Audit of Revenue Report
Executive Summary
Audit and Evaluation Branch
September 2003
1.0 Executive Summary
The audit of revenue was undertaken as part of the Audit and Evaluation Branch’s 2002–2003 audit plan. The overall objectives of the revenue audit were to provide assurance to Industry Canada that:
- revenues reported in the departmental financial statements comply with the financial information strategy (FIS) requirements and are supported by the sector or branch systems;
- data integrity exists in the sector or branch systems such that the summary information provided to and recorded in IFMS can be relied upon;
- revenue reconciliations support the preparation of year-end adjustments; and
- multiple systems are not causing needless duplication of data entry.
In the audit planning phase, the revenue systems of eight of Industry Canada’s branches and sectors were reviewed. A number of criteria were developed to select three branches for inclusion in the detailed examination phase of the audit. The criteria ensured that a significant amount of revenue dollars and revenue transactions would be covered in the audit scope and also that a wide cross section of information systems, types of financial processes and revenue streams would be included as well. In addition to the Comptroller which has a significant role in all revenue systems, Industry Canada’s Corporations Canada (ICCC), Small Business Loans Administration (SBLA) and Spectrum, Information Technologies and Telecommunications (SITT) were included in the detailed audit examination.
The following audit report details the audit observations and recommendations by branch reviewed. For summary purposes, the following provides an overall assessment and overview of the audit work by audit objective.
Audit Objective: Revenues reported in the departmental financial statements comply with the financial information strategy (FIS) requirements and are supported by the sector or branch systems.
The audit team was able to verify with a high degree of assurance that revenue information captured in Integrated Financial and Materiel System (IFMS) was well supported by detailed revenue information in the ICCC, SBLA and SITT information systems. The three branch information systems were developed for branch specific needs and they operate on a cash accounting basis. Procedures were in place to adjust revenues at fiscal year end for the required accrual accounting basis.
Recommendations were made in the audit to improve the documentation and sign-off procedures for the calculation of these year end accrual entries for SITT. Some minor recommendations were also made regarding the management of deposit accounts and refund tracking for ICCC.
The current practise of reporting revenue in the Public Accounts for SBLA by Regional Agency has caused a number of challenges for Industry Canada. The audit team was not able to undertake a reconciliation of revenue amounts reported on a cash basis on SBLA’s annual report to parliament and the amounts reported on an accrual basis in the Public Accounts across agencies. SBLA and the Comptroller (Financial & Materiel Management Directorate (FMMD)) are currently working on a solution to this reporting issue.
Finally a number of recommendations were made to the Comptroller regarding revenue reporting issues. A material error was noted during the audit on the 2001–2002 deferred revenue amount reported for SITT. The Comptroller should review its account coding for ICCC vote net revenue to ensure that it is appropriately recorded as vote net and other non-tax revenues as per the approved appropriations. Finally, prior to the audit, SBLA noted an input error on the 2002–2003 Main Estimates. Additional financial statement review processes by the Comptroller would reduce the probability of this occurring.
Audit Objective: Data integrity exists in the sector or branch systems such that the summary information provided to and recorded in IFMS can be relied upon.
Overall, the results of the detailed transaction testing done by the audit team provided a high degree of assurance that revenues were accurately entered into IFMS. SITT in particular exhibited a very high degree of control over the accuracy and completeness of its revenue transaction data.
Recommendations were made for both ICCC and SBLA regarding the tracking and internal verification of certain revenue streams. At the time of the audit ICCC was in the process of implementing a system to track annual return summaries as they become due for processing. This process once implemented will not only provide greater assurance for revenue tracking but also for forecasting of this significant revenue stream.
SBLA and the Comptroller need to work together to determine if the existing reliance on external audit reports to verify amounts due for annual loan administration fees is sufficient or if additional internal control processes need to be formally adopted to complete the revenue verification process. Finally, some recommendations were made for SBLA regarding timeliness and security of its bank deposits.
Audit Objective: Revenue reconciliations support the preparation of year-end adjustments.
To varying degrees all three branches require additional control processes to improve or implement reconciliation procedures. Of the three branches reviewed, SITT was the only one with complete revenue reconciliation processes in place. Further improvements could be had by SITT by documenting these processes and implementing a schedule for reconciling Branch to IFMS revenue information.
Both ICCC and SBLA had processes in place to reconcile some of their branch revenue information to information reported to IFMS. However, the processes were not in place at the time of the audit to regularly reconcile the summary information reported in IFMS to provide assurance throughout the year. Both branches need to ensure that complete reconciliation procedures are implemented and carried out according to schedule. The Comptroller must be involved in these processes to provide guidance as well as access to IFMS data.
Audit Objective: Multiple systems are not causing needless duplication of data entry.
The three branch systems used to manage revenues for ICCC, SBLA and SITT were all developed for program specific purposes. They varied greatly in their financial capabilities and none of them had the capacity to handle accrual accounting. There is no overlap between information kept in the ICCC system and the financial information reported in IFMS since the ICCC system was designed as a database system that tracks information regarding corporations, has a workflow component to manage work and create an audit trail for work processing as well as an image documenting system.
SBLA tracked registration fees received for new loan guarantees but not fees received on individual loans for the annual administration fees. SITT’s system was the most advanced and tracked all billing and payment information.
Given the differing purposes of these information systems with IFMS it is for the most part unavoidable that revenue information needs to be entered into the financial system using manual processes. SITT was the only branch noted in the audit where there is currently potential for additional electronic interfaces for financial data.
Conclusion:
Overall the audit concluded that for the most part revenue information was accurately processed in the branch systems and that summary information provided to IFMS was reliable. Data captured in the information systems was accurate although improvements could be made in a couple of cases to improve the tracking of revenue due to Industry Canada. The reporting processes for revenue information in public accounts and annual reports need strengthening. There are opportunities to improve the reconciliation processes of information captured between branch systems and IFMS. Finally, due to the differing purposes of the information systems there was limited opportunity to reduce current data entry requirements.
Audit of Revenue — Final Report (PDF, 248KB, 27 pages)
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Date Created: 2004-01-15
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