Core Control Audit of the Canadian Radio-television and Telecommunications Commission 2016

October 2016

Office of the Comptroller General

Why this is important

The Financial Administration Act designates deputy heads as accounting officers for their department or agency. As accounting officers, deputy heads are accountable for ensuring that resources are organized to deliver departmental objectives in compliance with government policy and procedures.

Core control audits provide deputy heads with assurance regarding the effectiveness of core controls over financial management in their respective organization. By doing so, core control audits inform deputy heads of their organization’s level of compliance with requirements contained in selected financial legislation, policies and directives.

About the Canadian Radio-television and Telecommunications Commission

The Canadian Radio-television and Telecommunications Commission (CRTC) is an administrative tribunal within the Government of Canada that is responsible for regulating and supervising Canada’s communication system in the public interest.

The CRTC operates under a number of legislative authorities and Acts of Parliament. These include the following: the CRTC Act, the Bell Canada Act, the Broadcasting Act, the Telecommunications Act, Canada’s Anti-Spam Legislation and the Canada Elections Act, which includes provisions that established the Voter Contact Registry.

At the heart of its mandate is the duty to serve the public interest by putting Canadians at the centre of the communications system. To this end, its role encompasses consulting Canadians on communications issues of importance to them, dealing with the many applications it receives by making decisions and rules, responding to enquiries and complaints, as well as reporting to Canadians on the progress and outcomes of its work. The CRTC promotes and enforces compliance with its regulatory policies and decisions. The CRTC encourages and facilitates industry co-regulation and self-regulation through consultations, committees and working groups with various industry stakeholders. The CRTC also plays a key role in resolving industry disputes. Finally, in the current dynamic and evolving communications environment, the CRTC collaborates with various domestic and international stakeholders to leverage capacity and intelligence on a host of interrelated policy issues and questions.

According to its 2014–15 Departmental Performance Report, the CRTC had spending of approximately $58 million and human resources of 445 full-time equivalents in fiscal year 2014–15.

Core Control Audit Objective and Scope

The objective of this audit was to ensure that core controls over financial management^{Footnote 1} within the CRTC result in compliance with key requirements contained in the selected financial legislation, policies and directives.

The scope of this audit included financial transactions, records and processes conducted by the the CRTC. Transactions were selected from the period of April 1 to December 31, 2015. The audit examined a sample of transactions for each of the selected policies and directives. The Appendix provides a complete list of policies and directives included in the scope of the audit and the overall compliance in the areas tested.

Conformance with Professional Standards

This audit engagement conforms with the Internal Auditing Standards for the Government of Canada, as supported by the results of the quality assurance and improvement program.

Audit Findings and Conclusion

Core controls over financial management regarding the transactions tested within the CRTC resulted in full compliance with key requirements contained in four of the thirteen policies, directives and corresponding legislation tested,^{Footnote 2} and partial compliance in three. The CRTC was not in compliance with the key requirements contained in the remaining six policies and directives tested.

The CRTC has established a sound financial management governance structure to ensure strong financial management of public resources. Sound controls were observed in receivables management, accountable advances and fleet management. In addition, leave with pay for most employees was approved and administered appropriately.

Weaknesses were identified in the areas of contracting, approval, documentation and timeliness.

Contracting

The audit observed that documentation to support both the contracting method (competitive and non‑competitive) and the contractor selected was frequently not on file. In particular, pre‑defined statements of work, sole‑source justification, best‑value analysis, bid selection method and evaluation criteria, requests for proposal, and bid evaluation reports signed by all evaluators were not consistently prepared or retained on file. Moreover, non‑competitive contracts were frequently awarded without documented consideration of existing mandatory methods of supply (e.g., government‑wide supply arrangements). Further, some contracts and contract amendments were approved after related work by the contractor had already begun, and contract amendments were not always properly justified and substantiated.

Approval

For delegation of financial authorities for disbursements, many employees with delegated financial authorities had not obtained mandatory training. Expenditure initiation was also not always performed by an employee with the delegated authority in the areas of contracting and hospitality, and there was frequently no pre-approval documentation on file for acquisition card  purchases. In addition, commitments were not always recorded as part of the expenditure initiation process in the areas of acquisition cards, contracting and hospitality. In the area of financial management of pay administration, staffing requests were frequently approved by an employee without the delegated authority.

Documentation

For acquisition cards, approval of credit limit increases was not retained on file, and formal cardholder acknowledgement of responsibilities was also absent. In the area of travel, supporting justification for meal reimbursement and accommodation costs above the approved city rate limits was not always present. Similary, justification for the provision of hospitality to federal employees was not always on file, and documentation was not always available to substantiate that the most economical means was used for hospitality and related event expenditures. For pay administration, performance agreements and year-end performance reviews were not always on file, and were not always signed and dated by all concerned parties. Further, account verification was not always properly supported with proof of execution and cost in the areas of acquisition cards, contracting and performance pay.

Timeliness

Pre-approvals were not always obtained prior to expenditure initiation in the area of contracting. Account verification was also not always performed on a timely basis in the areas of acquisition cards and contracting. For pay administration actions, letters of offer for acting assignments and casual contracts were frequently signed after the start date.

Recommendations

The Chairman of the Canadian Radio-television and Telecommunications Commission should ensure that:

1. The CRTC continues working with stakeholders to resolve the outstanding legal issue and to ensure that the Delegated Financial Signing Authorities Chart is current.
2. Employees who have been delegated financial authorities receive mandatory training before they exercise their delegated authorities, and revalidate their knowledge to maintain their delegated authorities.
3. Sufficient documentation is retained on file for acquisition cards, specifically in relation to the approval of credit limit increases, changes to allowable merchant categories and countries by responsibility centre managers, the acknowledgement of responsibilities by cardholders, and support that acquisition card purchases are government business-related expenses.
4. Contracting business processes are improved and are consistently performed in compliance with the Treasury Board Contracting Policy, and sufficient documentation is retained on file.
5. Travel business processes are improved and are consistently performed in compliance with the National Joint Council Travel Directive, and sufficient documentation is retained on file.
6. Hospitality business processes are improved and are consistently performed in compliance with the Directive on Travel, Hospitality, Conference and Event Expenditures, and sufficient documentation is retained on file.
7. Detailed year-end performance reviews are completed for all eligible employees, and performance agreements and year-end performance reviews are signed and dated by all concerned parties.
8. Expenditure initiation (pre-approval and commitment) is properly documented and performed by an individual who has the appropriate delegated authority before expenses are incurred, specifically in relation to acquisition card purchases, contracting, hospitality expenditures and pay administration actions.
9. Account verification is performed by the appropriate delegated authority on a timely basis, and is supported by complete documentation (proof of execution and cost), specifically in relation to acquisition card purchases, contracting, hospitality expenditures and pay administration actions.

Management Response

Management has accepted the audit findings and has developed an action plan to address the recommendations. It is expected that the management action plan will be fully implemented by October 31, 2017.

The results of the audit and the management action plan have been discussed with the Chairman of the Canadian Radio-television and Telecommunications Commission and with the Small Departments Audit Committee. The Office of the Comptroller General of Canada will follow up on the implementation of the management action plan.

Appendix: Policies and Directives Tested

Date modified:

2016-11-29