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									  2 Follow-up to the
  nd


Financial Management
     Audit - NCR




        July 2004
                               Follow-up to the Financial Management Audit of the NCR


Report Clearance Steps

      Follow-up process initiated                             September 2003
      Report completed                                        January 2004
      Follow-up report approved by Departmental Audit and     July 22, 2004
      Evaluation Committee




Acronyms used in the report

AEB                    Audit and Evaluation Branch
DAEC                   Departmental Audit and Evaluation Committee
DG                     Director General
EC                     Environment Canada
FAA                    Financial Administration Act
FIS                    Financial Information System
GC                     Grants and Contributions
GFMS                   Guide on Financial Management Accountability
IC                     Internal Control
NCR                    National Capital Region




Environment Canada                                                                  i
                                  Follow-up to the Financial Management Audit of the NCR




New Follow-up Process

As of the May 23, 2003 meeting of the Departmental Audit and Evaluation Committee
(DAEC) a new approach to follow-ups is being taken. While the practice in the past had
been for the Audit and Evaluation Branch (AEB) to conduct them, it is now the
responsibility of the relevant program managers to conduct follow-ups to
recommendations resulting from audits or evaluations of their own programs. This
information is provided in table format in Appendix 1 of this report. The information
provided by program managers has been reviewed by the AEB.


Context

This is the second follow-up that is being conducted on the Audit of the Financial
Management – NCR which was completed in 1997 The follow-up is being done to
determine the adequacy, effectiveness and timeliness of management action taken to
implement the recommendations made in the initial Review. Follow-ups are important, as
they give senior management a crucial indicator as to the implementation rate of
recommendations and adjustments made in relation to the management responses.


Current Status (Sample)

The first follow-up conducted in June of 2001 revealed that some of the major
recommendations made in the original audit had yet to be addressed. Outstanding
recommendations included the establishment of a formal framework for financial policy, a
long term training plan, a formal process to monitor the adequacy of internal controls and
a need for consistency in operational planning and improving financial management
reporting.

This follow-up revealed that all outstanding recommendations are being addressed. The
table in Appendix 1 outlines the actions for each of the recommendations in details.


Risks (as required)

Based on the recommendations made in the initial audit and the management response
in Appendix 1, we have not identified any unacceptable risks.

Future Actions

All recommendations are currently being addressed. Audit and Evaluation will continue
to monitor the progress made against the implementation of a formal process for
monitoring as part of its continual auditing process more specifically in the field of
accounts payable and pays and benefits. No future follow-up is recommended.




Environment Canada                                                                       1
                                                                                                                                    Follow-up to
                                                                                                        the Financial Management Audit of the NCR


                                                                   APPENDIX 1
                                                         PROGRAM RESPONSE:
                        2nd Follow-up to the Audit of the Financial Management - NCR


                                                                   Recommendation 1
        INITIAL                 1ST FOLLOW-UP – ACTION                    1ST FOLLOW-UP                 2nd Follow up - ACTION TAKEN/PROPOSED
    RECOMMENDATION                       TAKEN                          PROPOSED ACTION                                    PLAN
                                                                          PLAN June 2001
         (1997/98)                        June 2001                                                                       October 2003
The DG Finance review the       No formal framework for                December 2001 – Revise        Action Taken
resources allocated to the      financial policy has been               the Guide on Financial
                                                                                                      Since December 2001, EC has made great strides in
Departmental financial          developed except current efforts        Management
                                                                                                      this area. Work to revise the Guide on Financial
policies and training and       related to FIS accounting               Accountability.
                                                                                                      Management Accountability has started as part of the
ensure that:                    policies.
                                                                       September 2001 to 2002        Accountability and Internal Control Roles and
   A long term plan for        An inventory of Central Agencies        – Revise or develop 42        Responsibilities document. A significant number of
    developing a                and Departmental Policies has           financial policies as         the 42 new financial policies have been drafted and
    comprehensive               been created and the Managers           identified in the analysis.   other policies such as payment sampling process,
    Departmental financial      Guide to Grants and                                                   costing and acquisition cards are implemented.
    policy framework that       Contributions and the                  September 2001 –
                                                                        Prepare a training plan to    Major improvements have also been made in the
    integrates with the Guide   Commercialization Policy have
                                                                        ensure continuous             delivery of training to the financial community.
    on Financial                been reviewed. However none
                                                                        learning on FIS, financial    National Financial Management Workshops have
    Management                  of the documents have been
                                                                        policies, procedures and      been carried out annually, various training sessions
    Accountability, key         incorporated into a formal
                                                                        system.                       on policies and new systems initiatives have been
    departmental initiatives    framework for financial policy.
                                                                                                      carried out across all regions and a National Finance
    (e.g. Commercialization
                                No long term training plan has                                        Website, populated with some financial information
    Policy, G&C Manager’s
                                been developed. Instead,                                              and policies, has been created and is available to all
    Guide), and Central
                                limited levels of resources have                                      departmental employees.
    Agency policies should
                                meant that priority was given to
    be in place. This plan                                                                            Centers of Excellence have been established in all
                                FIS training and to systems
    should address the                                                                                regions to complement the Corporate policy initiatives
                                development and related training
    preparation,                                                                                      in such areas as transfer payments, acquisition card
                                requirements for Merlin and


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    Environment Canada
                                                                                              Follow-up to
                                                                  the Financial Management Audit of the NCR

    communication, tools,        associated tool and systems.   and statistical sampling. The Quebec region is
    resources, timelines and                                    currently championing a corporately funded learning
    maintenance of the                                          framework initiative targeted to responsibility center
    various elements and the                                    managers and national in nature.
    linkages within the policy
                                                                Although a lot of work has been accomplished with
    framework.
                                                                limited resources. a Long Term Financial Strategy is
   A long term training plan                                   being developed and it recognizes the need to
    that identifies financial                                   reinforce training and policy development functions.
    training needs with the
                                                                Proposed Plan: Develop a Departmental Financial
    tools and resources
                                                                Policy Framework and Training Plan:
    needed to communicate
    the required financial                                      Although the completion and implementation of a
    knowledge to those                                          comprehensive framework will be hampered by
    involved with financial                                     capacity constrains, plans are already in place for
    management and                                              integrating training on high priority policies with the
    operations should be                                        Merlin 11i Upgrade training in June 2004.
    prepared. Training
    should be used as an
    important source for
    communicating the
    Departmental policy
    framework.




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    Environment Canada
                                                                                                                                       Follow-up to
                                                                                                           the Financial Management Audit of the NCR




                                                                        Recommendation 2
        INITIAL                      1st FOLLOW-UP ACTION                      1st FOLLOW-UP               2nd Follow up - ACTION TAKEN/PROPOSED
    RECOMMENDATION                           TAKEN                           PROPOSED ACTION                                  PLAN
                                                                                     PLAN
The DG Finance ensure the          There is no formal process for           July 2001 – Prepare a       Acton Taken
implementation of a formal         monitoring the adequacy of                functional review plan to
                                                                                                         Since July 2001 mini functional reviews have been
process for monitoring the         internal controls or for reporting        ensure all regions are
                                                                                                         carried out in all regions and corporate staff have
adequacy of internal control       on the level of compliance.               audited the first year of
                                                                                                         received training on auditing techniques to obtain the
and reporting on the level of                                                FIS and every two years
                                   Any efforts to report on the level                                    skills sets required to carry out full functional reviews.
compliance, as required by                                                   after.
                                   of compliance with policies and                                       In addition, a draft Functional Review Framework has
the Guide on Financial
                                   procedures are directed to FIS                                        been developed as part or the Accountabilities and
Management Accountability
                                   policies and system                                                   Internal Control Framework. An IC Self-Assessment
(GFMA).
                                   development.                                                          Checklist has also been developed.
This monitoring should as a
                                   Instead of developing a plan for                                      A Monitoring Plan is being developed for Grants
minimum include:
                                   an internal control framework,                                        &Contributions whereby designated Financial Officers
   The level of compliance        priority has been given to the                                        will monitor program G&C files to ensure that all
    with Departmental              recreation of a National                                              required information/documents are present and
    financial management           Accounting Branch.                                                    terms and conditions are met.
    policies and procedures
                                   NCR Finance relies upon the                                           The above should support our capacity to provide an
    resulting from FAA
                                   Review Branch to audit internal                                       improved Management Accountability and
    Section 33 expenditure
                                   controls and process.                                                 Governance Framework at EC.
    verification process for all
    expenditure items,                                                                                   A Long Term Financial Strategy is being developed
    including credit cards;                                                                              and a major part of it recognizes the need to reinforce
                                                                                                         quality assurance functions.
   The adequacy and
    performance of other                                                                                 Proposed Plan: Develop and Implement a formal
    internal controls related to                                                                         process for monitoring the adequacy of internal
    assets and revenues;                                                                                 controls and to report on compliance.
   The effectiveness of cash                                                                            Next steps include the finalization of a formal process
    management activities,                                                                               and arrangements with all Regions and Services for
    such as timeliness of                                                                                finalization. This includes establishing templates for
    payments and interest                                                                                the 3 components identified in the 1997/98



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    Environment Canada
                                                   Follow-up to
                       the Financial Management Audit of the NCR

charges...           recommendation, developing reporting requirements,
                     guidelines for non compliance, carrying out a pilot and
                     implementation throughout all regions.
                     These efforts will be hampered by capacity restraints.




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Environment Canada
                                                                                                                                        Follow-up to
                                                                                                            the Financial Management Audit of the NCR




                                                                        Recommendation 3
        INITIAL                      1st FOLLOW-UP ACTION                      1st FOLLOW-UP                     ACTION TAKEN/PROPOSED PLAN
    RECOMMENDATION                           TAKEN                           PROPOSED ACTION
                                                                                     PLAN
Under the functional direction     The department Management                Winter 2001 – With the       Action Taken
of the DG Finance:                 Framework has been revised. It            Blueprint project,
                                                                                                          As at April 1, 2003, EC implemented a new financial
   The Department should          now clarifies accountabilities and        develop, test and finalize
                                                                                                          architecture intended to better link financial and non-
    continue its efforts to        aligns performance with                   a common reporting
                                                                                                          financial information. This is referred to as the
    develop and implement          resource planning.                        financial classification
                                                                                                          ‘Blueprint’. Each Departmental Business Line
    the mechanisms needed          Harmonization of the program              structure, to better
                                                                                                          developed coding related to their activities along with
    to effectively integrate       activity codes with the program           coordinate financial
                                                                                                          an activity dictionary, with a view to linking with
    business line planning and     definitions is currently underway         planning and
                                                                                                          results and performance information.
    responsibility centre          with the Management                       management along both
    management. For                Information Blueprint project.            business and                 Proposed Plan
    example, greater clarity on                                              organizational lines.
                                   Financial directives have not                                          Next steps are monitoring the appropriate use of the
    the responsibilities and                                                 Financial directives will
                                   been developed to ensure more                                          ‘Blueprint’ and producing reports that demonstrate
    resources of services and                                                be developed and
                                   consistent program and activity                                        the linkage of financial/non-financial. These efforts
    regions should be                                                        communicated thereafter.
                                   costs across the department.                                           will be hampered by capacity restraints.
    incorporated within the
    existing Component Action      Improving consistency in                                               A first attempt will be made in the Departmental
    Plans, in order to better      operational planning remains an                                        Financial Situation Report on key initiatives/activities
    coordinate financial           outstanding concern. Planning                                          for the 2003-04 fiscal year.
    planning and management        and reporting does occur but it is
    along both business and        not consistent across business
                                   lines. Blueprint is intended to                                            The Atlantic Region have introduced a
    organizational lines.                                                                                     planning/reporting database, the Results
                                   improve the consistency of
   The financial classification   planning and reporting.
                                                                                                              Management Tool, which will track spending by
    structure should be                                                                                       core functions/key activities as well as tie in
    reviewed with the objective                                                                               results and achievements. This year, Atlantic
    of harmonizing the                                                                                        Region launched the Results Management Tool,
    program activity codes                                                                                    region-wide. This tool is a web-based
    with the program                                                                                          planning/reporting database which creates a
    definitions reflected in the                                                                              common source to input and review planned and
    business plan and                                                                                         actual achievements (by management framework
    component actions plans,                                                                                  and by organization), and planned spending by


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    Environment Canada
                                                               Follow-up to
                                   the Financial Management Audit of the NCR

    as well as rationalizing the    functions and activities (using Blueprint
    application of the different    dictionaries). Noting the potential for knowledge
    fields of the chart of          sharing on programs and activities, linking
    accounts in light of the        activities with results, and linking financial and
    concerns identified.            non-financial information, Corporate Planning and
   Financial directives should     Reporting together with a multi-disciplinary team
    be developed and                from across organizations and regions, submitted
    communicated in order to        a proposal to the Learning Fund (03-04), and
    ensure a more consistent        were successful in receiving support to explore
    allocation of program and       broader application of this tool.
    activity costs across the
    Department.
   Mechanisms should be
    implemented to ensure
    managers assigned
    financial responsibility
    develop and maintain
    effective operational plans,
    so as to provide the formal
    basis for sound financial
    management and
    accountability.
   The Department should
    implement and improve
    financial management
    reporting in accordance
    with the principles and
    expectations defined in its
    Guide on Financial
    Management
    Accountability.




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    Environment Canada

								
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