Audit of Reconciliations Procedures,
Roles and Responsibilities
Executive Summary
Audit and Evaluation Branch
September, 2003
1.0 Executive Summary
Through sharing information with other departments, the Auditor General and the Treasury Board Secretariat, the Audit and Evaluation Branch (AEB) learned that some areas of risk in implementing the Financial Information Strategy (FIS) were in the reconciliation procedures, including roles and responsibilities, and in the financial statement format and procedures. Hence, this audit was included in the AEB 2002-2003 audit plan.
Audit criteria used in conducting the audit included the FIS Accounting and Receiver General Manuals. The review work entailed a series of interviews as well as analysis of accounting transactions to assess the degree of compliance to these policies.
This report details the audit observations and recommendations by audit objective as well as the management response. The following section provides a brief summary of the audit findings and recommendations contained in this report.
Audit Objective #1 : Procedures for reconciliations required under FIS are available and that reconciliations are prepared and differences are resolved on a timely basis for internal accounts and the Receiver General interfaces.
At the present time, procedures for reconciliation work are not available in formal written documentation, although staff for the most part are effectively carrying out the required procedures. The Comptroller' Branch will need to develop these written procedures. It is especially important that assignment of responsibilities, a defined schedule of work, monitoring and approval mechanisms be established to ensure that amounts reported in the departmental trial balance are accurate. The Comptroller' Branch also needs to define similar process controls for monitoring functions on suspense accounts and procedural controls over transaction approvals.
Once the new Grants and Contributions Management System (GCMS) is in place, the Comptroller' Branch should review the feasibility of implementing reconciliation processes to verify grant and contribution account balances with the Integrated Financial and Materiel System (IFMS) information.
The Comptroller' Branch should ensure that all prior year accounts balances such as those resulting from the Received Goods Ledger (GR-GL) and returned prior year cheques are cleared appropriately. It was noted during the audit that much progress had been made by the Comptroller' Branch in implementing new review processes as a result of FIS to ensure that at year end remaining account balances are accurately carried over to the new year. A business process will need to be developed to allow the clearing of old year returned or cancelled cheques in the IFMS system.
The Comptroller' Branch has implemented most of the required controls over information reported in the Receiver General – General Ledger (RG-GL) and the Central Financial Reporting Management System (CFMRS). The accounts payable unit needs to develop a procedure to reconcile amounts recorded in IFMS with those of the CFMRS. The Comptroller' Branch should develop a system to monitor and ensure that this work is done on a regular basis.
Audit Objective #2: Financial statements preparation procedures are being managed to produce accurate financial statements on a timely basis and a materiality level has been established to ensure that the financial statements present fairly the amounts reported.
For the most part detailed financial reviews take place mainly at year-end. The Comptroller' Branch is working on the implementation of additional reviews for these year-end statements. The addition of a reconciliation review to ensure that the information presented in the departmental financial statement and that of the public accounts would also ensure accuracy of this information.
Finally, staff currently rely on materiality definitions as very broadly defined in the FIS accounting manual. It may be beneficial for the Comptroller' Branch to develop more structured and quantitative guidelines for staff to use, particularly for accounting accruals prepared on a monthly basis.
Conclusion:
Overall, it was found that there are a number of reconciliation processes in place in the Financial and Materiel Management Directorate (FMMD) to cover most of the requirements of FIS and the Receiver General Manual. Some new processes will need to be developed in the accounts payable group as recommended in this report.
In most areas audited there was a requirement for clear assignment of responsibilities, a defined schedule of work, a process for monitoring, and an approval of the work undertaken. Coordination of the efforts of staff across units should be a key requirement when the Comptroller' Branch develops a set of written procedures for the reconciliation processes. We recommend that the Comptroller' Branch delineate these responsibilities, work schedules, monitoring and approval processes to ensure that financial statements are accurately reported.
Once the new Grants and Contributions Management System (GCMS) is operational, we recommend that the Comptroller' Branch should implement reconciliation procedures that it considers necessary to ensure integrity of data between the financial information contained in GCMS and IFMS.
Finally, the implementation of additional reviews as currently underway by the Comptroller' Branch and the addition of a reconciliation of financial statements between the departmental statements and the Public Accounts will add to the accuracy of financial information presented to the public. The provision of more specific guidelines on materiality levels would assist staff in making monthly adjustments to improve the accuracy of financial information.
Audit of Reconciliations Procedures, Roles and Responsibilities — Final Report (PDF, 183KB, 18 pages)
Note: to read the PDF version, you need Adobe Acrobat Reader on your system. If the Adobe download site is not accessible to you, you can download Acrobat Reader from an accessible page. If the accessibility of PDF is a concern, you can have the file converted to HTML or ASCII text by using one of the access services provide by Adobe.
Date Created: 2004-01-15
|