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PARKS CANADA AGENCY AUDIT OF KEY FINANCIAL PROCESSES AT THE BANFF NATIONAL PARK FIELD UNIT FINAL REPORT Prepared by: Interis DECEMBER 2005 Report tabled and approved by the A&E Committee Parks Canada Agency Audit of Key Financial Processes Banff National Park Field Unit ©Her Majesty the Queen in Right of Canada, represented by the Chief Executive Officer of Parks Canada, 2006 Catalogue No.: R60-3/2-1-2006E-PDF ISBN: 0-662-42924-9PEAG ii December 2005 Parks Canada Agency Audit of Key Financial Processes Banff National Park Field Unit TABLE OF CONTENT EXECUTIVE SUMMARY.......................................................................................................1 1 OVERVIEW.......................................................................................................................4 1.1 Background ........................................................................................................................... 4 1.2 Objectives and Scope ............................................................................................................5 1.3 Methodology ......................................................................................................................... 5 1.4 Assurance Statement .............................................................................................................6 1.5 Conclusion........ 6 2 ...
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PARKS CANADA AGENCY AUDIT OF KEY FINANCIAL PROCESSES AT THE BANFF NATIONAL PARK FIELD UNIT FINAL REPORT Prepared by: Interis DECEMBER 2005
Report tabled and approved by the A&E Committee
Parks Canada Agency
Audit of Key Financial Processes Banff National Park Field Unit
©Her Majesty the Queen in Right of Canada, represented by the Chief Executive Officer of Parks Canada, 2006 Catalogue No.: R60-3/2-1-2006E-PDF ISBN: 0-662-42924-9
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TABLE OF CONTENT EXECUTIVE SUMMARY.......................................................................................................1 1 OVERVIEW .......................................................................................................................4 1.1 Background ........................................................................................................................... 4 1.2 Objectives and Scope ............................................................................................................ 5 1.3 Methodology ......................................................................................................................... 5 1.4 Assurance Statement ............................................................................................................. 6 1.5 ................................ulisno..oCcn...........................6................................................................ 2 ........................................................7OBSERVATIONS AND RECOMMENDATIONS 2.1 Management Control Framework.......................................................................................... 7 2.2 ................................................................................................................................enueRev.9 2.3 13Contracting .......................................................................................................................... 2.4 16 ................................................................................................................Acquisition Cards 2.5 Payments to Suppliers ......................................................................................................... 18 2.6 Travel Expenditures............................................................................................................. 20 2.7 Financial Coding ................................................................................................................. 21 3 MANAGEMENT RESPONSE .......................................................................................23
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E X E C U T I V E S U M M A R Y
Audit of Key Financial Processes Banff National Park Field Unit
BACKGROUND Parks Canada Agency (PCA) is conducting a series of cyclical audits of field units, service centres and the national office to review key financial, administrative and management practices. The audits focus on compliance with Treasury Board of Canada Secretariat (TBS) and PCA policies and practices. The audit of the Banff National Park Field Unit was conducted as part of this cyclical audit program.
OBJECTIVES AND SCOPE The objective of this audit was to confirm that due diligence is being exercised in key management processes at the Banff National Park Field Unit and that the processes and controls in place are adequate to ensure compliance with TBS and PCA policies and practices. The scope of this engagement covered the following key financial process areas: Revenue, Contracting, Use of Acquisition Cards, Payments to Suppliers, Travel Expenditures and Coding. The period from April 1, 2005 to the date of the visit was covered in this audit.
METHODOLOGY The audit methodology included a review of relevant background documentation, interviews with Banff National Park Field Unit personnel, and transaction testing in the key financial process areas. The Banff National Park Field Unit was visited during the period October 17 to 21, 2005.
ASSURANCE STATEMENT In our opinion, sufficient audit work has been performed and the necessary evidence has been gathered to support the conclusions contained in this report.
CONCLUSION Overall, the Banff National Park Field Unit has financial procedures in place that ensure accountability of financial transactions (revenue and financial coding); however, due diligence could be strengthened with the definition and implementation of new procedures and controls related to Contracting, Acquisition Card Management, and Payment to Suppliers to ensure consistent compliance to Treasury Board Policies and PCA Policies.
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AUDIT REPORTING RATING SUMMARY 2.1 Management Control Framework
2.2 Revenue
2.3 Contracting
2.4 Acquisition cards
2.5 Payments to suppliers
2.6 Travel expenditures
2.7 Financial coding
RECOMMENDATIONS
Audit of Key Financial Processes Banff National Park Field Unit
Management Control Framework 1. The Field Unit Superintendent should consider introducing a zero-based budgeting approach to assess activities and planned spending so that resources can be allocated and clearly linked to the priorities established.
Revenue 2. The Field Unit Superintendent should obtain the assistance of senior management from PCA national headquarters to work with the CIBC to reduce the turnaround time for verification of deposits and establish agreed upon service levels. This will help to reduce the amount of time it takes to reconcile sales with deposits and follow-up on discrepancies, thus providing more assurance over the accuracy and completeness of revenue. 3. The Field Unit Superintendent should identify and train an additional resource in revenue accounting to backup and provide assistance to the Revenue Coordinator currently doing the revenue recording. 4. The Field Unit Superintendent should ensure that the total revenues as recorded in the POS system are periodically reconciled with IFMS to verify accuracy and completeness of
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Audit of Key Financial Processes Banff National Park Field Unit the revenue reporting. It is recognized that the reconciliation will be a difficult task, while there are still delays from the bank and many reconciling items.
Contracting 5. The Banff National Park Field Unit should establish a contract coordinator role who would have oversight responsibility to ensure fairness and ongoing compliance with Treasury Board Policy on Contracting and to PCA contracting guidelines. 6. The Field Unit Superintendent should assess training requirements for all staff with contracting authorities such that they are aware of proper contracting practices and documentation requirements to demonstrate fairness and compliance with TBS requirements. 7. The Field Unit Superintendent should continue with plans to implement commitment accounting and stress to her managers the importance of informing Finance of the commitment when it occurs.
Acquisition Cards 8. The Field Unit Superintendent of the Banff National Park Field Unit should ensure that adequate communication and training in eligible acquisition card purchases is provided to all cardholders, particularly those found non-compliant. 9. The Field Unit Superintendent of the Banff National Park Field Unit should ensure that the review of acquisition card purchases by Finance is enhanced to review for ineligible purchases, cardholder signatures on receipts and adequate documentation is attached to support the claimed amounts.
Payments to Suppliers 10. The Field Unit Superintendent should ensure that adequate communication and training in proper procurement practices, including the preparation of Local Purchase Order Authorizations (LPOA) and the process required to prepare a call-up from a standing offer is provided to all managers with spending authority. 11. The Field Unit Superintendent should ensure that the review of payments, by Finance is enhanced to review for appropriate purchase authorization.
Travel Expenditures 12. The Field Unit Superintendent should introduce a more formal review and challenge of travel expenditures by Finance to ensure that all claims are fully authorized and supported.
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1 O V E R V I E W
Audit of Key Financial Processes Banff National Park Field Unit
1.1 BACKGROUND Parks Canada Agency (PCA) is conducting a series of cyclical audits of key financial, administrative and management practices for all field units, services centres and the national office. There are 32 field units and four service centres in the PCA. Field units are groups of national parks, national historic sites and national marine conservation areas that are usually in proximity to one another. Their proximity allows them to share management and administrative resources. The service centres support the organization in a variety of professional and technical disciplines. Directors of the service centres and field unit superintendents are responsible for ensuring that the policies, directives and guidelines issued by the Treasury Board of Canada Secretariat (TBS) and PCA are followed. The Banff National Park Field Unit is responsible for managing the protected heritage areas and structures within the southern and eastern portion of Banff National Park. The park is the top tourist attraction in Canada and has an international profile. The Banff National Park Field Unit generates approximately 25%1of all revenue in Parks Canada. The complexity of managing Banff National Park was recognized in 1996/97 when the park was divided into two administrative units (Lake Louise, Yoho, Kootenay Field Unit and the Banff Field Unit). In addition to the Banff National Park management, the Banff National Park Field Unit is also responsible for managing: ♦three national historic sites (Cave & Basin, Banff Park Museum and Rocky Mountain House); ♦Canada Place in Banff and ♦Ya-ha Tinda Ranch. These operations have a low profile in the Field Unit due to the dominating nature of the issues in the national park. The Banff National Park Field Unit was allocated an A-Base budget of $13.8 million at the beginning of the 2005-2006 fiscal year, with a target of $18.3 million in revenues2. Additional transfers through the year, together with revenues over target, have increased the total expenditure budget to $19.9 million as of September 30, 20053.
1Banff Field Unit, 2002-2005 Business Plan 2PCA A-Base Budgets 2005-2006 Banff Field Unit 3PCA Western & Northern Canada, Banff Field Unit Forecast of Operations to Year-end as of September 30, 2005
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In 2003, a mountain park approach was taken for sustainable business planning. The Banff National Park Field Unit worked together with the other mountain parks to establish the 2004-2008 Mountain Park Sustainable Financial Strategy. This approach was taken to address the challenges of over-programming and escalating salary costs experienced by all the mountain parks. It is expected that this consolidated approach will assist in improving the declining condition of the mountain park assets, present opportunities for efficiencies and introduce some consistency among the field units.
1.2 OBJECTIVES AND SCOPE The objective of this audit was to confirm that due diligence is being exercised in key management processes at the Banff National Park Field Unit and that the processes and controls in place are adequate to ensure compliance with TBS and PCA policies and practices. To achieve this, the audit reviewed the management control framework in place and covered the following key financial process areas: ♦Revenue; ♦Contracting; ♦Use of Acquisition Cards; ♦Payments to Suppliers; ♦Travel Expenditures; and ♦Financial Coding. Transactions incurred during the period from April 1, 2005, to October 21, 2005 were covered in this audit.
1.3 METHODOLOGY The methodology used in conducting this audit included a visit to the Banff National Park Field Unit and the execution of the following activities: ♦Review of relevant documentation including: the Banff National Park Field Unit 2002-2005 Business Plan, Mountain Parks Sustainable Financial Strategy 2004-2008, Organization Chart, Delegated Signing Authorities, financial management policies from the PCA Western Canada Service Centre website, TBS policies dealing with the key financial process areas, and various financial reports; ♦with the Banff National Park Field Unit management and personnelInterviews responsible for the key financial processes; ♦of transactions in each of the key financial process areas.Examination of a sample
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Audit of Key Financial Processes Banff National Park Field Unit Upon completion of the fieldwork, a debriefing of our preliminary observations was held with the superintendent of the Banff National Park Field Unit over the phone on October 25, 2005. Our observations and recommendations have been made in accordance with the Audit Reporting Rating System described below: Audit Reporting Rating System Controls are not functioning and/or fraudulent activities have been Unsatisfactory detected which will or have a material impact on both the financial statements and operations of the Agency. The control environment is lacking and/or has degraded since the last Significant Improvements audit and is a contributing factor to non-achievement of Needed program/operational objectives. Immediate management actions need to be taken to address the control deficiencies noted. Some controls are in place and functioning; however, several major Moderate Improvements issues were noted that could jeopardize the accomplishment of Needed program/operational objectives. Minor Improvements Many of the controls are functioning as intended; however, some Needed minor changes are necessary to make the control environment more effective and efficient. Controlled Controls are functioning as intended and no additional actions are necessary at this time.
1.4 ASSURANCE STATEMENT In our opinion, sufficient audit work has been performed and the necessary evidence has been gathered to support the conclusions contained in this report.
1.5 CONCLUSION Overall, the Banff National Park Field Unit has financial procedures in place that ensure accountability of financial transactions (revenue and financial coding); however, due diligence could be strengthened with the definition and implementation of new procedures and controls related to Contracting, Acquisition Card Management, and Payment to Suppliers to ensure consistent compliance to Treasury Board Policies and PCA Policies.
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2 O B S E R V A T I O N S A N D R E C O M M E N D A T I O N S
2.1 MANAGEMENT CONTROL FRAMEWORK Controlled Controls are functioning as intended and no additional actions are necessary at this time.
CU R R E N TPR A C T I C E S The Field Unit refers to PCA policies for financial management. Financial signing authorities are established for PCA staff with approval authority. Training in financial management is mainly on-the-job with additional training taken in specialized areas, such as contract management. Staff interviewed are generally aware of their financial responsibilities but may not be clear on the details of Treasury Board policies. Staff refer to the Parks Canada website for direction on financial policy and procedures and rely on the services and expertise of Finance and Administration. There has been no turnover in the finance staff for the last twelve years. Sufficient segregation of duties exists within the Field Unit. Expenditures are recorded by Finance and Administration, with spending authority exercised by the various individuals with Section 34 authority. Payment authority (Section 33) rests with two individuals for the Field Unit, the Manager, Finance and Administration and a backup. It is clearly understood that the same individual cannot exercise both payment authority and spending authority. Bank reconciliations are performed by the Revenue Coordinator, an individual outside the Finance and Administration group. Gate receipts are received by the attendants, placed in the safe and deposited by an armoured car service. At other collection points, the attendants prepare and deliver the bank deposits. Receipts are recorded by the Revenue Coordinator. The management committee meets regularly and is attended by the managers who report to the Field Unit Superintendent. Meetings were held approximately every two weeks before the summer and are now being held every month. The management committee discusses planning, operational issues, updates and activities. A Finance update is a standing item on the agenda. PCA does not have a risk management framework in place at the national level. Although a formal risk profile with risk associated mitigation has not been developed in the Field Unit, the Banff National Park Field Unit informally considers risks in the development of its 3 year Business Plan and the 2004-2008 Mountain Park Sustainable Financial Strategy through the identification of priorities. Formal risk assessments are often conducted by Legal Services, particularly for land claims. The Banff National Park Field Unit is considered by PCA to be
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the most intensely scrutinized park in the system. The field unit is involved in an average of 4 5-10 major legal cases/litigations every year . Operational plans are developed with significant consultation and participation with local stakeholder groups. The Field Unit budget is established based on several elements: the Mountain Parks Sustainable Financial Strategy, the Banff National Park Field Unit 3 year Business Plan and the historical A-Base funding allocation. At the beginning of the year, the budget envelope is allocated to the different managers largely based on historical spending. Capital spending needs are identified and resources allocated based on priorities. The Manager, Finance and Administration, has a coordinating role in the budget planning exercise but does not have a challenge function. Managers are held accountable for achieving planned results with their budgets. This is a component of performance reviews for the management team. Variances from budget are monitored by the Manager, Finance and Administration and discussed with the managers and the Field Unit Superintendent. Variance reports are prepared quarterly and submitted to the Western Canada Service Centre in Calgary for consolidation. Formal processes for project management and reporting have not been established, but has been identified as an area where skills need to be enhanced and the Field Unit Superintendent has requested training for the relevant managers. Significant capital assets (items over $10,000) for the Field Unit are tracked in the Asset Module of SAP, including IT assets. The approval for the purchase of all IT assets rests with the manager responsible for IT. All purchases of software and hardware are tracked and maintained in a separate spreadsheet, including Blackberries. Items below $10,000 (such as furniture or digital equipment) are not centrally tracked. The accountability for these assets rests with the responsible manager. Disaster recovery plans are in place for electronic information for the Banff National Park Field Unit. All network files are backed up locally. A contract is in place with the network service provider, Telus, that ensures connectivity and availability. Facilities are safeguarded and locked. Safes are used to store all cash receipts for deposit and change.
OB S E R V A T I O N S The management control framework in place at the Field Unit is adequate to ensure stewardship of resources (financial, human resources, facilities, information technology systems). The audit has found some weaknesses with respect to revenues, contracting, acquisition card usage, travel and payment to suppliers. The details of those weaknesses are discussed in the relevant sections below, with corresponding recommendations. With respect to budget allocations, the following observation was made:
4Banff Field Unit 2002-2005 Business Plan
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