Acquisition Cards - March 2012

2. Findings, recommendations, and management responses

2.1 Acquisition Card Payment Discounts

Key finding:

The Department is not taking advantage of the single payment rebate offer from the card provider.

Audit Criterion:

The use of acquisition cards is in accordance with the TBS Directive on Acquisition Cards. [Criterion 1.0] Footnote 2

2.1.1 The TBS Directive on Acquisition Cards indicates that acquisition card payments made in advance of the due date are encouraged in order to maximize early payment rebates. The card provider for the Department of Justice offers discounts and rebates based on early single payments. Currently, the Department sends multiple cheques to the card provider to pay cardholders’ monthly statements within the stipulated 25-day grace period. This results in a 1.12% rebate on total departmental acquisition card expenditures per month. The card provider offers the Department the option to pay with a single payment the day after monthly statements are issued, which would provide a rebate of up to 1.44% per month.

2.1.2 A previous internal Audit of Acquisition Cards in 2005 recommended that the Department investigate receiving statements and making payments electronically to take advantage of the single payment option. Since that audit, the Department has implemented the ability to obtain electronic statements and monitor accounts online; however, the Department has not formally analyzed the requirements to implement in IFMS (the departmental financial system) the ability to pay the card provider with a single payment the day after statements are issued.

2.1.3 Senior management advised that there is a planned initiative to implement this ability in IFMS, but that it must be addressed after completing other priorities.

2.1.4 If the single payment option had been utilized in the last two fiscal years, the additional rebate to the Department would have been $7,613 in fiscal year 2009-10 and $11,026 in fiscal year 2010-11. The amount of the rebate is based on the Department’s volume of acquisition card expenditures. More than $18,000 in savings over the two past fiscal years has not been realized. The Department is encouraging the increased use of acquisition cards and therefore risks further opportunities for larger cost-saving efficiencies in the future.

Recommendation and Management Response

2.1.5 It is recommended that the CFO implement in IFMS the ability to pay the card provider with a single payment. (Low Risk Footnote 3)

Agreed. This functionality, which is part of the Federal Government’s SAP footprint, is scheduled to be implemented as a part of the Procure-to-Pay re-engineering project. This project is pending approval from the Department’s Executive Committee. The project is planned to be done in two phases. The first phase will consist of producing the business blueprint. The second phase will consist of implementing the new functionality in the Integrated Financial and Materiel System (IFMS) and performing the business transformation required. The second phase is planned to be completed by the end of fiscal year 2013-14.

2.2 Compliance with the Acquisition Card Transaction Limit

Key Finding:

The Library has exceeded the departmental acquisition card transaction limit.

Audit Criterion:

Acquisition card ongoing use and processes are in accordance with departmental policy and the TBS Directive on Acquisition Cards.[Criterion 7.0]

2.2.1 Section 2.1.1 of the Supporting Notes to the Delegation of Financial Signing Authorities states that individuals who have been authorized for and issued a departmental acquisition card may use the card for individual purchases up to $5,000 including all applicable taxes. The use of acquisition cards is recommended for purchases of day-to-day expense items for standard maintenance, repair and operational goods and services. Although the use of an acquisition card is not mandatory, it is strongly encouraged when the purchase is within delegated transaction authority.

2.2.2 The Atlantic, Quebec, and Ontario regions were in compliance with the maximum $5,000 transaction limit, and no purchases appeared to be an attempt to split transactions.

2.2.3 At headquarters, the Library made several payments on the same day to the same supplier in amounts that, when combined, exceeded the $5,000 limit. Procurement processes were respected with regard to these purchases; however, the proper payment process was not followed. There is a risk that acquisition cardholders will utilize cards for transactions in excess of the departmentally authorized limits deemed appropriate for day-to-day operations in compliance with the TBS Directive.

Recommendation and Management Response

2.2.4 It is recommended that the Director, Library Services Division ensure that the use of acquisition cards complies with departmental and TBS requirements. (Low Risk)

Agreed. In May 2011, discussions took place with the Chief Financial Officer Branch regarding the Library's compliance with the policy on the use of acquisition cards. The policy was clarified, and as a result, payments using acquisition cards are now consistent with the policy. All subsequent transactions have been in compliance with the policy. In December 2011 and February 2012, the Director, Library Services Division met with all acquisition cardholders in the Library and their managers to review policy and procedures subsequent to the audit findings to ensure a complete understanding of the policy and the correct procedures to follow for payments over $5,000.

2.3 Compliance with Section 32, FAA

Key Finding:

Acquisition card transactions do not consistently comply with Section 32, FAA.

Audit Criterion:

Sections 32 and 34 of the FAA are appropriately adhered to with respect to acquisition card transactions. [Criterion 6.0]

2.3.1 Performance of Section 32 is a requirement of the FAA and is supported by the 2009 TBS Directive on Acquisition Cards.

2.3.2 Evidence of non-compliance with this requirement was found in all regions audited and at headquarters. The results of audit transaction testing (by fiscal year) are summarized below.

Percentage of transactions without Section 32 approval
  Headquarters Atlantic Region Quebec Region Ontario Region
2009-10 44% 50% 91% 65%
2010-11 52% 70% 85% 2%

2.3.3 Staff in headquarters and all regions indicated that they viewed the Section 32 requirement as an administrative burden.

2.3.4 For all regions audited and headquarters, there is a risk that funds may not be available and that payments may be made for purchases that may not have been otherwise approved if the proper Section 32 authorization were in place.

Recommendation and Management Response

2.3.5 It is recommended that a) the Chief Financial Officer, b) the Regional Director General, Atlantic Region, and c) the Regional Director General, Quebec Region ensure that the Section 32, FAA requirement for acquisition cards is performed. (Medium Risk)

  1. Agreed. A bulletin will be issued to all Directors of Business Management, Financial Management Advisors, and Regional Directors of Finance by March 12, 2012. This bulletin will address the requirement to have evidence of Section 32 approval on file with all payments made by the Department.

  2. Agreed. The Atlantic Regional Office (ARO) will conduct information sessions on the proper use of acquisition cards to ensure that Section 32 of the FAA is in place. These sessions will target cardholders and accounting services, and will be conducted by March 30, 2012. The ARO will also establish a monitoring program for cardholder statements and supporting transaction documents to ensure ongoing compliance with the FAA and the TBS Directive on Acquisition Cards by April 30, 2012.

  3. Agreed. To ensure budgets are not exceeded, O&M (operating and maintenance) expenditures greater than $200 will be committed in IFMS and appropriate Section 32 FAA authorization will be kept on file. The expected completion date for the implementation of this recommendation by the Quebec Regional Office is May 1, 2012.

2.4 Physical Security of Acquisition Cards

Key Finding:

Some cardholders are not appropriately securing their acquisition cards when not in use.

Audit Criterion:

Acquisition cards are kept in a secure location at all times. [Criterion 5.0]

2.4.1 The TBS Directive on Acquisition Cards requires cardholders to safeguard card information and ensure that the card is kept in a secure location at all times. This Directive also requires the Departmental Card Coordinator to ensure that the use of acquisition cards is monitored. Card numbers are not to be recorded anywhere or made accessible to others and the acquisition card is to be kept in a secure location with controlled access when not in use.

2.4.2 Of the sample of cardholders selected at each location for compliance testing, overall 60% of cardholders kept their cards in a secure location. There was no evidence of lost or stolen cards in the sample selected. The results by individual location for cardholder compliance in securing their acquisition cards are as follows:

  Number of Cardholders Percent Compliance
Headquarters 120 40%
Atlantic Region 7 25%
Quebec Region 27 19%
Ontario Region 11 100%

2.4.3 The majority of cardholders interviewed stated that they were aware of the requirements of the TBS Directive on Acquisition Cards and had received training on the requirement to secure their cards. Some cardholders advised that they found it impractical to keep acquisition cards locked in their offices when not in use. They kept their cards in wallets or purses for ease of use, as it saves time when they are required to make purchases outside of office hours.

2.4.4 With an overall result of 40% non-compliance for securing acquisition cards, there is a risk of potential loss or theft if cards are not kept in secure locations.

Recommendation and Management Response

2.4.5 It is recommended that the Departmental Coordinator, Acquisition/Travel Cards and Relocation ensure that cardholders are reminded of the requirement to keep acquisition cards in a secure location.(Low Risk)

Agreed. A bulletin will be sent to cardholders to remind them of the requirement to keep their acquisition cards in a secure location. The bulletin will be sent by March 12, 2012.

2.5 Acquisition Card Roles and Responsibilities

Key finding:

Roles and responsibilities have not been clearly communicated.

Audit Criterion:

Responsibilities are documented and communicated in accordance with the TBS Directive on Acquisition Cards. [Criterion 2.0]

2.5.1 The TBS Directive on Acquisition Cards requires the CFO to ensure that responsibilities of the departmental acquisition card coordinator, managers, and cardholders are communicated.Cardholders receive adequate information on their responsibilities through mandatory training sessions from CMMD and regional acquisition card coordinators when their cards are issued. The roles and responsibilities of other resources involved in the acquisition card process (e.g. CFOB and CMMD) have not been formally communicated. Communicating roles and responsibilities has not been a priority for the CFOB, as acquisition cards are not considered risky procurement vehicles.

2.5.2 CMMD has developed a draft document, entitled Department of Justice (JUS) – Acquisition Card Procedures (Version 05-2011) that outlines procedures and processes for acquisition cards and contains information on roles and responsibilities. Distribution of this document, once finalized, will assist in providing information on roles and responsibilities. To mitigate the risk that key tasks may not be performed and completed, staff should be fully aware of their roles and responsibilities in the acquisition card process.

Recommendation and Management Response

2.5.3 It is recommended that the CFO ensure that roles and responsibilities are formally communicated to all resources involved in the acquisition card process and that the procedural document is finalized and communicated. (Medium Risk)

Agreed. The acquisition card procedural document has been finalized in conjunction with Contracting and Materiel Management Division, and the roles and responsibilities are clearly stated. The document is in the approval stage process and will be communicated to everyone involved with the acquisition card process by April 30, 2012.

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