Monday, January 2, 2017

Dear Mr. Wiun, Re: ---Employee Business Expenses Audit November 14, 2016-------Business Travel Costs. I read with interest the audit below: https://www.edmonton.ca/city_government/documents/16412_Employee_Business_Expenses_Audit.pdf Employee Business Expenses Audit November 14, 2016 I have several questions I wish to ask you. I will limit my questions to the business travel costs part of this audit.


From: Julie Ali 
Date: Mon, Jan 2, 2017 at 12:14 AM
Subject: Questions regarding the Employee Business Expenses Audit November 14, 2016--Travel expenses section
To: city.auditor@edmonton.ca, bryan anderson <bryan.anderson@edmonton.ca>, don iveson <don.iveson@edmonton.ca>


Dear Mr. Wiun,

Re: ---Employee Business Expenses Audit November 14, 2016-------Business Travel Costs.

I read with interest the audit below:


Employee Business Expenses Audit November 14, 2016

I have several questions I wish to ask you. I will limit my questions to the business travel costs part of this audit.

1) I note that there were large sums of cash spent on travel by employees. These expenses were for travel inside and outside Canada. I note from a CBC Investigation that the former city manager engaged in rather extensive travel that was not reined in by Edmonton City Council or the Mayor because there appears to be no council directive to require this sort of oversight.  I also note that the Auditor's Office also doesn't seem to have any oversight in terms of the Auditor's travel expenses (at least I wasn't able to find any directive to confirm control over this area).

So what this means to this citizen is that there is only one directive in place to regulate the travel expenses of all employees other than the city manager and the auditor. Please correct me if I am wrong.

The directive that regulates approval of travel is this one which has not yet been updated for some reason to reflect the new city manager's instructions which required all out of province travel to be approved by the department Deputy City Manager. Formerly only out of Canada travel required this approval.

Directive:

EMPLOYEE BUSINESS EXPENSES – LOCAL AND OUT OF TOWN
A1415I
Approving Authority The Program Manager will approve the Authority to Travel and Business Expense Claim for his/her own employees. At a minimum, One-up Approval is required. No employee may approve his/her own Authority to Travel or Business Expense Claim. The City Manager will approve the Authority to Travel and Business Expense Claim for General Managers. General Managers must approve Authority to Travel and Business Expense Claim for all travel outside of Canada. The City Auditor will approve Authority to Travel and Business Expense Claim for Office of the City Auditor staff including travel requests outside Canada. When an expense is incurred on behalf of several employees, the expense is most often authorized and paid for by the most senior approving authority. There may be circumstances that occur where this practice is not followed.
***

2016 Update to the Directive:


Employee Business Expenses Audit November 14, 2016

The Directive and Procedures require that expenses must be approved by an individual at least one level higher in the organizational hierarchy than the employee incurring the expense. This helps to ensure that there is appropriate oversight of expenses. In one instance, an employee temporarily acting in a higher position approved business expenses of peer employees. This is not a technical violation of the Directive and Procedures. However, as the approving individual may not have long-term accountability for their decision to approve the expense, this situation does not provide appropriate assurance

The memo issued by the City Manager in 2016 indicated that all travel out of province required the approval of the department Deputy City Manager. The Directive and Procedures only required out of country travel to be approved by the department Deputy City Manager. Since this is a change from what is required by the Directive and Procedures, the Directive and Procedures should be updated to avoid ambiguity and support employee compliance. Since this change was made in 2016, it did not affect our sample testing.

Thresholds

 In the current process, travel that is outside of Canada requires the most extensive approval and review process. However costs for travel within Canada can exceed those of international travel. Administration may want to consider reviewing and revising the existing approval process so that travel and expenses that are higher risk are provided with more scrutiny than travel and expenses that are lower risk. By linking financial thresholds or other risks to different levels of approval, Administration may be able to improve the effectiveness and efficiency of this process while still maintaining an appropriate level of control.

*****************
From what I understand from this information-- this directive --EMPLOYEE BUSINESS EXPENSES – LOCAL AND OUT OF TOWN-A1415I---and the update mentioned in the audit-- indicate that all employees other than the city manager and the auditor are required to go to the Department Deputy City Manager for approval of out of province and out of Canada travel.

It appears that travel inside the province simply requires approval by someone in a position higher than you. Again please correct me if I have misunderstood this information.

2) Since there appears to be gaps in the oversight of travel expenses with reference to the city manager and the city auditor's travel expenses why did you not recommend to the city council that these gaps be amended with proper oversight?

 In Calgary there is oversight of the city manager's expenses as per this article and so this is not an unprecedented intrusion into the affairs of the top manager.


CBC INVESTIGATES


Edmonton's former city manager spent 200+ days travelling on taxpayers' time and money

Mayor and new city manager vow to change policy and make expenses public

In Calgary, the mayor reviews city manager expenses. Iveson said trying to approve individual trips for the city manager in Edmonton would create a "cumbersome new approval bureaucracy."
"I think the challenge is that the employee reports to council, not to the mayor," Iveson said. "If you're going to set up a proper reporting and approval system, it's going to have 13 signatures on it, which is pretty cumbersome."
****

I don't feel that the current solution proposed by the mayor and the city manager is adequate. Why would we have public reporting AFTER the fact?

It would be best to have a council committee approve of the city manager and auditor's expenses PRIOR to the fact.

I find it difficult to understand why this major area of vulnerability was completely ignored in your audit.

Can you explain? 

3) Does the city auditor do audits of the city manager's expenses? 

4) Who does the audits of the city auditors expenses and confirms to the public that these are reasonable?

5) While there has been some decrease in the travel expenses for the 2016 fiscal year I do still find the expenses rather large for a municipal body. It's not as if the city of Edmonton is doing large scale business transactions that require out of province travel so why are these costs still high?

6)   I also note something that was not mentioned in the newspaper article I read which was the decrease in travel costs was for the period of January 1-September 30, 2016 which means to me that there were some travel expense costs that were not accounted for in this audit. 


Employee Business Expenses Audit November 14, 2016

Table 2 – Changes in Business Expenses 2015 & 2016 (Jan 1- Sept 30) (in thousands)
Business Travel Business Travel 
In Canada                                                  $ 415                        $ 312           25% decrease 
Business Travel - Out of Country             $ 203                        $ 143            29% decrease

***
Since the 2016 year is now complete can the City Auditor review the actual 2016 expenses for travel and tell us what the total was for the year 2016 for both In Canada and Out of Country costs? Can you also adjust the Changes in Business Expenses to provide us with a more accurate indication of the decrease? Is it still a 25% decrease and 29% decrease or is this change more modest?

7) While the audit looked at the appropriateness of expenses I note that you did not consider the appropriateness of the travel expenses approval process. What guidelines are in place to ensure that the travel is even required? Why do employees travel and is it essential?  

I am curious about what precipitates the need for all this travel. I mean the educational travel seems to be in a different category than the business travel. Can the City Auditor provide the public with information about why the city of Edmonton requires so much travel for business purposes?

These are a few of the questions I have about this audit. I will have more questions regarding the large amounts of cash spent on other areas of employee expenses such as Training and Conferences, Food Services and Hosting as well as Employee/ Partner Recognition which also seem a tad too rich for my liking. 


Employee Business Expenses Audit November 14, 2016

Table 1 – Employee Business Expenses 2013-2015 (in thousands)
Training & Conferences 

Local Training $ 3,335 $ 2,708 $ 2,866 

Training Requiring Travel – In Canada $ 930 $ 1,029 $ 960 
Training - Out of country $ 400 $ 547 $ 535 
Conference Fees $ 152 $ 92 $ 93 
Mandatory or Legislated Training $ 51 $ 23 $ 23 

Food Services & Hosting Food Services - Internal $ 1,008 $ 1,036 $ 1,249 Hosting - External $ 810 $ 1,020 $ 1,150 

Employee/Partner Recognition $ 972 $ 1,099 $ 989 



Once I have receivd your responses I will continue my blog series on this audit. The first one is here:
http://readingchildrensbooks.blogspot.ca/2017/01/employee-business-expenses-audit.html


Sincerely,
Julie Ali

des money spent in expenses by the top manager and the city auditor. Reporting of their expenses AFTER they have self approved their expenses is not enough. We need a better system and this would be direct control by city council. This way if we have the fiasco of the previous manager repeated due to lax control of expenses we know that city council is directly responsible.
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