An audit of Departmental Financial Controls was carried out in accordance with the approved Internal Audit Plan for 2004-05. The period of the audit covered the period that expenditures were incurred during FY 2003/04 and FY 2004/05 to end of October of 2004.

The audit assessed whether Industry Canada's financial control framework is adequate to ensure that: allocated funds are spent for their intended purposes and within approved limits; financial information is accurate; and appropriate controls are maintained over expenditures. The audit also assessed whether the department effectively discharges responsibilities as required under the Financial Administration Act (FAA).

The audit was department-wide in scope and encompassed financial responsibilities assigned to all levels of Industry Canada managers, as well as the framework of expenditure financial control within the department and applicable policies and procedures. The audit included a review of transfer payment programs and regular operating expenditures, but excluded salaries and revenues.

Key Findings

Effective controls necessary to ensure sound stewardship of public funds requires clearly defined roles and responsibilities, delegated authorities commensurate with these responsibilities, and appropriate accountability mechanisms. The current delegation of financial authorities and organization of financial functions within the department is set up in a manner that reflects the department's organizational structure, but, at the same time results in the risk of inadequate controls within the financial control framework of the department. For example, within the department, while autonomous agencies and sectors exercise payment authority under Section 33 of the FAA, Financial Officers do not report (in either a functional or administrative capacity) to the Senior Financial Officer (SFO). In addition, Financial Officers are not accountable to the SFO for the design and operation of related financial processes and controls.

Further complications arise at the regional level where various Industry Canada programs are delivered. Regional offices receive financial services from the Operations Sector. However, Regional Financial Officers approve transactions from satellite offices without, in most cases, requesting supporting documentation. Further, some Financial Assistants working in satellite offices are under the direct supervision of another program or sector and are not accountable to Regional Financial Officers exercising payment authority under Section 33 of the FAA.

Conclusion

Without the existence of a clearly documented, department-centric financial management organizational structure, complemented by an effective monitoring and review function and corresponding accountability mechanisms, there is no assurance that financial processes are being carried out in a consistent manner and that all required financial controls are in place and operating as intended. In the absence of these key controls, the SFO and the Deputy Minister are at risk of not being able to assess the design, implementation and maintenance of internal controls at a departmental level. As a result, auditors are unable to provide assurance that the Department's comptrollership responsibilities are being effectively managed.

Recommendations

Implementing a single point of accountability for ensuring financial controls exist and are operating effectively would increase assurance that managers are exercising their comptrollership responsibilities properly. Therefore it is recommended that:

An effective monitoring and review function should be implemented throughout the department, along with corresponding accountability mechanisms.
Monitoring and review functions, along with accountability mechanisms, should be monitored by a functional authority to ensure that they are effective and that they are carried out in a consistent manner.

Additional, detailed recommendations are provided in Section 6 of this report.

Final Report (PDF - 152 KB - 45 pages)

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