Internal Audit of the Administration of Travel Hospitality and Events

Summary of the Internal Audit of PPP Canada’s Administration of Travel, Hospitality, and Events

In July 2015 an Order in Council (OIC) was passed (#2015-1107) that requires Crown corporations, including PPP Canada, to align themselves with Treasury Board Secretariat (TBS) policy with respect to travel, hospitality and event expenditures. Specifically, PPP Canada is required to: 

a) “Align their travel, hospitality, conference and event expenditure policies, guidelines and practices with TBS policies, directives and related instruments on travel, hospitality, conference and event expenditures in a manner that is consistent with their legal obligations; and

b) Report on the implementation of this directive in their next corporate plan. 

As a result of OIC #2015-1107, PPP Canada reviewed and updated their Directive on Travel, Hospitality, Conference, and Event Expenditures. The amendments took effect on December 2, 2015. The Directive is a key financial management policy instrument that requires PPP Canada to have oversight mechanisms, accountabilities and controls in place to ensure that expenditures related to travel, hospitality, conferences and events are managed in an effective, efficient and economical manner. 

As a result of the OIC and the changes to the Directive, PPP Canada’s Board of Directors identified the administration of travel, hospitality and event expenditures as an area of interest and requested an internal audit be conducted over these expenditures, with key audit findings to be delivered at the September 2016 Audit Committee meeting.

The objective of the audit was to provide assurance that governance, risk management and control frameworks were adequate to ensure PPP Canada is compliant with the requirements of OIC #2015-1107. The scope of the audit included all travel, hospitality, conference, and event expenditures incurred by PPP Canada (including those expenditures incurred by the Board of Directors) from January 1, 2016 to June 30, 2016.

The audit found that PPP Canada met the requirements of the OIC #2015-1107 by aligning their Directive with the TBS Directive on Travel, Hospitality, Conference, and Event Expenditures. Overall, the audit found that the authority, responsibility, and accountability is clearly defined and understood by management, and that internal controls over administering and monitoring travel, hospitality, conference, and event expenditures are designed and operating as intended.  

The following table presents specific findings from the audit and provides a description of the recommendations and management responses:

Recommendations

Management Responses

Discussions with PPP Canada management and staff revealed that reports containing actual to budget information are periodically provided by Finance to VPs for travel expense only (nothing was provided for hospitality and event expenditures). It was noted that the information provided only contains total amounts and not the transaction detail.  Further it was noted that evidence of review and analysis by the VP is not retained.

PPP Canada agrees with this recommendation. PPP Canada recognizes the importance of providing periodic updates to VPs with respect to travel & hospitality expenses. The Finance Group will provide quarterly actual to budget reports to VPs as well as require confirmation of receipt and review for audit trail purposes.

All travel for PPP is booked through a single travel agency. It was expected that the corporate travel agency be familiar with PPP Canada’s most recent Directive so that they can ensure their activities in service to PPP are consistent with the Directive. 

The audit found that the administrators at the corporate travel agency were familiar with PPP Canada’s Directive; however, the Directive provided to the travel agency was from June 2011, which is not the most recent version.

PPP Canada agrees with the recommendation but notes that PPP Canada is always in control of compliance with the Directive. PPP Canada has provided the Agency with the most recent version of the Directive.

Testing revealed that in both hospitality transactions sampled, individuals who approved the expense were also participants of the hospitality event. Discussions with Management confirmed that both the CEO and CFO where in attendance at the events. Section 3.2.6 of PPP Canada’s Directive indicates that “an individual who is a participant at a hospitality event may not approve the hospitality”. It was also noted that, given the nature of the event (i.e. lunch for the Board of Directors), all delegated authorities were in attendance.

PPP Canada agrees with the recommendation. PPP Canada has amended Appendix 3 section 3.2.6 of the Directive to read “With the exception of the Chair of the Board, an individual who is a participant at a hospitality event may not approve the hospitality. In such circumstances, the approval of higher authority is to be obtained.  In situations when the CEO is in attendance the CFO will be the approval authority for hospitality”.

This wording is better aligned with the TBS policy on Travel and Hospitality, specifically section 2.2.5 which reads “With the exception of the Minister, an individual who is a participant at a hospitality event may not approve the hospitality. In such circumstances, the approval of higher authority is to be obtained.  In situations when the deputy head is in attendance the CFO will be the approval authority for hospitality”.