Audit of the Eastern Regional Office
Table of contents
- Objective 1: To assess the adequacy and effectiveness of internal controls related to the performance of services and invoicing of revised user fees
- Objective 2: To assess the adequacy and effectiveness of internal controls related to the administration of overtime in the Eastern Region
- Objective 3: To determine whether management controls and risk management are in place to enable effective and efficient operations in achieving organizational objectives
- Objective 4: To assess the adequacy and effectiveness of internal controls over general data security, including electronic and pre-printed documents
3.0 Findings and Recommendations
Objective 1: To assess the adequacy and effectiveness of internal controls related to the performance of services and invoicing of revised user fees.
3.1 The Canadian Grain Commission’s new user fees became active on August 1, 2013. The new funding model coincided with changes to the Canada Grain Act which affected the types of services offered by Canadian Grain Commission staff in the regions. As a result of these changes, most of the Eastern region staff have experienced changes in how they perform or invoice for their work.
3.2 There are several types of revenue generated in the region: official inspection and weighing of vessels, optional services (e.g. various analytical tests, provision of samples, statements of assurance, etc.), and recoverable overtime (discussed in Objective 2 below).
Official Inspection and Weighing
3.3 Inspection and weighing fees are invoiced monthly through an automated process. The Online Shipping Certification and Recording (OSCAR) system is used by inspection staff to record details about the grain samples being graded. The reported weight (the basis of invoicing the inspection and weighing fee) is also recorded in OSCAR and then verified by the Weighing Oversight and Certification Program in the Montreal office. Once Weighing Oversight and Certification Program has performed the required procedures to verify the weight and accept it in the OSCAR system, the fees are ready to invoice. At the beginning of each month, procedures are run in Canadian Grain Commission head office to create, print, and send invoices to each terminal for the vessel activity that took place the prior month, based on the information that has been entered in OSCAR.
3.4 The accurate and complete billing of Canadian Grain Commission’s main source of revenue relies on the correct weight being accepted in OSCAR by Weighing Oversight and Certification Program. Review of a sample of vessels from the Eastern region provided evidence that weights are thoroughly reviewed, including ensuring that scales have been calibrated and checked at the required intervals and scale tapes support the weights reported by the terminal.
3.5 In order to record and store the verification process, results and documents required, Weighing Oversight and Certification Program has implemented a third-party database program. Additionally, the Eastern region uses a spreadsheet to provide further tracking of certain key information. The use of these tools requires Weighing Oversight and Certification Program staff to re-enter information that is already in OSCAR, as well as information that is not currently captured or reportable by OSCAR. We made the following observations with respect to the functionality of OSCAR for the Weighing Oversight and Certification Program:
- Only a limited number of people are authorized to accept a weight and therefore initiate an invoice; however, access controls to the application are weak (identification is a 4-digit code with no password, the code does not change and may be learned by others).
- There is no log tracking which user accepts a weight, nor are changes made within the weight window logged.
- Information about key steps in the verification process, including date and time performed and by whom, cannot be captured.
- Documents supporting the final weight cannot be scanned or saved into the program.
- There is no area for recording occurrences, errors, or other observations made as part of the oversight process.
The use of multiple systems to address these gaps reduces the effectiveness of controls and is inefficient.
3.6 The official grade and weight of a shipment is certified to the customer by way of an official Canadian Grain Commission document called the Certificate Final. The information is manually entered on the Certificate Final by the documentation team (Administration Unit). The accuracy of the information is then verified by three of the units in the regional office: Administration, Inspection and Weighing Oversight. Each Canadian Grain Commission representative performs a number of different verification steps for an area of responsibility before signing the certificate; however, evidence that these specific steps are actually performed is lacking. Although no errors on the Certificates Final were identified in the sample tested, we could not conclude that all of the proper verification steps were performed based on the information available. A sign-off sheet or checklist would provide sufficient evidence that each detail on the certificate was reviewed without adding a documentation burden for the signors.
3.7 We recommend that future OSCAR system upgrades include integration of Weighing Oversight and Certification Program requirements in order to reduce manual re-entry of data, decrease chance of error, and facilitate elimination of additional computer applications and spreadsheet programs. This should include logging capabilities and improved access controls.
3.8 We recommend that a checklist be added to the documentation package that circulates with the Certificate Final during the review and sign-off process. The checklist should have a section for each of administration, inspection and weighing oversight with a list of the key steps that must be performed by each representative before authorizing the certificate. These steps will then be checked off and each section signed and dated by the representative who performed the work.
3.9 Optional services are all fees associated with inspection and documentation of a vessel other than official inspection and weighing, described above. All documentation and invoicing is currently prepared manually by administration staff in the regional office. Various spreadsheet-based applications are used to create, track and account for the documents and services that require invoicing. The Canadian Grain Commission is currently initiating an application development project to integrate vessels documentation into the OSCAR system to automate much of the work that is currently performed manually.
3.10 Once all optional services for a vessel are complete, an invoice is created by entering the fees into Canadian Grain Commission’s financial system. The administration unit in the Eastern Region employs appropriate segregation of duties between the preparation and review of fees to be entered and the actual entry of fees to create the invoice.
3.11 A sample of 16 optional services invoices (August 1, 2013 to February 7, 2014) determined that invoices were issued an average of 31 days following completion of the last test or letter requested by the customer. A total of 7 (44%) were issued over 30 days later, of which five were outstanding at least 40 days after the last test result was received or letter issued to the client. Invoices may be delayed due to delays in testing, issues arising during the documentation phase, or staffing shortages. However, most of these activities have service standards which, if achieved, should result in invoicing within 30 days or less.
3.12 We recommend that Industry Services and Finance establish service standards for invoicing and the timing be measured and reported with other activities.
Regionally-Based Computer Applications
3.13 Over time, Canadian Grain Commission’s regions have found there is a need to store, communicate, and automate information that is not met by existing corporate systems. As a result, various spreadsheets and MS Excel-based applications have been developed and placed on common network drives to assist staff in completing their work. In the Eastern region, the predominant working application is EastVessel. The EastVessel information is used when creating the Certificates Final, letters of analysis, optional services invoices and recoverable overtime invoices, among other uses.
3.14 EastVessel allows the units to clearly communicate information about a vessel (e.g. grading and testing results) between each other, and provides a common location to record a variety of pertinent information about a vessel. Unfortunately, most data found in EastVessel is also stored in other systems (such as OSCAR) and must be manually re-entered into the spreadsheets, resulting in extra work and increasing the chance of an error. As with most spreadsheets, EastVessel lacks access controls, change controls, and activity logs.
3.15 The use of different regionally-based computer applications, including EastVessel, has impeded the standardization of procedures across the Canadian Grain Commission. At the current time, EastVessel does provide value to the staff in the Eastern region; however, this would be better achieved through the use of a centralized application rather than a spreadsheet-based program. As described in above (ref 3.9), Canadian Grain Commission has initiated an application development project involving OSCAR, which will likely eliminate the need for much of EastVessel’s functionality.
3.16 We recommend that the EastVessel Excel-based application be decommissioned once improvements to the OSCAR system are implemented. Any remaining functionality that is not addressed by the OSCAR implementation should be addressed through national Industry Services procedures rather than through regional solutions.
Objective 2: To assess the adequacy and effectiveness of internal controls related to the administration of overtime in the Eastern region.
3.17 Overtime is both an expense and a revenue item for the Canadian Grain Commission. Employees work overtime hours and therefore earn overtime pay or compensatory leave. However, a significant amount of the overtime costs incurred by the Canadian Grain Commission at the waterfront are recoverable from the elevator operators, as described in the Canada Grain Regulations.
3.18 The workload of the Eastern Region staff, both in the office and at the waterfront, is seasonal as well as dependent on the activities of the grain companies. To meet customer demands, as well as Canadian Grain Commission’s own service standards, employees frequently work hours in addition to their regularly scheduled shifts or regular work hours. Each employee’s overtime entitlements are described in the employee’s specific collective agreement.
3.19 Employees record their hours worked, overtime, and other allowances on a Canadian Grain Commission daily attendance record form. Employees sign the form and forward it to their supervisor for review and approval. To request payment of overtime hours and allowances in cash, employees must log into the Extra Duty Pay system. The supervisor verifies that the request matches the daily attendance record and approves the amount in Extra Duty Pay. When the employee requests remuneration in the form of time-in-lieu (compensatory time), the Administration Officer inputs the hours in the human resources system (PeopleSoft) before filing the daily attendance record.
3.20 Our review of a sample of daily attendance records found evidence that supervisors are reviewing and approving the forms, and are comparing these forms to the claims made in Extra Duty Pay. We did not verify that the employees’ compensation was correct, as this was deemed out of scope for this audit.
3.21 Vessel-loading at the waterfront can take place at any hour, any day of the week. When a terminal requires services outside of the Canadian Grain Commission’s regular business hours, the Canadian Grain Commission issues an invoice to recover the cost of overtime (e.g. time and one-half overtime, double time overtime) incurred to provide the service. The overtime rates and application are described in the Schedule of Fees in the Canada Grain Regulations.
3.22 Recoverable overtime incurred by the Canadian Grain Commission inspectors is recorded on the “requisition for overtime – invoice to follow” forms each day, if applicable. In Churchill and Thunder Bay locations, a paper-based version of the requisition for overtime form is used. In all other Eastern locations, the inspectors complete the form electronically using the EastVessel program. In general, employees’ overtime recorded on the daily attendance records should be consistent with the hours on the requisition for overtime form; however, there are situations when overtime paid to employees is not recoverable, such as time spent on work related to Canadian Grain Commission contracts or memorandums of understanding with other government departments.
3.23 A sample of eight recoverable overtime invoices was analyzed for different ports in the Eastern region. We could only confirm that the hours recorded on the daily attendance records matched the hours recorded on the requisition for overtime forms for three of the invoices. For the remaining five invoices, we were unable to reconcile the hours on the daily attendance records to the requisition for overtime forms. Insufficient information was captured on the documents and regional office staff could not provide an explanation for variances.
3.24 Administration staff use the requisition for overtime forms to create recoverable overtime invoices in the financial system. This is a separate invoice from the optional services invoice discussed above (ref 3.9). The invoices and copies of the requisition for overtime forms are mailed to the elevators. Invoices in our sample were billed accurately (as compared to the requisition for overtime forms) and in a timely manner. However, the administration staff do not review the recoverable overtime hours billed for accuracy, existence, or completeness. This task has been assigned to the operations group, who are responsible for verifying the associated daily attendance records. We were informed that the operations supervisors in Montreal do not verify the hours on the requisition for overtime forms, and were therefore unable to assist in reconciling the overtime hours recorded on the daily attendance records to the requisition for overtime for the five invoices noted above.
3.25 It was also noted that “Officer in charge – Canadian Grain Commission” and “Authorizing elevator official” signatures were absent on the requisition for overtime forms for six of the invoices sampled. The authorizing elevator official is the customer signature acknowledging the amount that will subsequently be invoiced for the overtime incurred on that particular day. Only locations using the paper-based requisition for overtime forms (Thunder Bay and Churchill) collected signatures and provided a copy of the form to the elevator for their records.
3.26 At certain terminal locations in the Eastern region, a second employee shift is added during busy times of the year to accommodate a high volume of vessel loading activity by the terminal. The second-shift employees report for a regular work day, and although they may be eligible for a shift premium (shifts are generally 4:00 pm to midnight or 5:00 pm to 1:00 am), they do not earn overtime pay.
3.27 Our sample of recoverable overtime invoices included several vessels from locations with a second shift. Even though the Canadian Grain Commission employees were not earning overtime pay, the terminals were invoiced the time and one-half overtime fee. Further investigation revealed that it has been common practice to invoice these terminals for the second-shift hours since the shifts were implemented several years ago.
3.28 The new Canada Grain Regulations (C.R.C., c.889) came into effect on August 1, 2013. The definition of recoverable overtime located in Schedule 1 was amended. For example, for time and one-half overtime, the description of service is: “Overtime incurred to conduct an outward official inspection.” Since overtime was not actually being incurred by the Canadian Grain Commission for the second-shift employees, recoverable overtime under the Regulations would not apply, and certain terminals have been over-billed for recoverable overtime.
3.29 From August 1, 2013 to February 27, 2014, 55 recoverable overtime invoices were issued to the terminals involved, valued at over $97,000. The Canadian Grain Commission has calculated that approximately 40% of these charges for second-shift hours were not recoverable fees under the Regulations. Both the lack of oversight of the recoverable overtime invoicing process as well as the absence of terminal elevator acknowledgement (through signature on the requisition for overtime form) of overtime hours to be billed contributed to the errors occurring.
3.30 We recommend that recoverable overtime hours be reconciled to the daily attendance records and approved prior to invoicing. Non-recoverable time should be indicated as such and explained on the daily attendance records.
3.31 We recommend that the Eastern region stop billing for non-recoverable overtime hours, and that amount of recoverable overtime overpaid by the affected terminal elevators be calculated based on comparison of hours billed to employee daily attendance records, and the terminals be refunded as appropriate.
3.32 We recommend that Canadian Grain Commission inspection staff obtain a signature from a terminal elevator official on the “requisition for overtime—invoice to follow” form before it is submitted to the regional office for invoicing.
Objective 3: To determine whether management controls and risk management are in place to enable effective and efficient operations in achieving organizational objectives.
3.33 The regional management team members work together to manage the Eastern regional office, but each reports to a different national manager, who reports directly to the Director of Industry Services. Because of this structure, each regional management team manager has different objectives to achieve, risks to consider, and controls to perform on a daily basis.
3.34 Each manager identified a number of risks or challenges being faced by his/her unit, but was also able to identify several mitigating actions or plans to manage the risks. The regional management team has recently faced a re-organization of the region, changes to services offered, new user fees and service standards, as well as work force adjustment situations throughout the region. Although a number of related challenges continue to exist, the regional management team have been working together to implement solutions to address these issues while continuing to maintain Canadian Grain Commission’s service level.
3.35 One area that has continued to challenge the Eastern Regional Office is the full implementation of the Canadian Grain Commission’s Performance Development and Achievement Program. Although some progress has been made in the operations unit, the regional management team reported that for the majority of non-inspection staff there has been little or no progress on completing various elements of the program, including personal learning agreements and performance reviews.
3.36 In 2014, Treasury Board Secretariat is implementing the Directive on Performance Management, which requires the elements of the Canadian Grain Commission’s internal Performance Development and Achievement Program to be recorded in a standard format in a national, web-based application. All staff and management in the Eastern region will be required to comply with this directive including meeting the specified timelines for completing the Public Service Performance Agreement, which replaces Canadian Grain Commission’s Personal Learning Agreement.
3.37 We recommend that upon the roll out of the new Directive on Performance Management, Eastern Regional Office implement the program for all staff, including completion of the Public Service Performance Agreement and all required performance reviews.
Objective 4: To assess the adequacy and effectiveness of internal controls over general data security, including electronic and pre-printed documents.
3.38 During our visit to the office, we observed that the overall control environment (the general approach and attitude) concerning data security was good. Both building and office security are maintained; passwords were not visible and there was no evidence of password sharing; samples are identified with appropriate labels and stored in an appropriate manner.
3.39 As described above (ref. 3.6), the Certificate Final is an official Canadian Grain Commission document. It is internationally recognized and accepted as Canada’s assurance that the customer is receiving what it expected, i.e. the shipment meets Canadian quality and quantity standards.
3.40 The certificates are printed on special pre-numbered paper stock. The blank certificate stock in the Montreal office is kept in a secure location. Issued Certificates Final that were voided due to errors are maintained in the documentation package to ensure traceability. Issued and voided Certificates Final are tracked on a spreadsheet which specifies vessel details including bill of lading date, the vessel name and replacement Certificate Final if the original was voided. The administration staff identified numerous gaps in Certificate Final sequence numbers which were indicated on the tracking spreadsheet, but did not provide an explanation for the gaps. Upon further analysis it was determined that there were 51 gaps with a total of 466 certificate numbers for which staff could not account. Failure to track all Certificates Final could lead to potential loss, theft or fraudulent use of the certificate stock to create documents fictitiously representing the quality of a shipment of grain.
3.41 We recommend that the tracking of Certificates Final be improved to ensure traceability and accountability for all Certificate Final documents, including regular (weekly or monthly) verification by another member of the Administration Unit.
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