Audit and Evaluation - Audit of the RCMP 125th Anniversary (PWGSC Sponsorships)

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Audit and Evaluation

Audit of the RCMP 125th Anniversary (Public Works and Government Services Canada (PWGSC) Sponsorships)

Background

In 1998 and 1999, the Royal Canadian Mounted Police (RCMP) received funding from various sources for activities surrounding its 125th anniversary. In particular, it received sponsorship funds from the Government of Canada through Public Works and Government Services Canada (PWGSC). PWGSC chose Groupaction subsidiaries/affiliates (i.e. Gosselin Communications stratégiques inc. and Lafleur Communication Marketing) to act on its behalf for the delivery of sponsorship funds and in some cases for the coordination and/or provision of communication services to the RCMP for its 125th anniversary.

Groupaction is a communication agency based in Montréal. PWGSC provided RCMP Headquarters (HQ), through Gosselin Communications stratégiques inc. (Gosselin), with sponsorship funds of $1 million to support national activities surrounding the RCMP’s 125th anniversary. In addition, PWGSC provided the RCMP, through Lafleur Communication Marketing (Lafleur), with sponsorship funds totalling $650,000 for activities to be held specifically in C Division.

Scope of the Audit

The audit focussed on the sponsorship funds received by the RCMP from PWGSC to fund both national activities and activities specifically held in C Division (Québec) surrounding the RCMP’s 125th anniversary. This audit, which began in May 2002 and was completed in October 2002, reviewed the sponsorship funds received from PWGSC, through Gosselin or Lafleur, and the related expenses for 1998 and 1999.

Objectives of the Audit

Working within this scope, the objectives of the audit were to provide reasonable assurance that:

1. PWGSC sponsorship funds, as agreed, were received, through Lafleur/Gosselin, for activities related to the RCMP’s 125th anniversary;

2. Expenses related to PWGSC’s sponsorship of the RCMP’s 125th anniversary were compliant with applicable sponsorship agreements, policies, procedures and regulations, including those in the Financial Administration Act (FAA), the Contracting Policy and the Policy on Delegation of Authorities of Treasury Board Secretariat (TBS) and of the RCMP; and,

3. PWGSC sponsorship funds and related expenses for the RCMP’s 125th anniversary were properly and accurately recorded for financial purposes.

Results of Audit

Our audit included a review of the transactions related to the RCMP’s 125th anniversary and such tests as we considered necessary to provide reasonable assurance that the above objectives were achieved. The audit was conducted in accordance with the Standards for the Professional Practice of Internal Auditing from the Institute of Internal Auditors. Based on the results of our audit, we can conclude with reasonable assurance that PWGSC sponsorship funds, as agreed, were received, through Lafleur/Gosselin, for activities related to the RCMP’s 125th anniversary (Objective 1). However, given that some information required to complete our audit was not available for review, we are unable to provide reasonable assurance that the above objectives 2 and 3 were achieved.

Therefore, we recommend that Management takes appropriate actions to further investigate the absence of appropriate supporting records which led to the above conclusion. The table below (Appendix 1) further details our audit findings by audit objectives in support of our conclusion. Consistent with our approach, the audit report also includes a management action plan for the audit recommendation.

Audit Team
Sylvain Michaud, Director, Internal Audit Corporate Infrastructure
Raffaella Bertorelli, Senior Financial Auditor
Sandra Lopes, Auditor

Brian Aiken
Director General
Audit and Evaluation Branch

Appendix 1 Audit of the RCMP 125th Anniversary (PWGSC Sponsorships) (GHA 232-105)
Audit Objective #2: Expenses related to PWGSC’s sponsorship of the RCMP’s 125th anniversary were compliant with applicable sponsorship agreements, policies, procedures and regulations, including those in the Financial Administration Act (FAA), the Contracting Policy along with the Policy on Delegation of Authorities of Treasury Board Secretariat (TBS) and of the RCMP.

Audit Finding	Recommendation
2.1 Appropriate records should be maintained and retained for a reasonable period. For a few of the items selected in our sample of transactions processed at C Division, supporting records were not found which prevented us from pursuing our audit testing. Upon inquiry with staff responsible for Records at C Division, it was explained that such supporting records were destroyed in accordance with the RCMP’s Records policy which states that the retention period for documents relating to “Ceremonies and Celebrations” is 2 years. However given that these files contained financial information such as invoices they should have been retained for a period of 6 years, according to this same policy. Similarly a few items selected in our sample of transactions processed at HQ could not be traced to the appropriate supporting records. Such documents could not be found or were destroyed and no explanation was available as to why. Hence audit testing could not be completed for these transactions. Without proper supporting documentation it is impossible to provide assurance as to the validity and accuracy of the project’s expenses.	We recommend that Management takes appropriate actions under the relevant statutes or under Section 40 of the RCMP Act to further investigate this audit finding.

Management Action Plan “C” Division: The administrative review conducted in “C” Division concluded that the destruction of supporting documentation was due to a misunderstanding of relevant policies and that no further investigation was required. Headquarters: The administrative review conducted in Headquarters concluded that the destruction of supporting documentation was the result of a re-organization within Headquarters and Central Region. It further concluded that the destruction of supporting documents was not the result of a systemic problem and no indication of intentional act or omission was found.

Audit Finding	Recommendation
2.2 Expenses should be processed according to the RCMP’s and TBS contracting policies (process includes: bids, evaluation, selection, contract), and central agencies regulations. For all items tested for both C Division and HQ, the contracting policy was not followed. Non-compliance with the policy increases the risk of inappropriate transactions or transactions that do not provide appropriate value for money spent.	No recommendation is being proposed given that the RCMP 125th anniversary project was completed in 1999. However this issue will be further reviewed and reported, if necessary, as part of the Contracting Audit, which is currently underway.

2.3 Appropriate segregation of duties must be maintained between incompatible duties including: procurement, certification of the receipt of goods and the provision of services, requisition for payment, certification of requisition for payment and settlement. Based on audit test results, proper segregation of duties was not maintained at either C Division or HQ. However nothing came to our attention to suggest that inappropriate segregation of duties led to inappropriate transactions.	No recommendation is being proposed given that the RCMP 125th anniversary project was completed in 1999. However this issue will be further reviewed and reported, if necessary, in the Contracting Audit, which is currently underway, and the upcoming Accounts Payable Audit.

2.4 Regulations surrounding employer-employee relationships should be respected when hiring consultants. The project coordinators were hired by both C Division and HQ for the RCMP 125th anniversary as consultants however relationships with the RCMP resembled that of employees according to the guidelines established by Canada Customs and Revenue Agency (CCRA). Non-compliance with regulations could result in penalties and fines for the RCMP.	No recommendation is being proposed given that the RCMP 125th anniversary project was completed in 1999. However this issue will be further reviewed and reported, if necessary, in the Contracting Audit, which is currently underway.

Audit Objective #3: PWGSC sponsorship funds and related expenses for the RCMP’s 125th anniversary were properly and accurately recorded for financial purposes.

Audit Finding	Recommendation
3.1 PWGSC sponsorship receipts and expenses should be properly recorded in the RCMP’s corporate accounting system. All transactions relating to the RCMP 125th anniversary activities held in C Division were recorded in a manual accounting system rather than in the RCMP’s corporate accounting system. In addition, all deposits and payments were made through a separate bank account that was opened by C Division specifically for the RCMP 125th anniversary. The Receiver General account was not used and approval for a Departmental Bank Account (DBA) as required by Treasury Board Secretariat (TBS) policy was not obtained. As for the sponsorship funds received by HQ, the receipts and expenses related to the first $200,000 installment of the sponsorship were processed directly by Gosselin. Gosselin received the sponsorship funds and then paid the expenses upon receipt of invoices from the RCMP. The RCMP kept no record of these receipts and expenses. The remaining $800,000 and its related expenses however were processed by the RCMP and were recorded in the RCMP’s corporate accounting system. Lack of appropriate and accurate financial records can result in unreliable financial information, poor decision-making and inadequate audit trails.	No recommendation is being proposed given that the RCMP 125th anniversary project was completed in 1999. It should be noted that nothing has come to our attention that indicates that the RCMP’s corporate accounting system is not being used for projects that are currently underway within the RCMP nor is there evidence that proper records are not being kept. However, this issue will be further reviewed in the Contracting Audit, which is currently underway, and in the upcoming Accounts Payable Audit.