Follow-up Audit Report
March 2007
Recommended for Approval to the Deputy Minister by the DAC on December 5, 2007
Approved by the Deputy Minister on December 12, 2007
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Aussi offert en français sous le titre Rapport de vérification de suivi Rémunération et avantages sociaux
Table of Contents
- Executive Summary
- 1.Background
- 2.Objective of the Follow-up Audit
- 3. Approach and Methodology
- 4. Detailed Follow-up Audit Findings
Executive Summary
The follow-up audit of Pay and Benefits was carried out as per the approved 2006-07 Audit and Evaluation Plan. The follow-up assessed the extent to which the National Capital Region (NCR) Compensation Services Section of the HR Branch and the Human Resources Directorate of the Ontario Regional Office had implemented the planned actions arising from the March 31, 2003 internal audit report for four specific activities: pay and benefits, leave, provision of information and pay equity. The auditors visited the Compensation Services Section of the HR Branch in the NCR. An on-site visit to the Ontario Region was not conducted.
The 2003 audit noted weaknesses with the standardization and consistency of operating procedures which contributed to calculation errors and a deficiency in file documentation. The audit found errors in the calculation of extra duty and acting pay. Also, several cases were noted where sick leave credits were being accrued when employees were ineligible resulting in an overstatement of leave balances.
Management responded by establishing a Compensation Monitoring Program under the responsibility of the Manager, Compensation Policy and Monitoring in the Human Resources Branch NCR. This follow-up audit tested a sample of pay calculations and found them to be accurate. Peer reviews have also been instituted to strengthen monitoring and further reduce errors.
In conclusion, the recommendations of the 2003 audit have been largely addressed and we recommend that HRB consider the following:
- The HR Branch should continue its efforts to enhance its advisory role and take a formalized approach to ensure standardized operating procedures are applied across all regional offices and NCR HQ offices.
- The HR Branch should reassess the non-mandatory requirement of the various calculation tools.
- All Compensation Advisors should be reminded to ensure employee files contain adequate documentation to include calculations and checklists for each type of pay and benefit activity.
- The Compensation Monitoring Program should ensure that coverage of HQ and regional pay and benefits units provide assurance that transactions are processed accurately, in a timely fashion and in accordance with relevant agreements, guidelines and policies.
1. Background
In fiscal year 2002-03, an audit was conducted of two Pay and Compensation units of Industry Canada – the Compensation, Training and Management Services unit of the National Capital Region (NCR) and the Human Resources Directorate of the Ontario Regional Office. The fieldwork was performed during the months of October and November 2002 and a final report was issued on March 31, 2003.
The objective of the audit was to test pay transactions in each major activity of these two Pay and Compensation units to determine whether the transactions had been processed accurately, in a timely fashion and in accordance with the relevant agreements, guidelines and policies. The audit focused on five major elements including pay and benefits, leave, provision of information, pay equity and compensation management.
The initial audit concluded the following as it related to each of the activities/elements examined:
The audit findings, conclusions and recommendations of the audit were accepted by both Offices.
2. Objective of the Follow-up Audit
The objective of the follow-up of the Pay and Benefits audit is to assess the extent to which Pay and Benefits management have made progress in implementing their intended course of action arising from the March 31, 2003 audit recommendations. The audit assessed the effectiveness of the actions implemented by the Pay and Compensation units in both the NCR and the Ontario Region to address the issues raised in the audit report.
3. Approach and Methodology
In executing the follow-up audit, the Audit Team took the following actions:
- Issued follow-up notification letters to the Manager, Compensation Policy and Monitoring, Human Resources Branch (NCR) and the Director, Human Resources in the Ontario Region;
- Ensured the proposed actions in the Audit Report dated March 31, 2003 were still relevant;
- Developed a follow-up questionnaire aligning the Pay and Benefits management responses and proposed actions for both regions;
- Distributed follow-up questionnaires to Pay and Benefits management in both regions;
- Obtained and reviewed key documentation to assess the degree to which the proposed actions have been implemented;
- Interviewed the Manager, Compensation Policy and Monitoring (HQ) and the Manager, Compensation Services for the NCR. Held telephone conversations with the Director Human Resources and Manager, Compensation and Benefits for the Ontario Region;
- Obtained a listing of employees in the NCR to analyze the pay and benefits population and select, on a sample basis, employee files;
- Selected a random sample of three to four files for each Compensation and Benefits activity in the NCR to ensure that the recommendations had been fully implemented. The sample related to files covering the period January 2006 to March 2007; and
- Communicated our findings on the results of the follow-up audit with the Manager, Compensation Policy and Monitoring (HR Branch), the Manager, Compensation Services for the NCR and, in the Ontario Region, the Director, Human Resources and the Manager, Compensations and Benefits.
4. Detailed Follow-Up Audit Findings
The following summarizes the actions developed by the Compensation Services Section in the National Capital Region (NCR) and the Human Resources Directorate of the Ontario Region to address the recommendations raised in the March 31, 2003 audit report and the current status of their implementation.
4.1 Pay and Benefits
4.1.1 Basic Pay and Benefits
2003 Initial Recommendations and Management Response
Management Response: The Human Resources Branch will develop file documentation standards and this element is included within its new IC Compensation Monitoring Program to be launched in Fall 2003. Ontario Region has developed some manual templates in the interim that are currently in use.
We support the implementation of automated calculation templates; given the unavailability of funds for internal development we will gather and promote the use of existing IC templates and will be consulting with TBS, PWGSC or other departments to obtain other existing templates.
Findings for National Capital Region
Findings for Ontario Region
4.1.2 Acting Pay
2003 Initial Recommendation and Management Response
The Director, Compensation, Training and Management should ensure that employee files contain support for acting pay calculations and authorizations for acting pay transactions.
Management Response: The issue of file documentation for all types of transactions is a key component of our new IC Compensation Monitoring Program (Fall 2003). Guidelines and procedures will be published as required based on our findings.
Findings for National Capital Region
This recommendation has been substantially implemented
There is a specific procedure in place to approve acting pay. For periods of less than four months, the Staffing Section forwards an e-mail to the Compensation Advisor following confirmation received from the employee's manager. For approvals extending beyond four months, the Staffing Section provides a letter to the Compensation Advisor. In the sample of files tested, all acting pay was properly authorized. In one particular case, however, in which acting pay had been extended beyond four months, an e-mail instead of a letter had been received from the Staffing Section.
Currently an automated calculation tool is not in place for acting pay. It is anticipated that a tool will be developed in conjunction with a number of other government departments in 2007-2008. Acting pay calculations are reasonably simple to perform and given the three levels of peer review, internal controls are adequate to avoid errors. While no errors were found in the file review conducted, detailed calculations were not documented.
Findings for Ontario Region
This recommendation has been partially implemented
The Ontario region has not developed a template to calculate acting pay. The Region is looking to HR Branch to take the lead in creating templates. Compensation Advisors are advised to include a manual calculation of the transaction in the file. The Region believes there are sufficient checks and balances via the verification process to detect errors.
4.1.3 Extra Duty Pay
2003 Initial Recommendations and Management Response
Management Response: We support the implementation of automated calculation templates; given the unavailability of funds for internal development we will gather and promote the use of existing IC templates and will be consulting with TBS, PWGSC or other departments to obtain other existing templates. The performance of peer review has, for years, been a mandatory requirement; verification of adherence to this process is included in the new IC Compensation Monitoring Program (Fall 2003).
Findings for National Capital Region
Findings for Ontario Region
4.2 Leave
4.2.1 Leave Without Pay
2003 Initial Recommendations and Management Response
Management Response: Responsibility for approving sick leave rests with the employee's manager; terms and conditions are clearly outlined in all collective agreements which are posted on the HRB intranet site. Approximately 85-90% of "paid" leave transactions are now processed via the Leave Self-service functionality and as such, there are no paper documents on employee files. As "leave without pay" transactions may not be processed on-line, a signed Leave Application form is placed on the employee file. While the "Leave Year-end Process" is now fully automated, a copy of the statement is placed on individual employee files.
At the time of the audit, IC was utilizing HRMS version 7.13 and there was in fact a "bug" associated with leave accruals; IC has been utilizing HRMS version 7.5 since December 2, 2002 and this has resolved the accrual issue. A Leave Enhancement project currently being managed by the Government of Canada (GC) HRMS Shared System Cluster will further strengthen the delivered version 8 functionality and, IC's target date for upgrading to version 8 is April 2004. Notwithstanding, the IC-HRMS team monitors data integrity and provides HR Advisors and Compensation Advisors with exception reports on an ongoing basis.
The Director, Compensation, Training and Management Services, the Manager Compensation and Benefits Division, Regional directors of Human Resources and Compensation Advisors continue to make every effort to inform supervisors and employees of the importance of prompt notification when an employee is taking LWOP. LWOP transactions involving complex calculations, such as EI top up, undergo a first level of review through peer verification; questions and issues of concerns are raised with the Compensation supervisor/manager.
Findings for National Capital Region
Findings for Ontario Region
4.2.2 Terminations
2003 Initial Recommendations and Management Response
Management Response : The implementation of the new IC Compensation Monitoring Program (Fall 2003) will address issues of consistent use of existing and new templates and checklists.
As noted above, the issue of leave accruals has been rectified through the implementation of HRMS version 7.5 and, the IC-HRMS team monitors data integrity and provides HR Advisors and Compensation Advisors with exception reports on an ongoing basis.
Findings for National Capital Region
Findings for Ontario Region
4.2.3 Sick Leave Management
2003 Initial Recommendation and Management Response
We recommend the implementation of controls to ensure that "approving officers" forward supporting documentation to those responsible for maintaining employee records. Unnecessary delays must be followed up, and persistent non-compliance must be addressed in a proactive manner.
Management Response: Receipt of documentation/approvals by the appropriate "authorizing officer" prior to the conduct of a compensation transaction is an established requirement. The IC Compensation Monitoring Program will review file documentation and pursue corrective action where necessary.
Findings for National Capital Region
This recommendation is no longer relevant
New procedures for approving employee's sick leave in the PeopleSoft Self Service module were introduced. Employee leave is now requested on-line using the PeopleSoft system. The manager receives an e-mail and approves the leave application directly on-line in the PeopleSoft system.
The affiliated agencies of Industry Canada do not have access to the PeopleSoft system. These employees request their leave by completing the hard copy of the leave form. Following approval by the manager, the forms are forwarded to the Compensation Advisors at Industry Canada, who input the information into the PeopleSoft system.
Due to changes in new collective bargaining agreements, employees are no longer obligated to provide medical certificates for sick leave. The requirement to provide a medical certificate is now at the discretion of the manager. In the files examined, there were medical certificates in one of the three files.
Findings for Ontario Region
This recommendation is no longer relevant
An updated version of PeopleSoft system is currently being used to support the recording of leave. Compensation Advisors are associated with specific employee files such that Advisors automatically receive all information relating to their designated employee files.
The Ontario Region recommends that sick leave be certified but it is at the discretion of the manager. In fact, the Region is currently conducting random audits to determine if medical certificates were received in cases where certified sick leave was approved. A checklist from the Virtual Pay site is used to ensure that all documentation is on file. Also, the Region has introduced a Monthly Leave without Pay Report to control complicated LWOP and to provide sick leave information.
4.3 Provision of information
2003 Initial Recommendation and Management Response (Ontario Region only)
We recommend that the Director, Compensation, Training and Management Services and the regional directors of Human Resources consider the implementation of a logging and/or review process to ensure such delays do not take place in the future.
Management Response: Timeliness has always been one of the principal service standard elements in the management of a compensation function across IC. The Ontario Region did face some challenges; corrective action has been taken by the new Director HR to stabilize the organization and its delivery of services. The new IC Compensation Monitoring Program will be the formal review process for all compensation service delivery organizations across the department.
Findings for Ontario Region
This recommendation has been fully implemented
Employees are asked to provide a minimum of 45 days notice before their retirement date. Documentation provided indicates that there are no longer delays of up to six months postretirement to deliver pension letter documentation, related annuities, and severance payments. A checklist is completed to ensure that all documentation, including a copy of the pension letter, is on file.
4.4 Pay Equity
2003 Initial Recommendations and Management Response
Management Response: The Director HR for the Ontario Region has confirmed that all pay equity payments have been completed. As part of that process, several complex files were reviewed to ensure their adherence to procedures and corrections made, if required. The archiving of these files is now underway.
Findings for both regions
The management of pay equity files for both regions was completed in 2004. This recommendation is no longer relevant due to the fact that this activity no longer takes place.