Audit of Financial Management Controls

Table of contents (September 2008)

• Executive Summary
• Introduction
  • Background
  • Audit Objectives
  • Key Risks
  • Audit Scope
• Findings, Conclusions and Recommendations
  • Management Control Framework
  • Delegation of Authority Instruments
  • Compliance to sections 32, 33, and 34 of FAA
  • Segregation of Duties
  • Access Controls and Security
  • Risk Management
• Audit Strategy and Approach
  • Planning
  • Standards and Methodology
  • Audit team

Management Response and Action Plan

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Executive Summary

The audit of Financial Management Controls was carried over from the 2007-08 Risk Based Audit Plan and conducted during 2008-09. The audit was department wide in scope and covered the period of January 1, 2007 to June 30, 2008. The audit considered previous audit results along with a sample review from grants and contributions and operating expenditure transactions. The field work was done in July 2008 incorporating regional site visits, staff interviews, document review and transactional testing.

The audit objectives were to provide independent and objective assurance on:

• the adequacy of the finacial management control framework to ensure compliance with the Treasury Board financial management policies;
• the effectiveness of delegation of financial authorities;
• segregation of duties for key financial processes;
• the appropriateness of controls maintained over expenditures to ensure compliance to sections 32, 33 and 34 of the Financial Administration Act; and
• the responsiveness and effectiveness of financial risk management.

Each of these objectives is discussed in detail in this report. It is important to acknowledge the department has made significant progress to address concerns identified in previous audits. The department is working to enhance rigor and probity to manage its funds, as evidenced by recent work-in-progress around process improvements.

Key Findings

The department needs integrated financial management controls to ensure effective and sound stewardship of public funds. These controls should be part of a clearly defined and documented financial control framework that includes appropriate processes. The department does have elements of a financial control framework; however, this framework needs to be more clearly defined and documented. The department needs to link all its financial management processes together. The current delegation of financial authorities and departmental authority instrument are both current and effective. Adequate segregation of duties exists for the most part; however, one significant system control enhancement is recommended. For the transactions tested, sections 32, 33, and 34 of the Financial Administration Act were properly authorized by qualified and trained staff, although, the department should make some process improvements in this area. The department should consider significant strengthening to its financial risk management practices and processes.

Recommendations to strengthen the department’s key financial controls are included in this report.

Results of the criteria examined are summarized as follows:

Criteria	Assessed Results
Financial management control framework – current, well designed, documented, communicated	Criteria partially met
Delegation of authority – matrix is approved and current; delegated staff have training and tools	Criteria met
Compliance to sections 32, 33, and 34 of the Federal Administration Act	Criteria mostly met
Segregation of duties – well documented controls	Criteria mostly met
Financial risk management – identified, assessed, mitigated and regularly updated	Criteria partially met

Conclusion

Financial management controls exist at Western Economic Diversification Canada; however, improvements are needed in the areas of developing a standard departmental financial management control framework and developing a more rigorous financial risk management process. Based on internal audit standards and criteria selected, sufficient audit work has been completed and analyzed to support the conclusion.

In accordance with the Government of Canada internal auditing standards, a reasonable assurance is provided that financial management controls exist subject to the improvements recommended in this report.