Archived - Audit of Leave and Overtime

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Table of Content

Assurance Statement

Executive Summary


Assurance Statement

Internal Audit and Evaluation (IAE) has completed a compliance audit of leave and overtime. The objective of the audit was to assess the adequacy and effectiveness of internal controls related to the administration of leave and overtime. The audit approach and methodology followed Treasury Board Policy on Internal Audit and the Institute of Internal Auditors Standards for the Professional Practice of Internal Auditing.

The examination was conducted during the period of April through June 2008, and covered leave and overtime transactions processed for the fiscal year ending March 31, 2007.

The audit consisted of a review of applicable authorities, walkthroughs, interviews, and an examination of overtime and leave transactions using a risk-based statistical random sampling methodology. The audit evidence gathered is sufficient to provide senior management with reasonable assurance of the results derived from this audit.

We concluded with a high level of assurance that overall, leave and overtime expenditures for the fiscal year ending March 31, 2007 within the Department of Finance were managed in accordance with applicable laws, policies and collective agreements. However, opportunities exist to improve current practices and processes. Please see the detailed report for an assessment of each audit criterion.

In the professional judgment of the Chief Audit Executive, sufficient and appropriate audit procedures have been conducted and evidence has been gathered to support the accuracy of the opinion provided in this report. The opinion is based on a comparison of the conditions, as they existed at the time of the audit, against pre-established audit criteria. The opinion is only applicable for the entities examined and for the time period specified.

Executive Summary

Background

The audit of leave and overtime is an assurance engagement that is part of the approved Finance Canada Three-Year Risk Based Audit Plan (Fiscal Year 2007-2008 to 2009-2010).

Leave is defined as an authorized absence from duty. The collective agreements and the Terms and Conditions of Employment Policy set out employees' paid and unpaid leave entitlements. Overtime is defined as time worked by an employee in excess of the standard daily or weekly hours of work and for which the employee may be entitled to compensation.

The management of leave and overtime is governed by the Public Service Employment Act, the Financial Administration Act (FAA), and a series of Treasury Board (TB) policies and collective agreements. TB Circular 1977-37: Pay Administration clarifies the overall responsibility for pay administration by assigning departments the responsibility for the integrity of the overall pay process. As well, all payments and settlements must be verified and certified pursuant to section 34 (s.34) of the FAA as governed by Treasury Board's Policy on Account Verification.

As at November 2007, the Department of Finance Canada (FIN) had 1,207 FTEs in approximately 14 occupational groups represented by eight different collective agreements. The Departmental unaudited financial statements for 2006-2007 reported annual Salary and Wages of $70,817,000 as part of operating expenses. Total (Net) pay in lieu of leave amounted to $687,198. Overtime paid in cash and overtime hours worked and compensated in leave in lieu of cash payment was $1,499,134 and 5,783 hours respectively.

Objective and Scope

The objective of the audit was to assess the adequacy and effectiveness of internal controls related to the administration of leave and overtime. Specifically, the audit assessed the extent to which the control framework ensured the effective and efficient processing of leave and overtime.

This audit was primarily a compliance audit, focused on the appropriateness and effectiveness of the management framework in place to support leave and overtime activities and compliance with relevant regulations and departmental policies.

The audit covered the fiscal year (FY) 2006-2007 and the examination phase was conducted between April and June 2008.

Key Findings

The audit found that FIN administration of leave and overtime was compliant with applicable laws, policies and collective agreements. However, opportunities exist to strengthen the management control framework to articulate roles and responsibilities for overtime and leave management, and include a monitoring and risk assessment exercise. As well, a more consistent and inclusive approach to overtime costs and overtime forecasts, improvement to management and authorization of leave and overtime, changes to user functionality in PeopleSoft Human Resource Management System (HRMS), and development of formal and approved guidelines in the administration of leave and overtime would be beneficial.