.”
45. As previously outlined, there were effective processes in place to manage, monitor and report on the financial budgeting aspects of THC. This included departmental financial planning and variance management through monthly Financial Situation Reports. Budgeted amounts for THC were limited through caps that were carefully monitored in NCR and the regions.
46. In addition, THC transactions were reviewed for compliance through the Section 33 accounts verification process. However, there was no monitoring of the results of Section 33, to determine if there were systemic compliance issues within the Department that warranted senior management attention or changes in the control framework.
47. Further, there was no departmental policy instrument to assign the overall responsibility for monitoring and reporting on THC expenditure compliance, nor any management objectives or performance metrics for THC. This is in part due to functional limitations with the current travel system, a major source of data, and to limited resources available in the Finance and Procurement Branch. Ultimately, there was no reporting to senior management on whether or not the Department of Justice complied with FAA and other applicable authoritative requirements on THC.
Recommendations and Management Responses
3. The Chief Financial Officer should:
a. Develop and communicate comprehensive national policy instruments for travel, hospitality and conferences.
b. Report monitoring results of travel, hospitality and conferences at least annually to the Management Committee. (Medium Risk)
a. Agreed. The Finance and Procurement Branch will develop the appropriate THC policy instruments as described within the Justice Financial Policy Instruments Management Framework and communicate these nationally and to address the audit findings under subsection 2.1 of this report. These policy instruments will be communicated through use of the Department’s intranet site and at Finance and Procurement Branch training sessions, and will be further promulgated to clients by the Financial Management Advisors and Regional Finance Directors under the direction of the Director Financial Management Services. Target Completion Date: December 31, 2014.
b. Agreed. Upon the completion of the procedures for monitoring and reporting on travel, hospitality and conferences, the Director Accounting Operations will report the results to Management Committee on an annual basis. The monitoring results will provide sufficient information for the setting of management objectives related to these expenditures. The first report will be prepared based on the results of the last quarter of fiscal year 2014-15, and provided to Management Committee by June 30, 2015. Annual reporting will follow with fiscal year 2015-16 results. Target Completion Date: June 30, 2015.
2.5 Change Management
- Audit Criterion 3
- THC activities are planned in a manner that maximizes effectiveness in meeting organizational mandates, minimizes costs and demonstrates value for money.
- Audit Criterion 5
- Available resources for the efficient and effective procurement of THC are used to the extent possible.
- Audit Criterion 6
- Communications and training related to THC are clear and consistent throughout the Department.
- Key Finding:
- There is a major challenge to cope with significant and continuous change related to THC in both the NCR and the regions.
48. There has been a considerable amount of change in the management of THC to respond to evolving TBS requirements, and other changes in departmental financial management which extend beyond THC such as the consolidation of accounts payable. There may be further risks to the implementation of the new requirements for event planning and the new travel system, such as delays in system roll-out, inconsistent practices or a high error rate. Departmental stakeholders reported experiencing difficulties with past THC changes and being adequately prepared to implement upcoming changes.
49. In addition, a number of employees who play a key role in the management of THC, including accounting operations and event planning, are new to their positions. It may be increasingly difficult to retain corporate knowledge or replace individuals playing a key role in the THC control framework since there is a smaller pool of available experienced staff.
50. The Finance and Procurement Branch has put in place a number of project management tools for new initiatives, however these tools lacked a formal change management strategy. Without formal change management strategies, the likelihood of the successful implementation of new THC changes decreases. As such, the department would benefit from a formal change management plan to support future required modifications to the THC management control framework.
Recommendations and Management Responses
4. The Chief Financial Officer should develop a departmental travel, hospitality and conference change management plan, and report periodically to the Management Committee on the progress of the travel, hospitality and conferences change management plan. (Medium Risk.)
Agreed. The Finance and Procurement Branch recognizes the many changes that have occurred with respect to the direction provided by the Treasury Board Secretariat. In consideration of these changes, an integrated approach to the planning and reporting of travel, hospitality, conference and event expenditures is currently being developed and represents the next significant change that will impact the Department. All divisions within the Finance and Procurement Branch are engaged in this initiative, which is being led by the Deputy Chief Financial Officer. Challenges to implementing the integrated approach will be assessed and strategies developed to ensure a successful result, including the development of a change management plan. In addition, the new government-wide Shared Travel Service Initiative which is scheduled to be in place effective April 7, 2014, represents a new approach to managing and reporting travel expenditures. The Director Accounting Operations is developing a plan for the successful implementation and transition within the Department. Change management, communications and training implications will be included in this plan. The Deputy Chief Financial Officer will report periodically to the Management Committee on the progress of these Finance and Procurement Branch change management plans. Target Completion Date: June 30, 2014.
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