Audit of Departmental Travel. Indian and Northern Affairs Canada. Prepared by: Departmental Audit and Evaluation Branch.

#1056980 Indian and Northern Affairs Canada Prepared by: Departmental Audit and Evaluation Branch Assisted by: Night Hawk Technologies Audit of Departmental Travel Project 05/01 March 2007

Table of Contents Page Executive Summary... i Section 1 - Introduction... 5 Section 2 - Compliance... 2 Travel Planning...2 Pre-authorization of Travel...4 Use of AMEX Travel Cards...5 Review and Approval of Travel Expense Claims...7 Proactive Disclosure of Travel Expenses for Senior Officials...8 Section 3 - Management Control Framework... 9 Information Management and Reporting...9 Departmental Travel Policy and Directives...10 Reasonableness and Eligibility of Expenditures...11 Post-audit of Travel Claims...12 Annex Action Plan

Executive Summary Background To ensure that an effective management control framework is in place, in light of an increased focus and public scrutiny of government spending, the Departmental Audit and Evaluation Committee identified the audit of departmental travel expenditures as one of the essential components of the Department s 2005-2006 Annual Risk-based Audit and Evaluation Plan. INAC employees travel regularly to support departmental operations and various business lines servicing First Nations stakeholders across Canada. To facilitate the travel process and reduce administrative costs, INAC directs its employees to use individual American Express (AMEX) travel cards. INAC also uses departmental travel accounts, responsibility centre travel cards and travellers cheques when necessary. In fiscal year 2004-2005 departmental travel expenditures totalled $27.3 million, representing 21,547 travel claims. In October 2002, Treasury Board issued a new Travel Directive that replaced both the 1997 Travel Directive and the Travel Administration Guide. The new directive clarifies employer and employee responsibilities, including the need for employees to be familiar with Treasury Board directives and departmental travel policies, obtain authorization from responsibility centre managers prior to travel, communicate any specific needs requiring accommodation prior to travel, and submit expense claims with all supporting documentation as soon as possible upon completing travel. Indian and Northern Affairs Canada s (INAC) Finance Branch is responsible for developing and ensuring the implementation of travel policies and guidelines across the department. Regional Corporate Services directorates are responsible for providing travel authorizations and processing completed travel claims for employees located in the regions while the Finance Branch provides these services for headquarters employees. Finance Branch and Regional Corporate Services directorates also provide guidance and advice on policy-related questions. Responsibility Centre Managers (RCMs) approve travel requests and ensure that claims are consistent with Treasury Board policy and departmental travel directives. 05/01 - Audit of Departmental Travel Page i

Objectives The objectives of the audit were: to assure senior management that departmental travel transactions are in compliance with Treasury Board and departmental policies, procedures and guidelines; and to determine if an effective management control framework is in place to plan, communicate, monitor and report on travel activities, while ensuring the transparency and accountability for each transaction. Scope and Methodology The fieldwork phase of the audit of departmental travel was conducted at headquarters and in the Atlantic, Ontario, British Columbia and Yukon Regions between January and September 2006. During the planning phase for the audit, audit criteria were developed from the Treasury Board s Travel Directives (October 2002) and INAC travel policy guidelines and were agreed upon by auditee management of the Finance Branch at headquarters and the Corporate Services directorates in the regions. Audit work included an analysis and assessment of processes and procedures associated with pretravel authorization, expense claim documentation, proactive disclosure of travel expenses for selected members of the department s senior management team, eligibility of expenditures, use of AMEX travel cards, and the costs associated with INAC use of government travel service providers. Departmental reporting of costs and post audit mechanisms used to manage the function were also examined. The audit examined a randomly-selected statistical sample of 246 travel authorization requests and claim transactions from headquarters and four regions that occurred between April 1, 2004 and March 31, 2005. The sample plan was designed to provide a 95% confidence level that results could be extrapolated to the entire population of related transactions, with a precision of plus or minus 5%. Auditors also examined a judgmental sample of 40 senior management travel claims from the same period. In addition, the audit examined the usage of a sample of 162 AMEX travel cards. The specific card transactions examined were those incurred by the card holder between January 1 and December 31, 2005. The audit also examined fiscal year 2005-2006 data provided by the Shared Travel Services Initiative at Public Works and Government Services Canada to look at the frequency with which INAC purchased the lowest airfare and used the on-line booking tool versus the full service call centre. 05/01 - Audit of Departmental Travel Page ii

In examining travel claim files, auditors did not attempt to assess the value for money derived by the department, i.e. they did not question the necessity for the travel and did not consider whether there may have been more economical alternatives. Key Findings An opportunity exists for INAC to realize substantial savings on travel expenditures if travellers booked earlier, accepted the lowest available airfare and made greater use of on-line booking instead of the full service call centre. In 2004-2005, 45% of the $27.3 million travel expenditure was for air and other modes of transportation. In spite of departmental employees who are issued AMEX travel cards having to sign an agreement that commits them to use the card for business purposes only, 25% of the 162 travel cards reviewed contained transactions that were determined to be personal expenditures. If an employee fails to make the necessary payment to AMEX, personal use of travel cards creates unnecessary risk and additional administrative costs as INAC is required to pay the outstanding balance and set up an accounts receivable to monitor and subsequently collect the corresponding amounts directly from the employee. No reporting system is in place to provide periodic travel-related reports to Responsibility Centre Managers. The current departmental financial system (OASIS) does not provide detailed travel expenditure information to promote the efficient use of travel dollars available to the organization. Recommendations 1. The Chief Financial Officer, in consultation with headquarters and regional managers, should develop a clear department-wide strategy to ensure INAC meets, within a reasonable time frame, the Government of Canada s targets of 70% of airline bookings accepting the lowest available airfare and 50% of all bookings being made on-line. 2. The Chief Financial Officer, in consultation with headquarters and regional managers, should develop, implement and monitor the application of clear parameters for the acceptable use of Blanket Travel Authorities, taking into account the limitations and restrictions suggested by Treasury Board and including specific guidance on the circumstances under which such authorities are to be rescinded. 3. The Chief Financial Officer, should notify Responsibility Centre Managers of the requirement to complete and approve the necessary Travel Advance and Authority Form before travel occurs. 05/01 - Audit of Departmental Travel Page iii

4. The Chief Financial Officer should emphasize the requirement that the AMEX travel card be used for business purposes only, should develop criteria for identifying potentially inappropriate (personal) use of the AMEX travel card, and should develop procedures for RCMs and Finance to monitor and control the use of AMEX travel cards by employees. 5. The Chief Financial Officer, in consultation with headquarters and regional managers, should ensure that appropriate procedures are developed for the timely submission and reconciliation of travel expenditure documentation so that payments to American Express for departmental travel accounts can be processed by the due date. 6. The Chief Financial Officer, in consultation with the Regional Director General, British Columbia, should ensure, pursuant to Section 34 of the Financial Administration Act, that employees travel expense claims are verified by the next higher level manager who has delegated signing authority. 7. The Chief Financial Officer, should ensure that reports produced by the Government Travel Service Provider (GTSP) on travel expenditures are reviewed to determine the extent to which they can provide useful information for monitoring and decision-making purposes. Arrangements should be made to ensure valuable reports produced by the GTSP are made available to departmental management on a timely basis. 8. The Chief Financial Officer, in consultation with the Director General, Information Management Branch, should ensure that the enhancements to the OASIS system, as well as the introduction of the Expense Management Tool effectively improve the quality of travel information available for monitoring and decision-making purposes. 9. The Chief Financial Officer, in consultation with headquarters and regional managers, should ensure that newly-developed departmental travel policy and directives are standardized, and provide clear guidance to staff, particularly with respect to those areas of interest to INAC not explicitly addressed by applicable Treasury Board policies. Once developed, the new policy and directives should be communicated and enforced across the organization. 10. The Chief Financial Officer, should clarify and communicate the guidelines with respect to hotel accommodation and rental car insurance coverage to managers, travel coordinators and staff. 11. The Chief Financial Officer, in consultation with regional finance managers, should ensure that a consistent post audit of travel claims process is established and followed across the department. 05/01 - Audit of Departmental Travel Page iv

Section 1 - Introduction In fiscal year 2004-2005, INAC spent $27.3 million on travel and processed 21,547 travel claims. Employees on travel status are expected to be familiar with the provisions of the Treasury Board s Travel Directive and related policies and procedures. Responsibility centre managers are required to approve all travel requests and claims in accordance with Sections 32 and 34 of the Financial Administration Act, as well as Treasury Board policy and departmental directives. Finance Branch at headquarters is responsible for developing and ensuring the implementation of departmental travel policies and guidelines. Headquarters and Regional Corporate Services directorates are responsible for pre-authorization and processing of travel expense claims for employees located respectively at headquarters and in the regions. Finance Branch at headquarters and Regional Corporate Services directorates also provide guidance and advice on policy related questions. Between 2002-2003 and 2004-2005, total expenditures for travel and transportation were as follows: Type of Expenditure 2002-20003 2003-2004 2004-2005 Travel 1 - Public Servants $14,841,682 $13,929,717 $12,219,893 Transportation 2 - Public Servants $15,504,554 $14,071,831 $11,495,136 Travel - Non Public Servants 3 $1,892,047 $1,925,817 $1,603,536 Transportation - Non Public Servants $810,740 $669,268 $861,542 Relocation of Employees $1,761,725 $1,908,366 $1,189,448 Total $34,810,748 $32,504,999 $27,369,555 1 2 3 Travel includes expenditures on hotel accommodations, meals, per diem and incidental allowances. Transportation includes expenditures on airline tickets, train, bus, taxi, shuttle, car rentals, local transportation services and other vehicles. Non Public Servants include Minister s office exempt staff, and First Nation representatives attending consultation meetings between the department and aboriginal organizations, such as the Congress of Aboriginal Peoples, the Metis National Council, Tribal Councils, and other aboriginal groups. 05/01 - Audit of Departmental Travel Page 1

Section 2 - Compliance Travel Planning Audit Criterion INAC managers and employees are expected to be aware of key requirements outlined in both Treasury Board and departmental travel directives, in particular the need to seek the lowest available fare appropriate to the circumstances, and that bookings should be made as far in advance as possible in order to realize cost savings. Findings In 2004-2005, 45% of the $27.3 million travel expenditure was for air and other modes of transportation. When a traveller, or their administrative support staff, makes an air travel reservation, either through a government travel counsellor or via the on-line booking system operated by American Express on behalf of the Government of Canada, a departure and/or arrival time is requested. The government travel counsellor or the on-line booking system presents all possible departure and arrival times spanning four hours before and after the requested times. The lowest airfare is the lowest fare available to the government at the date and time of the travel booking. If the traveller does not choose the lowest fare available during the four hour time span, s/he is asked to select a reason for not doing so from a list of options. This request is automatic in the on-line system and travel counsellors are instructed to get similar information from the traveller. The lowest available fare is printed out at the end of the travel itinerary document along with the actual fare paid. An analysis of travel claims revealed that there are opportunities for INAC to realize significant savings through earlier booking of flights and through more widespread acceptance of the lowest available fares. The analysis also showed that the earlier in advance the flight is booked, the larger the difference between lowest and highest available fares while the closer to departure time the flight is booked, the difference between lowest and highest available fares is much smaller. In effect, late booking travellers will only have the choice between slight variations on full fares. The following table shows how booking times were distributed in the sample of travel claims examined and demonstrates a tendency to leave bookings to the last minute, as 55 percent of airfares were booked within one week of travel, thereby reducing the likelihood of having lower fares available. 05/01 - Audit of Departmental Travel Page 2

Number of days travel was booked in advance Percentage of all claims involving airfare 0 to 3 20% 4 to 7 35% 8 to 14 22% More than 14 days 23% Total 100% In our sample of 246 employee and 40 senior management travel claims, we observed 165 claims that included airfare expenditures. Of these 165 travel claims, 69 did not include information indicating whether a lower fare had been available at the time of booking. Among the other 96 travel claims, 39 had taken the lowest available airfare. Of the remaining 57 travel claims, a number provided explanations as to why the lowest airfare had not been taken. Including those claims for which an explanation had been provided, the total actual fare paid on those 57 travel claims exceeded the lowest available fare by over $42,000, an average of over $737 ($42,000/57) per ticket. According to recent data provided by the Shared Travel Services Initiative (STSI) at Public Works and Government Services Canada, in 2005-2006 INAC took the lowest airfare 52% of the time. The Government of Canada s target for acceptance of the lowest airfare is 70%. While there may be many valid reasons for not taking the lowest airfare (e.g. extended or inconvenient travel times, non-refundable fares), these should be documented. Responsibility Centre Managers should be ensuring that members of their staff are booking their flights as early as possible and accepting the lowest available airfare whenever practical. Finance should be monitoring travel claims with airfare components to ensure that the available lowest fare is always documented and that explanations are provided in cases where the lowest fare is not selected. In addition to the above, further savings can be realized if travel coordinators and employees book their travel using the on-line booking tool @ $20 per booking, rather than using the full service call centre @ $40 per booking. In 2005-2006 the following travel bookings took place: Type of Air Fare Booking No. of Bookings Booking Fee Total Cost Full Service Call Centre 10335 $40 $413,400 On-Line Booking 1262 $20 $25,240 05/01 - Audit of Departmental Travel Page 3

The Government of Canada s adoption rate for the On-Line Booking Tool was 21.43%. INAC s adoption rate was 11% for 2005-2006. The Government of Canada s goal is a minimum of 50% for on-line booking for domestic or trans-border travel. Achieving this goal would result in substantial savings for the department. It is recognized that booking a lower airfare further in advance increases the risk of incurring additional fees should scheduling changes be required. In 2005-2006, INAC changed 2,497 out of the 11,597 tickets issued at the cost of $41.49 change fee per ticket, for a total of $103,600. However, the combined savings resulting from booking lower airfares further in advance and increasing the use of the on-line booking tool far outweigh the total cost of the change fee. Recommendation 1. The Chief Financial Officer, in consultation with headquarters and regional managers, should develop a clear department-wide strategy to ensure INAC meets, within a reasonable time frame, the Government of Canada s targets of 70% of airline bookings accepting the lowest available airfare and 50% of all bookings being made on-line. Pre-authorization of Travel Audit Criterion Employee travel is to be authorized by Responsibility Centre Managers (RCMs) in advance of travel to ensure that expenses will be incurred in accordance with Treasury Board provisions and departmental travel policies and directives. Findings Blanket travel authorities, also known as annual travel authorities, are extensively used in the regions audited to reduce the perceived administrative burden associated with authorizing each single trip. The audit team is of the opinion that extensive use of blanket travel authorities could expose INAC to significant risks unless their use is well controlled. The current Treasury Board Travel Directive of October 2002 is silent on the use of Blanket Travel Authorities, although they were clearly allowed in the October 1997 version. The Departmental Finance Branch believes that this element of the previous policy was therefore carried forward to the current set of directives. Treasury Board analysts, upon enquiry, have stated in writing that Blanket Travel Authorities for individual employees are allowed as long as they are subject to annual renewal. 05/01 - Audit of Departmental Travel Page 4

They have also suggested that it would be prudent to have limitations or restrictions for each blanket authority, such as, but not limited to: blanket authority for trips within Canada only; employee to seek specific approval for trips in excess of a predetermined number of days; employee to seek specific approval for trips in excess of a predetermined dollar value; and employee to seek specific approval for trips which are partially business/partially personal. In addition, it is suggested that a detailed post-audit be conducted subsequent to all blanket authority trips. Should the post-audit identify charges or practices which are contrary to the terms outlined in the blanket travel authority, said authority should be rescinded immediately. Compliance tests revealed that 10% of travel claim files did not contain a Travel Advance and Authority Form and were not covered by a blanket travel authority. Another 10% of travel claims contained a Travel Advance and Authority Form that was not properly approved or that was approved after the travel took place. Recommendations 2. The Chief Financial Officer, in consultation with headquarters and regional managers, should develop, implement and monitor the application of clear parameters for the acceptable use of Blanket Travel Authorities, taking into account the limitations and restrictions suggested by Treasury Board and including specific guidance on the circumstances under which such authorities are to be rescinded. 3. The Chief Financial Officer should notify Responsibility Centre Managers of the requirement to complete and approve the necessary Travel Advance and Authority Form before travel occurs. Use of AMEX Travel Cards Audit Criterion Individual AMEX travel cards are expected to be used only for authorized government businessrelated travel purposes, in accordance with Treasury Board and departmental travel policies and directives. 05/01 - Audit of Departmental Travel Page 5

Findings All employees who are issued individual travel cards sign an agreement that commits them to use the card for business purposes only. Although each employee issued one of the 162 travel cards in our sample had signed an agreement, 25% of the cards contained transactions that were deemed 4 to be personal in nature. In thirteen of the 162 cases, employees had a large number of personal transactions on their AMEX travel card. For example, during the period of January to December 2005, three headquarters employees had 183, 113 and 70 cash withdrawals and 75% of the transactions on one regional employee s account were for personal expenditures without any travel or hospitality claims on the employee s file that corresponded to the periods of the expenditures. When an employee defaults on AMEX travel card payments, INAC is required to pay the outstanding balance and set up an accounts receivable to monitor and subsequently collect the corresponding amounts directly from the employee. The personal use of travel cards creates unnecessary risk and additional administrative costs for the department. In addition, employees derive an unauthorized benefit by using the travel card for personal reasons because the outstanding balance is interest-free for 60 days. It is important to recognize that, once these issues were brought to the attention of Finance Branch, it took the initiative to communicate to all employees the requirement to use the AMEX travel card only for authorized business related expenditures. The effectiveness of this measure could not be assessed during the audit. In addition, we examined departmental AMEX travel accounts in the four regions covered by the audit. Departmental AMEX travel accounts are used to book airline and rail tickets, as transportation expenses pre-paid by the department, for employees located in the regions. As the AMEX travel accounts may be used to cover more than one responsibility centre, proper coordination and the timely receipt of required supporting documentation are key for the settling of amounts owed by the due date. Certain delays were noted that resulted in the payment of interest charges to American Express. Recommendations 4. The Chief Financial Officer should emphasize the requirement that the AMEX travel card be used for business purposes only, should develop some criteria for identifying potentially inappropriate (personal) use of the AMEX travel card, and should develop procedures for RCMs and Finance to monitor and control the use of AMEX travel cards by employees. 4 Expenses deemed personal were those not normally associated with travel, e.g. hardware or department store purchases, or those which occurred outside the period(s) of approved travel. 05/01 - Audit of Departmental Travel Page 6

5. The Chief Financial Officer, in consultation with headquarters and regional managers, should ensure that appropriate procedures are developed for the timely submission and reconciliation of travel expenditure documentation so that payments to American Express for departmental travel accounts can be processed by the due date. Review and Approval of Travel Expense Claims Audit Criterion Responsibility centre managers accountability for the review and approval of employees travel claims is expected to be clearly defined, set out and implemented. Findings Treasury Board directives and departmental travel policies require that employees provide justification for travel and obtain an authorization to travel from their RCM. After completing the travel, the employee needs to submit a completed travel expense claim with the necessary supporting documents to the RCM for verification and approval. Once the travel claim is reviewed and approved pursuant to Section 34 of the Financial Administration Act, the travel claim is forwarded to the Corporate Services Directorate for further verification, processing and payment. The accountability framework for the exercise of signing authority for travel expenses was adequately defined and implemented, with the exception of the application of Section 34 of the FAA in the British Columbia Region. Treasury Board Policy on Account Verification requires that the primary responsibility for verifying individual accounts, pursuant to Section 34 of the Financial Administration Act, rests with the next higher level officer who has the authority to confirm and certify entitlements and accuracy of the payment requested. In the British Columbia Region, contrary to the requirements of the Treasury Board Policy on Account Verification, employees travel claims are reviewed and approved pursuant to Section 34 of the Financial Administration Act by finance clerks and not by employees supervisors or the next higher level officer. Recommendation 6. The Chief Financial Officer, in consultation with the Regional Director General, British Columbia, should ensure, pursuant to Section 34 of the Financial Administration Act, that employees travel expense claims are verified by the next higher level manager who has delegated signing authority. 05/01 - Audit of Departmental Travel Page 7

Proactive Disclosure of Travel Expenses for Senior Officials Audit Criterion Departments are expected to demonstrate accountability and transparency through the proactive disclosure of all travel expenses for selected senior government officials. These expenses are to be published quarterly on the department s internet site. Findings In December, 2003, the Prime Minister announced a new policy on mandatory disclosure of travel and hospitality expenses for selected government officials. This includes the travel and hospitality expenditures incurred by the Minister, the Parliamentary Secretary, the Deputy Minister and other senior management. In the sample of 40 senior management travel claims examined by auditors, 18 met the criteria for posting on the departmental website. Of those 18, 14 were found to have been adequately verified and posted on the departmental website. The process of timely verification and posting of the remaining 4 travel claims was delayed. During the course of the audit of the Public Accounts of Canada for 2005-2006, the Office of the Auditor General, as part of their review of executive compensation and expenses, including travel and hospitality, examined a sample of INAC s senior management s travel claim files, one of which was found not to be accurately posted on the internet. Upon being notified by the Office of the Auditor General, Finance Branch promptly allocated additional resources to ensure the timely review and posting of senior management s travel claims in accordance with proactive disclosure guidelines. This process has been put in place as of August 21, 2006 in conjunction with the department s financial reporting system. Furthermore, to ensure that the data posted online is accurate, starting in September 2006 quarterly reporting was to be certified by each designated person, i.e., the Minister, Deputy Minister, Associate Deputy Minister, Assistant Deputy Minister, and other members of senior management. Recommendation None. 05/01 - Audit of Departmental Travel Page 8

Section 3 - Management Control Framework Information Management and Reporting Audit Criterion Timely, comprehensive and consistent travel expenditure related information is expected to be provided to management for monitoring, control and decision-making purposes. Findings There are currently no processes or procedures in place to provide timely periodic reports on the status of travel expenditures to management. Finance Branch is unable to provide detailed information, including budgeted and actual travel expenditures, as the current departmental financial system (OASIS) is not equipped to capture all the data included in travel claims. In the absence of periodic reports from the departmental financial system, one region (British Columbia) uses Excel spreadsheets to generate monthly reports to track and monitor travel expenditures against the budget. Finance Branch management advises that recent enhancements, from Oracle 11.03 to the Oracle 11i System, will provide managers with more flexibility to retrieve, analyze and generate the necessary reports to review and control travel expenditures. At present, and as required for proactive disclosure purposes, OASIS provides detailed travel information pertaining to senior management, and a report is being developed to extract similar information for the entire department. Over the next eighteen months, INAC will also implement the Expense Management Tool as a part of the government-wide Shared Travel System Initiative (STSI). It is expected that, with this initiative, INAC s reporting capabilities will be vastly improved. The Government Travel Service Provider (GTSP) consolidates information by government department and releases statistical reports to each department s Finance and Administration Branch on a yearly basis. These statistical reports provide an overview of the department s performance in travel management as well as a snapshot of areas where the department is doing well or needs more attention to effect change and realize savings. Some information related to travel reservations is available from the GTSP. In addition, upon request, the GTSP can make available various ad hoc reports to departments relating to specific travel expenditures. Distribution of annual or ad hoc reports received from the GTSP to headquarters and regional management could assist the department in efficiently managing available travel dollars. 05/01 - Audit of Departmental Travel Page 9

Recommendations 7. The Chief Financial Officer, should ensure that reports produced by the Government Travel Service Provider (GTSP) on travel expenditures are reviewed to determine the extent to which they can provide useful information for monitoring and decision-making purposes. Arrangements should be made to ensure valuable reports produced by the GTSP are made available to departmental management on a timely basis. 8. The Chief Financial Officer, in consultation with the Director General, Information Management Branch, should ensure that the enhancements to the OASIS system, as well as the introduction of the Expense Management Tool, effectively improve the quality of travel information available for monitoring and decision-making purposes. Departmental Travel Policy and Directives Audit Criterion Departmental travel policy and directives are expected to be clear and consistent with those of Treasury Board. Findings Treasury Board Travel Directive does not cover all possible areas of travel expenditures and management. For example, as noted earlier, it is silent on the use of Blanket Travel Authorities. Our compliance review also showed that there is a need for additional clarity in the areas of booking air travel, hotel accommodations (see Section 3.3) and insurance coverage on rental vehicles (see Section 3.3). One of the regions visited is in the process of developing a regional travel policy. Headquarters is also developing a revised travel policy. While these are both good initiatives, there is a need to coordinate them to ensure consistent department-wide travel policies and directives. These initiatives should provide a detailed set of terms and conditions for Blanket Travel Authorities, travel bookings, use of AMEX travel cards exclusively for business related purposes, hotel accommodation, rental vehicles, travel insurance, and alternatives to travel, such as use of video tele-conferencing. We understand that some communication and training has been provided in the past, in particular during the implementation of the Treasury Board s revised Travel Directive of October 2002. Nevertheless, our audit findings demonstrate a need to develop specific tools that will make managers, travel coordinators and staff more accountable for travel expenditures. Increased awareness of roles and responsibilities in this area is likely to translate into significant cost savings for INAC. 05/01 - Audit of Departmental Travel Page 10

Recommendation 9. The Chief Financial Officer, in consultation with headquarters and regional managers, should ensure that newly-developed departmental travel policy and directives are standardized and provide clear guidance to staff, particularly with respect to those areas of interest to INAC not explicitly addressed by applicable Treasury Board policies. Once developed, the new policy and directives should be communicated and enforced across the organization. Reasonableness and Eligibility of Expenditures Audit Criterion Expenditures incurred for travel must be in compliance with the Treasury Board and departmental Travel Policies and Directives. Findings Employees are not following government directives regarding the level of hotel accommodation allowed. In our sample, 7% of the submitted claims included charges for hotels that were above the city dollar limits set out on the PWGSC web site. Vehicle collision damage insurance coverage was taken in 4% of our sample by employees who had a government AMEX travel card, even though this card offers this coverage at no extra cost. Contrary to the Treasury Board travel directive, these employees used their personal credit cards rather than the AMEX travel card issued to them, accepted collision damage insurance coverage and thus incurred unnecessary costs for INAC. While it may not be practical to oblige employees to use the government AMEX travel card in all instances, an increased degree of promotion and encouragement could result in savings as the card provides the required insurance coverage at no extra cost. This situation may be the result of a lack of awareness of both managers and employees of the benefits and coverage offered by the AMEX travel card. Recommendation 10. The Chief Financial Officer should clarify and communicate the guidelines with respect to hotel accommodation and rental car insurance coverage to managers, travel coordinators and staff. 05/01 - Audit of Departmental Travel Page 11

Post-audit of Travel Claims Audit Criterion Monitoring practices and controls are expected to be in place to ensure compliance with travel policies and should include an effective post-audit function. Findings The post-audit process for travel claims is expected to be established in compliance with directives set out in the Treasury Board Policy on Account Verification so that instances of noncompliance with Travel Policy and Directives can be identified and corrective action taken whenever required. As part of compliance with the Policy, departments must ensure that the sampling methodology used is consistent with sound sampling theory and practice, reflective of the risk level of the transactions under review. The audit team noted that INAC, with the exception of the British Columbia Region, had not completed any post-audit reviews from April to December 2005. At the time of the audit, only one other post-audit was completed, using a significantly reduced sample of 1 out of 100 paid travel claims. In INAC, the sample selection process is supposed to be the same for all regions. To ensure the sampling methodology is appropriate, a survey questionnaire was sent out to regions in August 2005 to obtain their input on the sampling process. As a result, the sampling plan was modified to include 100% of travel expenses greater than $1,500 and at least 5% of the total travel claims (i.e. 1 in 20 documents). In spite of this renewal of the sampling plan, we noted regional variations on how the post-audit process is carried out and some exceptions regarding the completeness of the documentation. As noted above, two areas for specific monitoring and follow-up should be the non-acceptance of the lowest available airfare and the personal use of AMEX travel cards. Recommendation 11. The Chief Financial Officer, in consultation with regional finance managers, should ensure that a consistent post audit of travel claims process is established and followed across the department. 05/01 - Audit of Departmental Travel Page 12

Action Plan

Action Plan Project Title: Audit of Departmental Travel Project: 05/01 Region or Sector: Chief Financial Officer, Chief Financial Officer Sector Page: 1 of 4 Recommendations Actions Responsible Manager (Title) Planned Implementation Date 1. The Chief Financial Officer, in consultation with headquarters and regional managers, should develop a clear department-wide strategy to ensure Indian and Northern Affairs Canada (INAC) meets, within a reasonable time frame, the Government of Canada s targets of 70% of airline bookings accepting the lowest available airfare and 50% of all bookings being made on-line. A strategy to ensure INAC meets, within a reasonable time frame, the Government of Canada s targets will be developed and communicated to all employees. Employees will be trained on the Expense Management Tool and the Online Booking Tool which will include emphasis on using the lowest airfares, and will enable our employees to book their travel online. Director, Financial Policies, Systems and Accounting Directorate August 31, 2007 March 31, 2008 The department will develop a process with Public Works and Government Services Canada (PWGSC) to monitor improvements. August 31, 2007 2. The Chief Financial Officer, in consultation with headquarters and regional managers, should develop, implement and monitor the application of clear parameters for the acceptable use of Blanket Travel Authorities, taking into account the limitations and restrictions suggested by Treasury Board and including specific guidance on the circumstances under which such authorities are to be rescinded. Guidelines were issued by the Deputy Minister on July 21, 2006 which identify under which conditions Blanket Travel Authorities may be granted. A policy on Blanket Travel Authorities is under revision to meet these new guidelines and to identify how Standing Travel Authorities should be managed, including the rescinding of Blanket Travel Authorities. The revised policy will be re-issued and communicated to all employees. Director, Financial Policies, Systems and Accounting Directorate June 30, 2007 As part of the implementation of the Chief Financial Officer organization, a monitoring process will be developed and implemented as part of the Chief Financial Officer Compliance Initiative. March 31, 2008

Action Plan Project Title: Audit of Departmental Travel Project: 05/01 Region or Sector: Chief Financial Officer, Chief Financial Officer Sector Page: 2 of 4 Recommendations Actions Responsible Manager (Title) Planned Implementation Date 3. The Chief Financial Officer, should notify Responsibility Centre Managers of the requirement to complete and approve the necessary Travel Advance and Authority Form before travel occurs. This will be included in the training for the Expense Management Tool and the Online Booking Tool. The departmental Travel Policies and Procedures will be updated to emphasize the steps that must be followed for any type of business travel. Director, Financial Policies, Systems and Accounting Directorate March 31, 2008 August 31, 2007 4. The Chief Financial Officer, should emphasize the requirement that the AMEX travel card be used for business purposes only, should develop criteria for identifying potentially inappropriate (personal) use of the AMEX travel card, and should develop procedures for RCMs and Finance to monitor and control the use of AMEX travel cards by employees. An e-mail was sent to all employees July 11, 2006 from the Assistant Deputy Minister, Corporate Services reminding them that the Designated Travel Card is to be used for departmental travel only. As part of the implementation of the Chief Financial Officer organization, a monitoring process will be developed and implemented as part of the Chief Financial Officer Compliance Initiative. Director, Financial Policies, Systems and Accounting Directorate Implemented March 31, 2008 5. The Chief Financial Officer, in consultation with headquarters and regional managers, should ensure that appropriate procedures are developed for the timely submission and reconciliation of travel expenditure documentation so that payments to American Express for departmental travel accounts can be processed by the due date. The departmental travel expenditure procedures will be reviewed and updated as required through the implementation of the Shared Travel Services Initiative (STSI) to ensure that they will ensure timely submission and processing of travel authority and expense requests. The department will implement the Oracle Cluster automated solution for reconciliation and payment of departmental travel accounts. Director, Financial Policies, Systems and Accounting Directorate March 31, 2008 March 31, 2008

Action Plan Project Title: Audit of Departmental Travel Project: 05/01 Region or Sector: Chief Financial Officer, Chief Financial Officer Sector Page: 3 of 4 Recommendations Actions Responsible Manager (Title) Planned Implementation Date 6. The Chief Financial Officer, in consultation with the Regional Director General, British Columbia, should ensure, pursuant to Section 34 of the Financial Administration Act, that employees travel expense claims are verified by the next higher level manager who has delegated signing authority. The Travel Policies will be revised to emphasize the necessity for all travel related transactions to be approved by the traveller s direct supervisor, or by the appropriate level of management. Communication from the Chief Financial Officer will be sent to the Regional Director General of the British Columbia Region to ensure that they follow the correct approval process for Section 34 relating to travel expenditures. Director, Financial Policies, Systems and Accounting Directorate August 31, 2007 March 31, 2007 7. The Chief Financial Officer, should ensure that reports produced by the Government Travel Service Provider (GTSP) on travel expenditures are reviewed to determine the extent to which they can provide useful information for monitoring and decision-making purposes. Arrangements should be made to ensure valuable reports produced by the GTSP are made available to departmental management on a timely basis. As part of the implementation of the Chief Financial Officer organization, a monitoring process will be developed and implemented. Reports will be developed throughout the implementation of Shared Travel Services Initiative to fit INAC specific needs. Director, Financial Policies, Systems and Accounting Directorate March 31, 2008 8. The Chief Financial Officer, in consultation with the Director General, Information Management Branch, should ensure that the enhancements to the Oasis system, as well as the introduction of the Expense Management Tool effectively improve the quality of travel information available for monitoring and decision-making purposes. INAC with the Oracle Cluster Group will develop and implement the required interface(s) between the Expense Management Tool and Oasis which will provide improved information for monitoring. Director, Financial Policies, Systems and Accounting Directorate March 31, 2008

Action Plan Project Title: Audit of Departmental Travel Project: 05/01 Region or Sector: Chief Financial Officer, Chief Financial Officer Sector Page: 4 of 4 Recommendations Actions Responsible Manager (Title) Planned Implementation Date 9. The Chief Financial Officer, in consultation with headquarters and regional managers, should ensure that newly-developed departmental travel policy and directives are standardized, and provide clear guidance to staff, particularly with respect to those areas of interest to INAC not explicitly addressed by applicable Treasury Board policies. Once developed, the new policy and directives should be communicated and enforced across the organization. All departmental travel policies are currently under review to update their content due to both departmental and Treasury Board of Canada Secretariat changes, and to update them to the standard Oracle Tutor format. This process includes full consultation with regions. As each revised policy is published, a bulletin is sent to all employees notifying them of the updated version and of any changes that were made to the policy. As part of the implementation of the Chief Financial Officer organization, a monitoring process will be developed and implemented as part of the Chief Financial Officer Compliance Initiative. Director, Financial Policies, Systems and Accounting Directorate Implemented March 31, 2008 10. The Chief Financial Officer, should clarify and communicate the guidelines with respect to hotel accommodation and rental car insurance coverage to managers, travel coordinators and staff. A memo was sent December 20, 2006, to all regional accounting offices for distribution to all employees reminding them that their employees must use the Public Works and Government Services Canada Standing Offers for both Accommodations and Car Rentals for all departmental travel. Changes to requirements for usage of the Designated Travel Card will be communicated to employees as approved by Treasury Board of Canada Secretariat. Director, Financial Policy, Systems and Accounting December 20, 2006 (Implemented) 11. The Chief Financial Officer, in consultation with regional finance managers, should ensure that a consistent post audit of travel claims process is established and followed across the department. As part of the implementation of the Chief Financial Officer organization, a monitoring process will be developed and implemented as part of the CFO Compliance Initiative to ensure timely and consistent completion of Post-Audits. Director, Financial Policies, Systems and Accounting Directorate March 31, 2007