Audit of Travel, Hospitality, Conference and Event Expenditures

Criterion 1

Travel expenditure monitoring and control mechanisms ensure compliance with the FAA and the applicable directives on THCE expenditures.

Condition

Conclusion about the criterion

A review of 30 trips showed that, overall, the monitoring and control mechanisms in place are effective and ensure compliance with the FAA and the applicable directives on THCE expenditures. However, some shortcomings were identified.

Compliance with the FAA and the applicable directives on THCE expenditures

Travel authorizations

According to the Directive on THCE Expenditures, a travel authorization for expenditure initiation must be completed by the traveller and approved by a delegated authority before each trip. This travel authorization must indicate the purpose and the estimated costs of the trip. The CSA, like a number of other federal government departments, uses HRG's Shared Travel Services Portal to manage travel for public servants and non-public servants. For contractors whose travel costs are reimbursed by the CSA, travel is generally provided for under their contracts and subsequently subject to individual travel authorizations in the form of email exchanges with the CSA.

We found that:

Public servants and non-public servants (22 trips reviewed):

• For 20 trips, travel authorizations were completed and pre-approved by individuals with the delegated authority required under section 32 of the FAA.
• For two trips, travel authorizations were completed after the travel took place. One case involved regular and routine travel as part of the employee's duties. However, the trip exceeded the approved limit on the employee's annual travel authority. The other case involved a non-public servant whose agreement provided for this type of travel. Nevertheless, a specific travel authorization must be completed prior to each trip.
• According to the Directive on THCE Expenditures, for each trip, the employee must provide a justification explaining why virtual presence is not a possible alternative to travel. However, in seven of the cases reviewed, the reason selected was "Cost saving for alternatives is marginal or nil", although most of these cases involved international travel. We are of the opinion that the reasons provided were not appropriate in these situations. Valid reasons should have been provided, for example, by indicating that on-site presence was required. It appears that the requirement to provide a justification in this regard is not clearly understood by travellers and managers. However, because all trips were approved by an individual with the appropriate delegated authority, risks to the organization are limited.

Contractors (eight trips reviewed):

• For six trips, travel authorizations were completed by the traveller and pre-approved by individuals with delegated authority.
• For two trips, the travel had been provided for in the contracts; however, individual travel authorizations were approved by a person with delegated financial authority after the travel took place. Both cases involved trips taken at the request of CSA project managers.

Eligibility of travel expenditures

Expenditures claimed in expense reports must comply with the NJC Travel Directive with respect to meals and incidentals, kilometric rates and authorized maximums for accommodation. In addition, there are specific parameters governing the use of transportation for travel. Furthermore, the Directive on THCE Expenditures states that the most economical solution must be selected based on the nature of the trip, when booking transportation and accommodation.

Following our review of the 30 trips, we found very few cases of non-compliance with the directives in terms of the eligibility of claimed travel expenditures. These results demonstrate that the travel expenditure monitoring and control system in place at the CSA is effective. The identified cases of non-compliance are as follows:

• For three trips, meal allowances were claimed even though meals were included in the cost of accommodation, airfare or train fare. No specific justifications were on file. The existing account verification control process did not bring these irregularities to light. These irregularities may have resulted from the travellers' misinterpretation of allowance entitlements in these situations. The impact is limited because meal overpayments are of low materiality.
• One trip involved business class air travel by a non-public servant. For non-public servants, business class airfare is not reimbursed beyond the maximum amount allowed for a full-fare economy class ticket. The trip was completed as part of an interdepartmental agreement under which an individual has been supporting a specific project in an expert capacity for a few years now. The CSA had not been informed that the traveller had recently changed status from employee to contractor. As stipulated in the agreement, an external third party subsequently reimbursed the CSA for the travel costs.

Through our review of the files, we were able to determine, in an accurate manner, that expenditures relating to meals, incidentals, land transportation and accommodation complied with the requirements of the directives. However, it is difficult to determine whether travellers selected the most economical flight options, as the options available at the time the trips were planned cannot be verified after the fact. Nevertheless, apart from the non-compliant expenditures indicated above, we did not identify any situations suggesting that the most economical solutions were not selected or justified for the trips reviewed.

Certification of expenditures in accordance with sections 33 and 34 of the FAA

The TBS Directive on Account Verification stipulates that employees responsible for confirming and certifying travel expenditure payments in accordance with section 34 of the FAA must ensure that payment recipients are entitled to or eligible for reimbursement of their travel costs. They must also ensure that the documentation supporting the claim is complete, i.e., that the claim is supported by the proper documentation. The Directive states that financial officers with the authority to reimburse travel costs under section 33 of the FAA must ensure that there is auditable evidence demonstrating that the account verification has taken place and has been certified pursuant to section 34 of the FAA.

We found that, for all trips:

• Travel expense reports are certified by an individual with the delegated financial authority required under section 34 of the FAA;
• Travel expense reports are certified by an individual with the delegated financial authority required under section 33 of the FAA;
• Expenditures claimed in the expense reports are supported by the proper documentation.

However, the following shortcomings were observed:

• When travel costs are paid to another department following the signing of a Memorandum of Understanding, invoices are issued and payments are made automatically in the form of accounting entries. As with all other expenditures, certification under section 34 of the FAA is required for each payment. However, for the Memorandum of Understanding reviewed as part of this audit, certification under section 34 was carried out for all travel expenditures at year-end only. Since a number of invoices were received and paid over the course of the year, certification should have been carried out upon receipt and payment of these invoices, and not at year-end. As this was an interdepartmental agreement and all associated work and travel were provided for in the agreement, the risks to the CSA are low.
• For four of the trips reviewed, claimed expenditures were higher than the pre-authorized expenditures. In three of the four cases, these discrepancies were due to the fact that the cost of air transportation increased between the time the trip was planned and the time it was approved. In order to monitor these situations, an internal procedure at the CSA provides that the financial clerk must obtain the traveller's justification and submit the expense report to the level of delegated financial authority that had pre-authorized the travel. The CSA's cost discrepancy tolerance levels applicable to this procedure are 43% for flights and 10% for accommodation. However, in the cases outlined above, there were no notes on file regarding justifications obtained from the traveller or analyses conducted by the financial clerk. Although these travel expenditures were approved by the appropriate level of authority, we are of the opinion that cost discrepancy control documentation could be improved to properly inform the person approving the expenditures. The current internal procedure, however, does not state that the financial clerk must record the justification in the travel report submitted for approval.

Organization

Finance Directorate

Function

Manager, Accounting and Financial Policy and Systems

Details of the action plan

An email will be sent to travellers and managers to inform them of their responsibilities. A meeting will be held with clerks to remind them of their account verification responsibilities.

Deadline: March 31, 2017

Criterion 2

Hospitality expenditure monitoring and control mechanisms ensure compliance with the FAA and the directives on THCE expenditures.

Condition

Conclusion about the criterion

After reviewing five hospitality files, we found that the hospitality expenditure monitoring and control mechanisms in place are appropriate and ensure compliance with the FAA and the directives on THCE expenditures.

Compliance with the FAA and the directives on THCE expenditures

We found that:

Authorization of hospitality expenditures

• In four cases reviewed, hospitality forms were approved by an individual with the delegated authority required under section 32 of the FAA before incurring hospitality expenditures.
• In one case reviewed, the hospitality form (section 32) was authorized after the contract was signed with the supplier. However, the form was authorized before the hospitality activity took place.

Eligibility of hospitality expenditures

• In all cases reviewed, claimed hospitality expenditures were eligible in accordance with the Directive on THCE Expenditures.

Certification of expenditures

• Hospitality expenditures incurred are consistent with pre-authorized hospitality expenditure authorization requests in all cases reviewed.
• Hospitality expenditures incurred are supported by the proper documentation in all cases reviewed.
• Hospitality expenditures incurred are certified by an individual with the delegated financial authority required under section 34 of the FAA in all cases reviewed.
• Payments for hospitality expenditures incurred are certified by an individual with the delegated financial authority required under section 33 of the FAA for all cases reviewed.

Organization

N/A

Function

N/A

Details of the action plan

N/A

Deadline: N/A

Criterion 3

Conference expenditure monitoring and control mechanisms ensure compliance with the FAA and the directives on THCE expenditures.

Condition

Conclusion about the criterion

After auditing five conference files, we found that, overall, the monitoring and control mechanisms in place ensure compliance with the FAA and the Directive on THCE Expenditures. However, our review of the files helped identify a few minor shortcomings.

Compliance with the FAA and the directives on THCE expenditures

At the CSA, a computer-based tool is used to control and authorize conference attendance requests and anticipated costs: the Conferences, Learning and Events (CLE) System.

We found that:

Authorization of conference expenditures

• For each conference expenditure reviewed, attendance requests were pre-authorized in the CLE System.

Eligibility of conference expenditures

• For four conferences reviewed, all conference fees incurred and claimed were eligible in accordance with the Directive on THCE Expenditures;
• For one conference expenditure reviewed, we identified a non-eligible amount of $116. The account verification control process in place did not bring this irregularity to light.

Certification of expenditures

• For all conference expenditures reviewed, conference fee payment requests are certified by an individual with the delegated financial authority required under section 34 of the FAA;
• For all conference expenditures reviewed, conference fee payments are certified by an individual with the delegated financial authority required under section 33 of the FAA;
• For three conference expenditures reviewed, conference fee payment requests are supported by the proper documentation.

However,

• For two conference expenditures reviewed, invoices supporting the conference fees were not included in the files. However, proof of payment of expenses by the participants requesting reimbursement were available. One of these invoices includes the $116 amount referred to in the previous section. The absence of invoices makes it difficult for the person certifying the expenditures (section 34) or the clerk verifying the account to be sure of the eligibility of the expenditures claimed.

The account verification control process in place provides for the review of supporting documentation for all payments. We are of the opinion that the existing process ensures compliance with the FAA and the directives on THCE expenditures.

Organization

Finance Directorate

Function

Manager, Accounting and Financial Policy and Systems

Details of the action plan

A meeting will be held with clerks to clarify the supporting documentation procedure to be followed.

Deadline: March 31, 2017

Criterion 4

Event expenditure monitoring and control mechanisms ensure compliance with the FAA and the directives on THCE expenditures.

Condition

Conclusion about the criterion

Our review of five event expenditures and 40 other travel, hospitality and conference expenditures during this audit showed that, overall, the existing event expenditure monitoring and control mechanisms ensure compliance with the FAA and the directives on THCE expenditures.

However, some shortcomings requiring management's attention were identified through the audit.

Compliance with the FAA and the directives on THCE expenditures

According to the Directive on THCE Expenditures, events include business meetings, departmental or corporate management meetings, conferences as well as any other formal gathering of public servants or non-public servants invited to participate in these activities. Events do not include meetings or activities whose sole purpose is the direct delivery of the Department's core mandate. Events typically represent or support business activities and governance.

The Directive on THCE Expenditures requires an event to be authorized by the minister if the total cost of the event is greater than $25,000, or by the deputy head if the total cost is $5,000 or greater, but less than or equal to $25,000.

In order to monitor application of the Directive at the CSA, events must be recorded in the CLE System. All participants obtain authorization of their participation in the event, as well as all anticipated event costs. The system calculates all activity costs and automatically sends the request for authorization to the appropriate level of authority.

Authorization of events

We found that:

• The five event expenditure files reviewed were recorded in the CLE System. For four of them, authorizations were granted in accordance with the Directive on THCE Expenditures. For one event, authorization was not granted by the appropriate level of authority. The costs were underestimated when recorded in the CLE System; they did not include $1,240 in booth transportation costs. With this amount factored in, the total event costs reached $5,576.
• With respect to travel expenditures, out of the 30 cases reviewed, we identified four that met the definition of an event under the Directive on THCE Expenditures. Of that number, three were identified as such and recorded in the CLE System for cost control purposes. The other one, of less than $5,000, was approved by an individual with the appropriate level of delegation as per the usual travel authorization process.
• Regarding the five hospitality expenditures reviewed, we are of the opinion that three of them met the definition of an event under the Directive on THCE Expenditures. Cost control was carried out for one of these three events. It should be noted that total expenses for each of these three events were lower than $5,000. Hospitality expenditures were authorized by an individual with the appropriate level of delegation.
• All five of the conference files reviewed were considered to be events under the Directive on THCE Expenditures. We found that authorizations were granted in accordance with the Directive for four of the five files reviewed. For one conference, total event costs were $5,876 and the CLE System failed to identify the correct level of authority required for authorization. This was a technical system error. The technical issue was resolved.

In some cases, it appears that the definition of what constitutes an event and the underlying procedures are not understood by all managers. In addition, omitting to record an expense in the CLE System results in the system not being able to calculate all costs associated with an event and thus automatically forward the authorization request to the appropriate level of authority.

Certification of event expenditures

We found that:

• All event participation fee reimbursements are certified by an individual with the delegated financial authority required under section 34 of the FAA.
• All event participation fee payments are certified by an individual with the delegated financial authority required under section 33 of the FAA.
• All event participation fee payment requests were supported by the proper documentation.

Organization

Finance Directorate

Function

Manager, Accounting and Financial Policy and Systems

Details of the action plan

Clarifications and a questions and answers guide on events will be sent to employees.

Deadline: March 31, 2017

Criterion 5

Travel, hospitality and conference expenditures are disclosed in keeping with the requirements.

Condition

Conclusion about the criterion

Travel, hospitality and conference expenditures are disclosed in keeping with the requirements.

Compliance with the Directive on THCE Expenditures and the guidance document on proactive disclosure

We reviewed the information published on the CSA's website regarding senior management's travel and hospitality expenditures for the first two quarters of 2016-2017.

We found that:

• Senior management's travel and hospitality expenditures are disclosed in keeping with all the requirements of the guidance document and in a timely manner.

In addition, under the Directive on THCE Expenditures, the CSA must disclose the organization's total annual travel, hospitality and conference expenditures, including a brief description of the key discrepancies in relation to the actual expenditures of the previous fiscal year. We reviewed the information published for 2013-2014 and 2014-2015.

We found that:

• The annual travel, hospitality and conference expenditures reviewed were disclosed in a timely manner and in keeping with the requirements of the Directive on THCE Expenditures.

Organization

N/A

Function

N/A

Details of the action plan

N/A

Deadline: N/A