audit ar eng

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Audit Key Steps

Planning completed August 2008

Field work completed February 2009Draft report completed and sent for management response February 2009

anagement response recei!ed arc" 2009

Final report completed April 2009

#eport presented to t"e $%ternal Audit Ad!isory &ommittee April 2009

Appro!ed by t"e Deputy inister June 2009

Prepared by the Audit and Evaluation Team

Acknowledgments

'"e team responsible for t"is audit, comprised of Julie &la!et(Drolet, under t"esuper!ision of )runo Pilotte and t"e direction of Jean *eclerc, would like to t"ank t"oseindi!iduals w"o contributed to t"is pro+ect, and particularly, employees w"o pro!idedinsig"ts and comments as part of t"is audit

-riginal signed by

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&"ief Audit $%ecuti!e


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'able of &ontents

$/$& '1 $ 3 A#4 i5 16'#-D &'1-6 5

5 5 &onte%t 55 2 Analysis of #isks 75 7 -b+ecti!es and 3cope5 et"odology

2 F16D16 3 A6D #$&- $6DA'1-63 :2 5 #eco!ery of Debts :

2 5 5 &ollection actions :2 5 2 alue of 3ums to be #eco!ered ;

2 2 Administrati!e &"arges and 1nterest ation for =riting off of 1nterest 502 7 7 Financial &oding sed for =rite(offs 50

2 Financial 3ystem 552 5 Accessibility to t"e Accounts #ecei!able odule 552 2 #econciliation of t"e Accounts #ecei!able odule wit" t"e eneral *edger

522 : 3egregation of Duties 572 ; #ecording #e!enue in t"e Appropriate Fiscal Period 52 < Departmental Policies and Procedures 5:

7 &-6&* 31-6 5; Anne% 5 Audit &riteria 5igh

Problems withinvoicing 3delays/amounts4

"nade


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Audit of Accounts #ecei!able

1.3 #b$ecti"es and %co&e

'"e purpose of t"is audit was to ensure t"at $n!ironment &anada?s accountsrecei!able are managed fairly, efficiently and effecti!ely to reco!er suc" recei!ablesand minimi>e t"e risk of loss '"e audit ob+ecti!es were to assessB

w"et"er t"e framework of controls for t"e management of accounts recei!ableis appropriateH and

t"e degree of t"e Department?s compliance wit" t"e applicable accountingregulations, policies and standards

'"e audit dealt wit" internal accounts recei!able Cwit" ot"er federal departments andorgani>ations and e%ternal accounts recei!able created during t"e 200


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'"is audit "as been conducted in accordance wit" t"e International Standards for theProfessional Practice of Internal Auditing and t"e Policy on Internal Audit of t"e'reasury )oard of &anada

1n our professional +udgement, sufficient and appropriate audit procedures werecompleted and e!idence gat"ered to support t"e accuracy of t"e conclusions reac"edand contained in t"is report '"e conclusions are based on a comparison of t"esituations as t"ey e%isted at t"e time of t"e audit wit" t"e establis"ed criteria

0 '")+")BS A)+ RE *$$E)+AT"*)S

2.1 Reco"ery of ebts

08(8( ollection actions

'"e 'reasury )oard of &anada 3ecretariat Policy on #ecei!ables anagementstipulates t"at departments must !igorously pursue t"e collection of recei!ables '"esemeasures must be appropriate, timely and cost(effecti!e '"e results of t"e audit re!ealt"at t"e Department does not seem to be fully compliant wit" t"is re uirement

ont"ly account statements are generated and are sent to all clients w"o "a!e unpaidbalances wit" t"e Department '"ese account statements are generated during t"e firstt"ree mont"s following t"e original in!oice

="en t"e balance is still outstanding after 90 days, t"e procedure t"at is followed!aries from one accounting office to anot"er For e%ample, some offices do a directfollow(up wit" t"e debtor, w"ile ot"er offices contact t"e managers to inform t"em of t"edelay in payment -t"er offices "a!e not de!eloped any clear procedures for follow(up

'"e accounting offices mentioned t"at t"ey would like to recei!e more informationabout t"e met"ods of collection a!ailable to t"em, especially for debts outstanding formore t"an 90 days For e%ample, at w"at point s"ould t"e ser!ices of a collectionagency be used, and beginning at w"at amount 3ome accounting offices would alsolike to "a!e better definition of t"e roles and responsibilities of accounting officeemployees and t"ose of t"e managersKin particular of w"o is responsible for collectingsums recei!ablesKin order to ensure t"at effecti!e follow(up is done

'"ere is a significant lack of follow(up bot" wit"in t"e regional accounting offices and inDepartmental Accounting '"e lack of !igorous action on collections increases t"e riskt"at recei!ables owed to t"e Department will not be reco!ered Alt"oug" some of t"esedebts are relati!ely small, t"ey are recei!ables due to t"e Department and s"ould becollected, failing w"ic" t"ey s"ould be written off

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08(80 #alue of Sums to be Recovered

At t"e time of writing, t"e balance of e%ternal accounts recei!able 7 was E2 2 million -ft"at amount, accounts recei!able totalling E:25,000 were more t"an 7;: days past

due &lose to 8; of accounts t"at "a!e been o!erdue for more t"an a year are forless t"an E:00 1n addition, in ;2 of cases, t"e amount in suspense accountsconsisted solely of accumulated interest 3teps s"ould "a!e been taken earlier tocollect t"ese debts or to write t"em off

Table '. *reakdown of accounts recei"able by due date

)umber of days past due

)umber of accounts

)umber of accounts 354

Amounts due3thousands of

dollars4

Amounts due354

0 @ 29 505 8 8 5 :< ; ing t"e practices to be followed in t"emanagement of accounts recei!able, departmental procedures would facilitate t"etraining of new employees in t"e accounting offices

. *) =!S"*)

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'"e main purpose of t"is audit was to ensure t"at accounts recei!able are beingmanaged fairly, efficiently and effecti!ely 1n particular, it !erified t"e control frameworkfor t"e management of accounts recei!able and t"e degree to w"ic" t"e Department isin compliance wit" applicable accounting regulations, policies and standards

Audit criteria and tec"ni ues were de!eloped in order to gat"er sufficient information

on t"ese sub+ects '"e met"odology used consisted primarily of inter!iews, dataanalysis, and a re!iew of t"e rele!ant documentation

'"e main obser!ations s"ow t"at, in general, t"e Department?s accounts recei!ableare managed in accordance wit" t"e principal policies, regulations and standards t"atgo!ern t"em Gowe!er, t"e management framework for accounts recei!able "ascertain gaps, and steps s"ould be taken by management in order to impro!e itsefficiency Departmental Accounting s"ould play a more acti!e role in t"is regard

'"e following measures could be put in place to impro!e t"e effecti!eness andefficiency of t"e management of accounts recei!ableB

de!elop and distribute guidelines on t"e processes t"at are currently inplace, suc" as t"e collection and writing off of recei!ables and t"e in!oicingof administrati!e c"arges and interestH

re!iew key controls, suc" as t"e segregation of duties, access to t"eaccounts recei!able module, t"e section on t"e writing off of interest in t"edepartmental delegation instrument, and monitoring and reconciliationsH and

take t"e necessary steps to reco!er sums t"at are more t"an 7;: days pastdue or write t"em off, as appropriate

'"e Department could address most of t"e identified gaps wit" a reasonable amount of effort commensurate wit" t"e anticipated benefits '"e re!iew of t"e accounts

recei!able management process s"ould, "owe!er, be integrated into ot"er initiati!eswit"in t"e Department, suc" as t"e initiati!e on t"e state of preparedness of audit(readydepartmental financial statements

1t would also be appropriate to re(establis" acti!e communications wit" t"e accountingoffices A few years ago, an annual national works"op was organi>ed, and !ariousfinancial topics were discussed at t"is works"op 1t would be ad!antageous to organi>esuc" an initiati!e again in order to promote t"e s"aring of best practices betweenDepartmental Accounting and t"e accounting offices

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*b?ective 0 +etermine the degree to which the +epartment is in compliance withapplicable accounting regulations/ policies and standards8

Creation of accounts recei"able

'"e Department recogni>es recei!ables promptly X

A process is in place to allow recei!ables to beidentified promptly and customers to be in!oiced

X

e&osits

Deposits are made promptly and assets areprotected

X

'"e Department c"arges interest and appliesadministrati!e c"arges w"en appropriate

X X X

Collections

'"e Department pursues collections !igorously X X X

*ad debts

Actions wit" respect to any write(off, remission,forig!eness, or wai!er of debts are taken on a timelybasis in accordance wit" rele!ant regulations,'reasury )oard policies and guidelines

X X X

Allowances for doubtful accounts are estimated inaccordance wit" t"e Policy on Allowances foraluation of Assets and *iabilities

X X

ear end /rocedures

4ear(end procedures are followed X X

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Anne& 0Authority +escription

Receipt and Deposit of Pu"lic Money Regulations$ ('')$ ')3

Interest and Administrative Charges Regulations$ ')3

De"t *rite+off Regulations$ ('',$ ')3

Policy on Allowances for aluation of Assets and *iabilities, ')3

1nterdepartmental 3ettlements Policy, ')3

Financial 1nformation 3trategy Accounting anual, ')3

#ecei!er eneral anual

$n!ironment &anada Accounting Gandbook

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