Audit report

Revenue operations

February 1998

Background

In accordance with the Passport Office's Internal Audit Plan, as established by its Secretariat, the revenue and accounts receivable function was reviewed to ensure adequacy of control over passport and consular fees, and to identify areas for improvement.

Objectives

The audit objectives were to determine that:

The Passport Office had established policies and procedures to ensure that money received is properly classified and promptly recorded in the accounts of the Passport Office and the Department of Foreign Affairs and International Trade (DFAIT), and that there were proper internal controls in place for the receipt and recording of money;
Consular fees were properly accounted for and remitted to DFAIT;
Direct costs related to collecting, recording, controlling, segregating, and remitting consular fees were accounted for and reported;
Prompt and vigorous collection action was taken to keep accounts receivable to a minimum; and,
The Passport Office and central agency prescribed policies and procedures were complied with.

Scope

The audit encompassed the activities related to revenue recognition, including costs associated with the collection and administration of consular fees, and the management of accounts receivable. The auditors conducted a limited review of revenues generated at missions abroad, as reliance was placed on audits of missions undertaken by DFAIT. The audit selected revenue transactions covering the period from November 1995 to February 1997.

The audit was conducted under the guidelines of the previous Treasury Board Review and Internal Audit Policy which was in effect up to March 31, 2001.

Audit results

The following summarizes the major points of the audit:

Best Practices

Two employees involved in processing unusual transactions, such as voids, are beneficial to the organization (control over money) and the employee (protects their integrity).
Passport issuing offices have benefited from making extensive use of electronic forms and reports for managing their office and for central reporting.
The practice of further empowering front line managers would eliminate excessive controls.
The acceptance of debit/credit cards as a method of payment for services has good built-in controls, reduces cash handling, and provides better client service.

Audit Results

We generally found the controls in place to be effective in ensuring that money received is accurately accounted for and adequately controlled to prevent or reduce error, fraud, or omission.
Consular fees are properly accounted for and remitted to DFAIT.
Since the Passport Office is self-sufficient, we believe management should be provided with reliable cost information about its various services. We found a number of activities which may be costing more than revenues generated. Systems should be established to track the cost of these activities in order to provide management with the information required to consider alternative service delivery options.
The system for invoicing government departments should be modified to provide for invoicing by responsibility centres.
Passport issuing offices generally comply with the Passport Office and central agencies' prescribed policies and procedures.

Status of action plan

Management fully agrees with the observations and recommendations.

The following corrective actions will be implemented:

An activity base costing implemented since May 1997 will provide detailed information on the cost of providing passport services.
An internal policy with effective procedures will be implemented for the management of accounts receivable.

Within the scope of PPT service fee review in 1998/1999, we will examine the appropriateness of having services charged in US dollars. Should we decide to do so, we will proceed in accordance with the policy on user fee and the Government of Canada regulatory process.