AUDIT OF OVERTIME

INTERNAL AUDIT REPORT

September 2007





Office of the Chief Audit Executive
Canadian International Development Agency
Canadian International Development Agency
200 Promenade du Portage
Gatineau, Quebec
K1A 0G4
Tel: (819) 997-5006
Toll free: 1-800-230-6349
Fax: (819) 953-6088
(For the hearing and speech impaired only (TDD/TTY): (819) 953-5023
Toll free for the hearing and speech impaired only: 1-800-331-5018)
E-mail: info@acdi-cida.gc.ca
2
List of Acronyms and Abbreviations

Acronyms and Abbreviations Description

AIS/SAP

Agency Information System

CPAG

Corporate Planning Agency Group

CWP

Costed Work Plans

ESS

Employee Self-Service System

HR

Human Resources

OT

Overtime (cash or in-leave)

TB

Treasury Board





























3


TABLE OF CONTENT


ITEM Description Page
Summary...................................................................................................................................... 4

1.0 INTRODUCTION.......................................................................................................... 8

1.1 Background...................................................................................................................... 8
1.2 Mandate............................................................................................................................ 9
1.3 Objectives ........................................................................................................................ 9
1.4 Scope ................................................................................................................................ 9
1.5 Criteria............................................................................................................................ 10
1.6 Methodology.................................................................................................................. 11
1.7 CIDA Overtime Trend (2003-04 to 2005-06)............................................................... 12

2.0 OBSERVATIONS AND RECOMMENDATIONS .................................................. 12

2.1 Compliance with TB Overtime Policy, CIDA Overtime Directive, Collective
Agreements...................................................................................................................... 12
2.2 Probity of Overtime Pay Transactions ............................................................................ 16
2.3 Management Practices and Controls............................................................................... 27
2.4 Efficient and Effective Use of Human Resources ......................................................... 30

3.0 CONCLUSIONS.......................................................................................................... 34

4.0 AUDITORS OPINION.............................................................................................. 34



Graph 1 Overtime Trend Lines 2003-04 to 2005-06.............................................................. 11
Graph 2 Overtime as a percentage of entitled salaries 2003-04 to 2005-06........................... 30
Graph 3 Monthly Overtime 2003-04 to 2005-06.................................................................... 32

Table 1a Employees entitled to claim overtime (2003-04 to 2005-06) ................................... 35
Table 1b Number of employees who submitted overtime (2003-04 to 2005-06).................... 36
Table 1c Employees who submitted 20 claims or more (2003-04 to 2005-06)....................... 37







4



SUMMARY

Introduction

Overtime at CIDA is governed by the Treasury Board (TB) Policy on Management of Overtime and
the CIDA Overtime (OT) Directive dated June 11, 2003 which uses the Treasury Board definition
of OT as authorized 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 pursuant to the provisions of a
collective agreement or a Treasury Board authority. Currently, TB has a draft document for
consultation and approval entitled Directive on Financial Management of Pay Administration,
dated September 27, 2006. This is available for consideration and guidance. The Treasury Board
Policy on Management of Overtime was repealed in early 2006.

The terms and rates governing overtime compensation are provided for in the various collective
agreements. SAP-HR is the departmental system used to recommend (pre-approve), approve and
record claims for overtime compensation. Human Resources Directorate (HRD) oversees the
administration of these collective agreements and maintains the HR component of the SAP system.
Corporate Finance maintains the financial component of the SAP system. HRD has established
principles and guidelines promoting the effective management and administration of Agency
overtime.
1


In 2005-06, 1,014 or 63.6% of the 1,594 employees entitled to claim overtime, submitted
claims totalling $2.942 M for overtime compensation. In 2004-05, 63.6% of the 1,541
employees entitled to claim overtime submitted claims totalling $3.078M.

The value of claims for OT as a % of salaries for those employees entitled to OT
compensation was 2.8% in 2005-06 and 3.1% in 2004-05.


Audit Objectives

The objectives of this audit were to assess the adequacy of Agency measures to ensure:

Compliance with applicable TB Overtime Policy, CIDA Overtime Directive, and collective
agreements;
Effective management practices and controls;
Efficient and effective use of human resources.




1
CIDA publications: CIDAs Overtime Directive; Questions Raised about the Overtime Directive and
Management and Approval Process of Overtime for Employees on Assignment in the Field.

5


Highlights of Findings

1. Agency Compliance with TB Overtime Policy and CIDA Overtime Directive and
Collective Agreements.

The CIDA Overtime Directive does not provide sufficiently clear direction on Agency requirements
for pre-approval of overtime (except for emergency situations and unusual, unplanned work
demands), and the requirement that this information be recorded in the SAP system.

It is not possible to determine the extent to which employees are given a choice between recorded
and unrecorded overtime or the extent to which employees entitled to overtime under collective
agreements are expected to work or travel in excess of the standard daily or weekly hours of work
without being compensated, in time or money. However, results of the 2005 Public Service
Employee Survey reported that 37 % of the CIDA employees who completed the survey felt that
they couldnt claim overtime compensation.


2. Probity of Overtime Pay Transactions

Managers are not always properly exercising their delegated signing authority under s.33 and s.34
of the Financial Administration Act respecting the approval, recording and certifying of overtime
compensation for employees working outside normal working hours. In six (6) of the sixty-two
(62) randomly selected overtime pay transactions examined, line managers approved the overtime
without proper s.34 signing authority. Also, overtime was recorded in the SAP system and
processed by the Human Resources Directorate exercising s.33 and s.34 authorities without the
proper segregation of duties.


3. Management Practices and Controls

Managers indicated that the SAP system should better respond to their information needs on
overtime utilization rates, commitments and balances to assist in planning, organizing and
controlling overtime work. The SAP system is viewed by managers and employees as not user-
friendly and enhancements are required to facilitate ease of access, monitoring of data integrity,
and production of management reports on OT performance.

Overtime data recorded in the SAP system continues to require manual corrections by HR pay
specialists where compensation for overtime is not calculated in accordance with the provisions of
applicable collective agreements.

Inconsistent financial reporting of overtime costs at year-end does not comply with the TB Policy
on Payables at Year-End. Overtime incurred and compensated in time during the year is not
captured as a cost and is not reported in the year-end financial statements. This gives the
appearance that cost-centres where OT is compensated in cash during the fiscal year, rather than in
time, have operated less efficiently and economically than those cost-centres where OT is
6
compensated in time. This also affects the ability of managers to effectively plan workload
requirements without the benefit of consistent year-end reports on overtime costs.

In terms of managing overtime, managers interviewed recognized the need for standard practices
for monitoring overtime to ensure transparency and equitable treatment of all employees. A number
of the branches have, or are planning, to introduce more effective monitoring practices for travel
and overtime work at missions.


4. Efficient and Effective Use of Resources

The audit was not in a position to fully assess the extent to which managers consider cost effective
alternative solutions to mitigate the need for overtime. However, the audit identified some areas
taking positive steps to ensure overtime is pre-approved and better justified as the most efficient and
effective means of providing essential services. In some cases, the use of overtime has been
substantially reduced e.g. through introduction of organizational restructuring and streamlining.

While overtime represents approximately 3% ($3.0 M) of the total salaries of employees entitled to
claim overtime, this percentage is not considered significant when compared to the overall salary
budget of CIDA, consultant fees and temporary help expenses. However, given the practice of not
recording some of the overtime worked by employees, this figure may not be representative.


Conclusion

Generally, CIDA is in compliance with the applicable TB Overtime Policy, CIDA Overtime
Directive and collective agreements. Clear Agency policy direction is required for pre-approval of
overtime and the recording of this information.

Managers must ensure proper exercising of delegated signing authority under s.33 and s.34 of the
Financial Administration Act respecting the approval, recording and certifying of overtime
compensation for employees working overtime.

Management needs complete, accurate and timely information from the SAP to effectively manage
overtime.

Consistent management practices for the use and monitoring of overtime would help to ensure
transparency and equitable treatment of all employees.

7
1.0 INTRODUCTION

1.1 BACKGROUND

Overtime in CIDA is governed by Treasury Board Policy on the Management of Overtime,
published in 2000, and by CIDAs Overtime Directive. Overtime (OT) is defined as authorized
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 pursuant to the provisions of a collective agreement
or a Treasury Board (TB) authority. It should be noted that the Treasury Board Policy on
Management of Overtime published in 2000 was repealed in early 2006.

The terms and rates governing overtime compensation, for work performed outside of an
employees regular hours at the employers request, are provided for in the various collective
agreements. SAP is the departmental system that is used by employees and managers to request
approve and record claims for overtime compensation. Human Resources Directorate (HRD)
oversees the administration of these agreements and maintains the HR component of the SAP
system while Finance maintains the financial component. The HR and Finance modules were in the
process of undergoing improvements during the period of this audit.
2


The Treasury Board Policy on the Management of Overtime provides general direction. HRD has
established principles and guidelines promoting the management and administration of Agency
overtime.
3
The Agency financial signing authority and delegation of authority documents identify
managerial responsibility for account verification and pay authorization procedures administered by
Finance.


In 2005-06, 1,014 or 63.6% of the 1,594 employees
4
working for CIDA entitled to claim
overtime, submitted claims totalling $2.942 M, for overtime compensation. In 2004-05,
980 or 63.6% of the 1,541 employees working for CIDA entitled to claim overtime
submitted claims totalling $3.078M.
5


The value of claims for OT as a % of salaries for those employees entitled to overtime
compensation was 2.8% in 2005-06 and 3.1% in 2004-05.
6


The value of OT claimed by employees submitting 20 or more claims per year represents
approximately 50% of the total value of all OT claims submitted each year.
7





2
HRD and Finance are working to fully integrate the SAP - HR and financial modules to ensure more effective
interface and processing of overtime compensation.
3
CIDA publications: CIDAs Overtime Directive; Questions Raised about the Overtime Directive and Management and Approval
Process of Overtime for Employees on Assignment in the Field.
4
Table 1a) Employees entitled to claim OT 2003-04, 2004-05, 2005-06, page 35
5
Ibid
6
Ibid
7
Table 1c) Summary of OT Employee submitting 20 claims per year (2003-04, 2004-05, 2005-06), page 37
8


The audit examined overtime data in the SAP HR salary system for fiscal years 2003-04, 2004-05,
and 2005-06. Presently, the number of Full-Time Equivalent employees working for CIDA as
identified in the latest employee census, varies slightly from the numbers recorded in the SAP HR
Module that formed the basis of the audit analysis of overtime. This does not have material impact
on the overall audit findings.

1.2 MANDATE

This audit was identified and approved by the Audit and Evaluation Committee as part of the
Agency Internal Audit plan for 2005-06.

1.3 OBJECTIVES

The objectives of this audit were to assess the adequacy of Agency measures to ensure:
Compliance with applicable TB Overtime Policy, CIDA Overtime Directive, and collective
agreements;
Effective management practices and controls;
Efficient and effective use of human resources.

1.4 SCOPE

The audit reviewed the adequacy of internal controls and practices for ensuring that:
Agency practices are compliant with TB Overtime Policy and CIDA Overtime Directive on
the management and administration of overtime;
Managers properly exercise their responsibilities under s.33 and s.34 of the Financial
Administration Act (FAA);
Employees are properly compensated for approved overtime in accordance with the
provisions of the applicable collective agreements; and,
Cost-effective alternative solutions are considered by managers to mitigate the need for
overtime expenditures.

Scope Inclusions:

The audit:
Assess work planning practices for managing overtime for travel and work at Headquarters
and at missions;
Assess the adequacy of managerial controls to ensure the completeness and accuracy of
recorded overtime information for processing approved overtime claims and employee
compensation;
Assess managerial compliance with the Financial Administration Act (s.33, s.34) for the
approval and processing of employee overtime compensation;
Assess the adequacy of Agency controls for ensuring proper delegation of authority and
exercise of managerial responsibilities; and,
Identify the extent, dollar value and impact of unrecorded overtime.
9

Scope Exclusions:

The audit did not:
Include an examination of the impact of overtime on operational services or program
performance;
Include the use of consultants although it is recognized that short term consulting contracts
can represent an alternative to overtime;
Include the EX Group and other employees on performance pay who are not entitled to
overtime compensation;
Include CIDAs Legal Services Branch (LSB) as these are Justice Department employees.
Compare planned overtime allocations to actual expenditures as overtime is not
administered as a separate budgetary line item;
Examine planning documents such as costed work plans;
Attest to the overall integrity, accuracy and completeness of the data recorded in the SAP
system; and,
Examine cases of authorized and informal flexible working arrangements where an
employee occasionally works outside normal working hours for short periods of time, and
where such time is not recorded in the SAP system.


1.5 CRITERIA

Agency Compliance with TB Overtime Policy and CIDA Overtime Directive

Overtime is properly authorized by managers:
o Before its occurrence, unless otherwise justified, by a person with proper delegated
authority; and
o When the work or service is considered essential.

Management Practices and Controls

CIDA managers have access to complete, accurate, timely, authorized, detailed information
on overtime for planning, organizing and controlling overtime work within their respective
area of responsibility;

Managers properly exercise their delegated authority under s. 33 and s.34 of the FAA to
approve and authorize overtime compensation for employees working outside normal
working hours and entitled to overtime compensation; and

The compensation for overtime is calculated in accordance with the provisions of applicable
collective agreements.




10
Efficient and Effective use of Human Resources

Cost-effective alternative solutions are considered by managers to mitigate the need for
overtime expenditures.

The rights of the employees as defined in TB Overtime Policy, CIDA Overtime Directive
and collective agreements are consistently applied across the Agency.


1.6 METHODOLOGY

The audit included employees working at Headquarters and at missions that have incurred overtime
expenditures in the past three fiscal years (2003-04 to 2005-06).

The audit used standard questionnaires and the analysis of selected transactions of the SAP data on
claims from the past three fiscal years. This information was used to identify causal factors
generating the need for overtime, to assess management practices and processes for controlling
overtime, and to identify potential for improvements.

Individual and group interviews with managers, employees and union representatives were
conducted to identify issues, concerns and opportunities for improvement to compliance measures
as well as management practices and controls. Interviews were also conducted with HR officials
and pay specialists responsible for administrating the employee module of the SAP system and for
monitoring and interpreting the application of the TB Overtime Policy, CIDA OT Directive and
provisions of applicable collective agreements.

Six (6) case studies were undertaken in areas of high OT intensity. This involved extensive
interviews with various managers who were responsible for the approval of overtime and for
ensuring that human resources were utilized in an efficient manner. The audit team also selected a
random sample of 62 overtime transactions out of a total population of 7,600 transactions from
October 2005 to June 2006 to assess the adequacy of management practices and processes for the
approval, certification and processing of claims for overtime compensation. The audit team was
confident that the size of the random sample was sufficient to provide high level of assurance of the
audit findings and that further audit analysis would not be an efficient use of audit resources.












11



1.7 CIDA OVERTIME INTENSITY (FYs 2003-04 to 2005-06)

Overtime intensity has been relatively stable during the past three (3) fiscal years. The OT trend-
lines for this period are presented in Graph 1.

Graph 1
CIDA Overtime Trendline
Overtime as % of salaries of employees entitled to OT
For fiscal years 2003-04, 2004-05 and 2005-06
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
A
p
r
-
0
3
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-
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D
e
c
-
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3
F
e
b
-
0
4
A
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r
-
0
4
J
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-
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4
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4
O
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D
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F
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-
0
5
F
e
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-
0
6

Source of Data: SAP - HR salary system (2003-04, 2004-05, 2005-06)



2.0 OBSERVATIONS AND RECOMMENDATIONS

Audit Objective:


2.1 COMPLIANCE WITH TB OVERTIME POLICY, CIDA OVERTIME DIRECTIVE,
AND COLLECTIVE AGREEMENTS

Criterion 2.1.1 Overtime is authorized before its occurrence, unless otherwise justified, by a
person with proper-delegated authority.

Finding

Managers interviewed indicated that they were not aware of any instances in which overtime was
not properly approved.



12
Analysis

Overtime pre-approval can be verbal or in writing. The TB Overtime Policy, CIDA Overtime
Directive, and the applicable collective agreements do not explicitly state that the pre-approval must
be in writing or necessarily recorded. The framework governing overtime expenditures, such as
pre-approval and the consideration of cost-effective alternatives does not generally constitute a
formal exercise supported by verifiable documentation. Consequently, the audit findings are
formulated from interviews and other qualitative evidence.

CIDA Overtime Directive requires that overtime be approved in advance by the delegated level of
management who determines the duration of the overtime to be worked. The collective agreements
of the majority of CIDA employees (AS, CM, CR, DA, IS, OE, PM, ST and WP) mention that an
employee is entitled to overtime when the overtime work is authorized in advance by the employer
or is in accordance with standard operating instructions and when the employee does not control the
duration of the overtime work. In the case of the other groups (CO, CS, ES, PG, SI), the
requirement that overtime be pre-approved is implicit: When an employee is required by the
Employer to work overtimethe employee shall be compensated

There are exceptional cases where overtime cannot be pre-approved. For example, an employee
can find him/herself in an emergency situation where work must be done, or travel incurred, and it
is not possible or practical to obtain pre-approval from a manager.

Sixty-two (62) overtime transactions were selected at random for employees at headquarters and
missions covering the period from October 2005 to June 2006. Eleven (11) of the transactions were
for travel overtime, and the remaining fifty-one (51) were for work overtime. For each transaction,
the approving manager was asked whether the overtime was approved verbally or in writing, and in
the latter cases, to provide a copy of the pre-approval document or exchange of emails.

In the case of travel overtime, the travel authorization, which is mandatory, indicates the hours of
departure and arrival to destination. In most cases, the approving authority knows whether the travel
time will exceed normal working hours. In some branches, the employee requesting travel
authority is required to submit, in advance, a trip planning document detailing estimated overtime,
travel and site work plans which must be pre-approved.

A total of 11 travel OT transactions were examined by the audit team to determine if the travel
overtime was pre-approved by the manager. The employee e-mail survey revealed that one (1)
employee received verbal pre-approval and five (5) received pre-approval in writing. Five (5)
employees did not respond to the audit survey.

A total of 51 work OT transactions were examined by the audit team to determine if the work
overtime was pre-approved by the manager. The employee e-mail survey revealed that thirty-three
(33) employees received verbal pre-approval; three (3) received pre-approval in writing; one (1)
was not pre-approved; and fourteen (14) employees did not respond to the audit survey.

13
A number of managers provided verbal explanations on the need for overtime worked by certain
employees. However, without written pre-approval records, it is difficult to verify the terms of the
pre-approval, as required in the CIDA Overtime Directive.


Criterion 2.1.2 Overtime is authorized when the work or service is considered essential and
this is the most appropriate and cost-effective means.

Finding

Managers at all levels of the organization generally viewed overtime work as an important
management tool to meet expected, and sometimes unexpected, pressing operational and program
demands. The CIDA Overtime Directive provides clear direction to managers on the need to
rationalize the use of overtime as a means of meeting urgent and essential service requirements.

Analysis

Managers and employees interviewed indicated that every effort is made to ensure that work
overtime is used as a last means to meet pressing policy, program or operational needs, both in
headquarters and missions. However, practices vary among branches and divisions in terms of the
pre-approval process and whether this is written or verbal. In terms of travel overtime, all requests
are authorized in advance.

With respect to the level of detail in travel itineraries, including overtime work planned at missions,
practices vary among branches and divisions. Some managers request very detailed estimates
while others are less demanding. Some managers request and review trip reports in minute detail
before approving the overtime claims while others rely more on trust and the professionalism of
their staff and do not query claims in detail. Managers interviewed by the audit team, indicated
that, for the most part, they try to ensure that:

o Overtime is scheduled on a Saturday rather than a Sunday;
o Traveling time is kept to a minimum and only when required; and
o Compensatory time off does not create a need for additional overtime.

Managers reported that occasionally alternatives to overtime are not always considered due to time
constraints (the need for urgent policy clarifications, responses for Question Period and Briefing
Notes/Presentation Packages for senior management) or other emergency requirements e.g.
evolving international situations such as Sudan, Darfur, and Indonesia.


Criterion 2.1.3 Unrecorded overtime is recognized and consistently managed across the
Agency.

Finding

Unrecorded overtime exists and is reported as not being consistently managed in the Agency.
14
Analysis

Unrecorded overtime:

Refers to the time worked and/or traveled, which is not recorded in SAP but for which the
employee has the right to be compensated under a collective agreement; and,

Does not refer to the normal flexibility that is expected from professionals who may remain
at work a little longer at the end of the day and may be allowed to come a little late or leave
a little earlier another day, provided this does not lead to the accumulation and the banking
of expected compensation.

Unrecorded overtime does not leave a management trail and is therefore difficult to detect and even
more difficult to measure. Questions regarding the existence and extent of unrecorded overtime
were raised with all managers. Some admitted they were using this practice while others said they
were not. One manager reported keeping a written private record of all outstanding unofficial
compensatory time owed to employees.

The two main reasons given for using unrecorded overtime were less administration and reduced
cost if the overtime is compensated on a 1:1 basis or less. Unrecorded overtime offers the possibility
to remain within the planned salary budget even if significant overtime is worked.

It is not possible to determine the extent to which employees are given a choice between recorded
and unrecorded overtime or even to which extent employees entitled to overtime under their
collective agreement are expected to work or travel in excess of the standard daily or weekly hours
of work without asking for any compensation, in time or money.

However, the results of the 2005 Public Service Employee Survey suggest that 37 % of the CIDA
employees who completed the survey felt that they couldnt claim overtime compensation. In
addition to its other impacts such as understating operating cost, unrecorded overtime may result in
litigation related to the status of employees in case of accident. Unrecorded overtime may also
result in a loss by the employee if the manager with whom there is an informal agreement leaves or
goes on long term medical leave, leaving no trace of the overtime worked by his/her employee(s).


Recommendations

It is recommended that:

1. Human Resources Directorate obtain approval of the Corporate Resources
Committee to amend the CIDA Overtime Directive to include a mandatory
requirement to pre-approve, in writing, all overtime work at Headquarters and
missions.


15
2. Human Resources Directorate monitor performance and report to Corporate
Resources Committee on compliance with the mandatory requirement to pre-
approve overtime in writing.


Managements Response

1. The Human Resources Directorate agrees with the recommendation and
acknowledges the importance of a mandatory requirement to pre-approve all
overtime work in writing. To this end, the CIDA Overtime Guidelines are currently
being revised. The Human Resources Management Committee (HRMC) reviewed
the draft on May 8, 2007. It will be presented to Unions at the next Labour
Management Consultation Committee meeting scheduled for June 20, 2007. Once
this is done, the final draft will be sent for presidential approval. It is expected that
the revised CIDA Overtime Guidelines will be ready for release by September 2007.

The proposed Guidelines will require the pre-approval of all overtime work at
Headquarters and missions, except in extraordinary circumstances where there is
insufficient notice to do so.


2. CIDAs Financial Services Section and Human Resources Directorate are currently
elaborating an overtime pre-approval monitoring process that will be systematically
implemented by the Post-Payment Verification Unit (PPVU). This unit will
perform statistically-based testing of overtime payments and of the related pre-
approvals that were granted during a given fiscal year, and report on the results of
this work through an annual compliance report to the Business Management
Committee.

The tools enabling the monitoring process will be developed by October 2007 and
monitoring will commence on overtime payment transactions incurred in the last
half of fiscal year 2007-08.

It is not felt that reports need to be made to the CRC on such issues unless there are
significant problems identified in the monitoring process.











16
Audit Objective:

2.2 PROBITY OF OVERTIME PAY TRANSACTIONS

Appropriate delegation of authority

Criterion 2.2.1 Managers properly exercise their delegated authority under s. 33 and s.34 of
the Financial Administration Act (FAA) to approve and authorize overtime compensation for
employees working outside normal working hours and entitled to overtime compensation.

Findings

Managers do not always properly exercise their delegated signing authority under s.33 (requisitions)
and s.34 (payment for work, goods or services) of the FAA for approving and certifying overtime
claims. In six (6) of the sixty-two (62) randomly selected overtime pay transactions examined; line
managers approved the overtime without proper s.34 signing authority. Also, overtime was
recorded in the SAP system and processed by the Human Resources Directorate exercising s.33 and
s.34 authorities without the proper segregation of duties.

Analysis
The Financial Administration Act (FAA) sets specific rules, most notably in the areas of collection,
management, and spending of public funds.
The FAA imposes rights and duties on ministers and directly on deputy heads in relation to the
institutions they manage. These include, notably, the obligation for a deputy head to establish
procedures and maintain records respecting the control of financial commitments chargeable to
public funds, the fact that only a minister or his / her delegate can request the issuance of a payment,
and that before a payment is issued in return for work, goods, or services, the deputy or a minister
(or another delegate) must certify that the work has been performed, the goods received, or the
services rendered (sections 33, 34).
Departments are primarily responsible and accountable for the following:
The expenditure of funds and management of assets that they have been allocated;
Delivering the results that they commit to achieving with the resources they have been
allocated; and
Meeting management expectations according to performance indicators in the Management
Accountability Framework (MAF) for performance reporting and accountability.
Delegation of Financial Signing Authorities to Human Resources

The wording of sections 34 and 33 of the FAA allows organizations to delegate these authorities to
persons outside of the finance organization. As long as the Minister designates the person in
writing, that person can exercise these authorities on the Ministers behalf.
8


8
Policy on Pay Administration, Appendix B, 1(a) Delegation of financial authorities to human resources Elements of
17

Ministers and deputy heads must formally delegate and communicate financial authorities in
writing and establish an appropriate division of responsibilities in order to ensure that controls are
applied in the spending of public money.
9


The Minister responsible for CIDA and the President of CIDA both approved the transfer of
Delegated Authority for exercising s.33, payment responsibilities, from the Director General,
Finance to the Director General, Human Resources. The CIDA Delegation of Selections Authorities
and Contractual and Financial Signing Authorities, Table 3 Operating and Expenditures and
Miscellaneous Authorities, dated January 26, 2004 reflects the transfer of delegated authorities for
s.33 to the Director General, Human Resources. The basis of this official transfer of delegated
responsibilities was an agreement reached by the then respective Directors General of Finance and
Human Resources in a memorandum dated April 26, 1999.

The policy objective of the Treasury Board Comptrollership Policy on Pay Administration, which
became effective April 1, 1997; is to ensure that adequate controls are established and
implemented for financial pay transactions, and to ensure the efficiency and effectiveness of the pay
process within the framework of departmental financial management.

Departments must establish policies and procedures that will ensure an adequate level of control
over delegated authorities and that persons with delegated authority are well informed of their
responsibilities in this regard.
10


CIDA responsibilities are outlined in the Financial Bulletin Account Verification Policy, dated
October 5, 2003 as this relates to:

The nature and extent of account verification required under Section 34 of the FAA; and
The roles and responsibilities of the Finance Division, branches, Section 34 officers and
account verification staff relating to the verification of accounts.

Roles and Responsibilities

The Treasury Board Comptrollership Policy on Pay Administration requires the following elements
of a control framework to be in place in support of delegation of financial authorities to human
resources:

Responsibilities Section 33 of the FAA

3(a) Financial officers with payment authority under section 33 of the FAA must ensure
that an adequate process is in place to verify accounts under section 34 of the FAA,
and that the process is being properly and conscientiously followed.


a control framework, April 1997.
9
Treasury Board Policy on Delegation of Authorities, (s.1) 01.10.1994
10
Treasury Board Policy on Delegation of Authorities, (s.2) 01.10.1994
18
3(b) Section 33 of the FAA authority can be delegated to a person outside the line
authority of the Senior Financial Officer (SFO) of the department (Agency). In such
cases the SFO, being responsible for the overall quality of financial management,
remains entirely responsible for the effectiveness and efficiency of the person
exercising that authority.

3(c) Therefore, the SFO should establish procedures and, probably, an audit program to
ensure that authority under section 33 of the FAA is exercised in accordance with
departmental standards and control objectives. As well, the SFO must ensure that
proper mechanisms are in place to allow the person with authority under section 33
of the FAA to verify the legality of the payment and the availability of funds.

Responsibilities Section 34 of the FAA

4(a) Persons who have delegated authority under section 34 of the FAA must receive a
set of instructions or procedures to ensure that they respect all departmental, legal
and regulatory requirements.

4(b) Those officers who are delegated payment authority under section 33 of the FAA are
responsible for issuing these instructions and for the system of verifying accounts
and related financial controls.

Other requirements

5(a) Two principles must be observed:

- No person shall exercise signing authority under both sections 33 and 34 of
the FAA with respect to a particular payment; and
- No person shall exercise spending authority (section 34 of the FAA) with
respect to a payment from which he or she personally can benefit, directly or
indirectly.

The audit identified several areas where the Agencys Delegation of Selection Authorities Table
3, and the Financial Bulletin Account Verification Policy (94-7) do not fully comply with the
Treasury Board Comptrollership Policy on Pay Administration.

More specifically:

The current roles and responsibilities of Human Resources Directorate in terms of the
Agencys system of account verification and related financial controls that formerly were
assumed by the Senior Financial Officer for all pay transactions, including overtime, are not
clearly stated in CIDA Financial Bulletin (94-7) Account Verification Policy. At an
operating level this responsibility was previously assumed by those officers within Finance
Division who were delegated payment authority pursuant to section 33 of the FAA. Finance
responsibilities pursuant to section 33 of the FAA are extensive and detailed in s.3.1 of the
CIDA Account Verification Policy - Financial Bulletin 94-7.
19

The audit observed that:

The Account Verification Policy - Financial Bulletin 94-7 does not reflect the transfer of
s.33 responsibilities from Finance to HR for all pay transactions, including overtime
compensation;

The Human Resources Directorate is performing both s.33 (payment) and s.34 (account
verification) responsibilities without a separation of functions (persons) as required by
Treasury Board - Comptrollership Policy on Pay Administration, s.5(a).

o The Manager, Labour Relations and Compensation have not assumed the full
responsibilities for exercising s.33 as outlined in the CIDA Financial Bulletin 94-7 -
Account Verification Policy.

o The Chief, Compensation (direct reporting relationship) and the two (2) pay
specialists (indirect reporting relationship) are exercising s.34 account verification,
and s.33 payment authorization for pay and overtime claims.

o The two pay specialists are responsible for verifying, on behalf of the s. 34 officer,
the accuracy of accounts for payment. Account verification staff act in a support role
to the s.34 officer, identifying all matters of concern in connection with the
legitimacy and correctness of accounts for payment.
11


Treasury Board Policy on Delegation of Authorities requires:

- No person shall be permitted to exercise authorities unless the minister or the deputy minister
has formally delegated these authorities and the officer to whom the incumbent of the position
reports has formally designated the person.
- Persons properly designated to exercise authorities shall not delegate these authorities.

S.33 payment responsibilities of the FAA have been delegated to the Manager, Labour Relations
and Compensation, Human Resources and Corporate Services Branch. The Chief, Compensation
(direct reporting relationship) and two (2) pay specialists are also exercising s.33 payment
responsibilities. The re-delegation of s.33 responsibilities from the Manager, Labour Relations to
the Chief, Compensation and the two pay specialists does not comply with the Treasury Board
Policy on Delegation of Authorities.








11
CIDA Financial Bulletin Account Verification Policy (94-7), s.3.4

20
Other areas requiring management attention include:

Improvements are required in the following areas:

Training

The level of training and experience required for certifying financial officers in the carrying out
s. 33 responsibilities is extensive. It is not clear what training and development the HR pay
specialists received to perform comparable functions to those previously performed by financial
officers in the exercising of s.33 responsibilities.
12
As important as training is, there is an
apparent lack of understanding to keep s.33 and s.34 as separate functions (responsibilities).

Separation of functions (responsibilities) s.33 and s.34 of the FAA

In terms of procedural requirements Treasury Board Policy on Delegation of Authorities
requires:

In assigning responsibility to individuals involved in the expenditure process, a deputy head
must ensure that the following functions are kept separate:

Procurement;
Certifications of entitlement, verification of accounts, and preparation of requisitions for
payment or settlement (s.34); and
Certification of requisitions for payment or settlement pursuant to section 33 of the
Financial Administration Act.


The audit identified the following process weaknesses:

Signatures (s.34) of managers authorizing OT payment are not checked against their
signature cards as part of the HR s.34 verification process.

OT corrections in the SAP system (time or cash) are not returned to the appropriate
manager for re-certification under s. 34.

OT recorded as time in the SAP system is not reviewed/validated under s. 33 prior to
sending payment requisition (cash) to PWGSC.

It is noted that Electronic Authorization and Authentication of FAA Section 33 procedures and
steps performed exists for Finance payment transactions but not for HR salary and OT payment
transactions.

The Agency is also responsible pursuant to section 5.2 of the CIDA Account Verification Policy
(Financial Bulletin 94-7) to regularly monitor the quality assurance processes used to assess the

12
Ibid (s.3.10)
21
adequacy of section 34 account verification system relative to the risk level of the transactions
reviewed. This function is not presently being performed.

Processing of Overtime Compensation

Overtime is recorded in the SAP Employee Self-Service System (ESS). Each employee has
protected access to his/her ESS account through a user name and a password. When claiming
overtime, the employee enters the date and the time worked or traveled outside regular working
hours and the type of overtime requested. The request is then sent electronically to the appropriate
manager identified in the system. The manager then approves or denies the request pursuant to
his/her delegated responsibility under Section 34 of the Financial Administration Act.

The manager has the legal obligation under s.34 to certify that the employee was working or on
travel status during the period for which overtime is claimed, that the date and time are correct and
that the employee is entitled to the compensation in accordance with the applicable collective
agreement.

In most cases, the manager trusts the employee and accepts the request as he/she was not present
during the period claimed and has no direct knowledge that the overtime was actually done. If the
manager questions any aspect of the overtime claim, he/she has the responsibility to verify that the
work was actually done and services/deliverables met.

Out of the 62 transactions reviewed, six (6) different branch managers did not have the proper
delegation to approve overtime.

Account Verification Process

Human Resources Directorate and the Finance Directorate are not complying with s.33 (d) of
the FAA in terms of providing assurance of the adequacy of the s. 34 account verification
responsibilities.

Section 33 (d) of the FAA stipulates that Financial officers with payment authority
pursuant to FAA s.33, must provide assurance of the adequacy of the s.34 account
verification and be in a position to state that the process is in place and is being properly
and conscientiously followed.

In a memorandum dated April 26, 1999, the respective Directors General of Finance and Human
Resources mutually agreed to transfer the delegated authority for s.33 (payment) from Finance
to the Human Resources branch. This agreement required the DG Human Resources to assure
that there would be segregation of duties between employees responsible for signing and
recording compensation and benefits pursuant to s.34 and those responsible for account
verification and payment under s. 33.

The audit observed that HR made an effort to segregate employee duties respecting
responsibilities under s.33 and s.34. However, HR pays specialists routinely check each others
work which does not constitute a full separation of these functions.
22

Recommendations

It is recommended that:

3. Human Resources Directorate (HRD) in consultation with Finance Branch should
review CIDA Overtime Directive and Account Verification Policy (Financial
Bulletin 94-7), including management controls for assuring Agency compliance with
Treasury Board Comptrollership Policy on Pay Administration.

4. Human Resources Directorate (HRD) in consultation with Branches should ensure
that the CIDA Overtime Directive clearly describes managers accountability,
including:

Certifying the accuracy of employee requests for overtime and overtime
claims; and
Ensuring that the authorized signing delegation under S. 34 of the FAA is
affixed.

5. Pursuant to s.33 of the FAA, Finance Division should approve overtime payments
and certify the proper exercising of s.34 responsibilities by HR pay specialists for
all overtime miscalculations.

Managements Response

3. The HRD agrees with the recommendation and acknowledges the importance of
including management controls for assuring Agency compliance with Treasury
Board Comptrollership Policy on Pay Administration. To this end, and as
mentioned earlier, HRD is currently revising the CIDA Overtime Guidelines, which
are expected to be ready for release by September 2007. Further, the Account
Verification Policy (Financial Bulletin 94-7) will be reviewed in order to include the
roles and responsibilities for the HRD as for the expenditures process related to
overtime. This is expected to be completed by November 2007. The approval
process related to the authority under Section 34 of the FAA granted to HRD will
be reviewed in order to ensure that it is in line with Treasury Board policies.

4. HRD agrees that the CIDA Overtime Guidelines should clearly describe manager
accountability regarding employee requests for overtime and overtime claims.
Consequently, and as noted above, CIDAs Overtime Guidelines are currently
being revised. As a result of HRMC consultation regarding this matter, a
communications strategy highlighting key responsibilities will accompany the
release of the Guidelines to ensure that all CIDA employees, including managers,
are well aware of their responsibilities. Management responsibilities regarding the
determination, authorization, and conditions surrounding overtime are clearly
spelled out in the guidelines.

23
5. As the TB Policy on Pay Administration enables the Finance Division to delegate
approval of salary, including overtime payments, under Section 33 of the FAA to
HRD, the Finance Division will continue to delegate this authority to HRD.
A committee, comprised of Finance and HR members, will develop options and
propose recommendations: for the proper process to confirm the exercising of
Section 34 certification; and its verification. Recommendations will be presented to
senior management by March 31, 2008.


Compensation of Overtime


Criterion 2.2.2 The compensation for overtime is calculated in accordance with the
provision of applicable collective agreements.

Findings

Overtime data recorded in the SAP system continues to require manual corrections where these are
non-compliant with the provisions of collective agreements.


Analysis


The approach for processing employee overtime compensation once it has been certified by the
manager is dependent on whether the claim is to be paid in cash or time. If the employee has
requested time, the time credit is recorded in the SAP HR module and stays there until the
compensatory time is taken by the employee or the deadline specified in the Collective Agreement
(September 30 for most employees) occurs, at which time all credits accumulated are paid in cash.

If the employee has requested cash, the request is extracted manually from the SAP HR module and
transferred to the SAP Finance Module where it becomes a payable until the employee has received
his/her compensation.

In both cases, the amount of compensation is automatically calculated by SAP. An internal
verification and validation of overtime data put into the SAP time system in June 2005 identified
irregularities related to compliance with the provisions of some collective agreements. Subsequent
testing by the audit team confirmed that these irregularities continue to persist. Overtime requests
are manually verified every month to ensure that the calculation agrees with the amount of time and
the provisions of the applicable collective agreement.

In fiscal year 2005-2006 12,426 claims for overtime were submitted by CIDA employees.
The audit sampled 62 overtime pay transactions in the SAP and identified an error rate of 16.6% for
cash transactions and 21.2% for time transactions covering a nine (9) month period from October
2005 to June 2006. These errors have to be manually corrected by HR pay specialists.

24
Recommendation

It is recommended that:

6. Human Resources Directorate and Finance Division monitor the progress of the
integration of the HR and Finance modules of SAP and report to the Corporate
Resources Committee on the success in reducing the number of manual
interventions to correct pay transaction errors

Managements Response

6. The Agency Information Systems (AIS) SAP-HR team is working closely with
IMTB to implement functionality that will mitigate the risks associated with this
issue. HR is working to leverage the use of self-service technology, by
incorporating the collective agreement rules regarding overtime compensation for
each group into the current AIS. Among other things, this will reduce the number
of codes for types and reasons for overtime, matching them to those that are
actually covered by collective agreements. It will also ensure the system drives the
payment in accordance with collective agreement rates and conditions, reducing the
possibility of errors. Internally, this particular correction is known as Service
Request Number 1370. It is expected that this functionality will be implemented by
the end of the fiscal year, subject to Agency pressures and priorities. CRC
reporting on this issue is not seen to be necessary to fulfill the intent of this
recommendation, nor is it an effective use of limited resources to prepare reports to
a senior committee on this level of detail.


Payables at Year-End


Criterion 2.2.3 Compliance with TB Policy on Payables at Year-End (PAYE)

Findings

Incomplete and inconsistent financial reporting of overtime costs impacts on Agency year-end
financial reports. The overtime incurred and compensated in time during the year is not captured as
a cost and is not reported in the year-end financial statements.


Analysis

Accounting for Overtime Cost

Overtime is an operating cost. When overtime is compensated in money, the calculation of the cost
is straightforward: it is the amount paid to the employee.

25
Overtime claimed during the same fiscal year as incurred

When overtime is taken in time and claimed in the same fiscal year, the time bank is cleared as
the compensatory time is taken. As a result, the overtime incurred and compensated in time during
the year is not captured as a cost and is not reported in the year-end financial statements.

The impact of variances in reporting of overtime between cost-centres can have an impact on the
overall perception of operational efficiency and economy. For example, two cost centres can vary
in how they compensate overtime during the year. One cost-centre may compensate in cash while
the other may compensate in time. Everything else being equal, year-end financial reports will
show higher operating costs for the first centre while the second will appear to have operated much
more efficiently and economically.

In the opinion of the auditors, the cost of overtime exists in both of these cost centres and should be
recorded using either the full dollar equivalent or the incremental cost approach.

Earned overtime paid in subsequent fiscal year

In some cases, overtime earned during a period is compensated during the subsequent period. For
instance, over a thousand claims for overtime deposited between April and June 2006 were for
overtime earned during the 2005-06 fiscal year.

TB Policy on Payables at Year-End states that:

It is the policy of the Government of Canada to record liabilities to outside organizations and
individuals incurred up to and including March 31st in each fiscal year and to charge them to
existing appropriations or provide for them through a central provision for valuation.

Amounts incurred by March 31 and to be paid after that date for salaries and wages, overtime,
retroactive wage and salary settlements, and other entitlements for items such as compensatory
leave, extra duty, shift work and lay days for ships crews are debts and therefore must be accrued
under the requirements of this policy.

HRD uses the PAYE method to charge the unremunerated overtime identified at the end of the
fiscal year. It establishes a PAYE amount representing the unpaid overtime to be compensated in
cash and in time, using the full dollar equivalent in the latter case.

As outstanding overtime claims are processed during the subsequent fiscal year, the amount paid to
the employee, or the full dollar equivalent of the overtime taken in compensatory time, is deducted
from the PAYE. Since overtime taken in time during the same fiscal year is not captured as an
expense, this approach creates a reporting discrepancy.

If the outstanding overtime has not been identified at year-end, it is not included in the PAYE and
contrary to policy is charged to the year in which it is compensated. If the compensation is in cash,
the full payment is recorded as an expense. If it is compensated in time, then the compensatory time
is not recorded as a cost in the financial system and year-end reports.
26

Recommendations

It is recommended that:

7. HRD, in consultation with Finance and the Branches, develop a consistent approach
for recording the cost of overtime compensated in time and monitor compliance.

Managements Response

7. The SAP entries for overtime compensation directly identify whether overtime is to be
claimed in cash or in compensatory time, and HRD is therefore able to identify and
report on overtime claimed

Additionally, the CIDA Overtime Guidelines will remind managers that overtime
compensation is normally to be paid in cash, in accordance with Central Agency
directives. This will reduce the organizations risk of overtime compensatory time
producing a need for on-going overtime, as well as the risk of employees using
compensatory time in lieu of annual leave vacation time and requiring the department to
cash out annual leave in excess of the carry-over allowable limits.

There will also be new system reports available to managers to track overtime usage and
costs. (See recommendation 9)


2.3 MANAGEMENT PRACTICES AND CONTROLS

Criterion 2.3.1 CIDA managers have access to complete, accurate, timely, authorized,
detailed information on overtime for planning, organizing and controlling overtime work
within their respective area of responsibility.

Findings


The absence of a specific overtime forecast in the Costed Work Plans (CWP) reduces the capacity
for management at the branch and corporate level to effectively monitor the use of overtime.


Analysis

CWPs were introduced three years ago to provide a formalized approach for corporate and financial
planning. Some CWPs cover only one cost centre while others represent a roll-up of several cost-
centres. Managers reported that they set up internal mechanisms to monitor overtime expenditures
separate from the CWPs. This enables managers to track OT expenditures and to identify the need
for additional funds based on current OT usage rates. However this is reported (rolled-up) at the
Branch and Agency level on a needs basis only.
27

In the Instructions and Definitions for Completing the Financial Data Template of the Costed Work
Plan, salary is defined as including actual salary forecast and overtime. None of the 10 Branch-
level CWPs examined by the auditors contained a separate forecast for overtime. The Instructions
do not require that salaries and overtime be presented separately and do not make reference to
overtime compensated in time.

Although a forecast for overtime may be established in the cost centre for internal use, the absence
of a specific overtime forecast in the CWP reduces the ability of management to monitor the actual
use of overtime against the planned use. To maintain responsibility and accountability within the
cost centres, a forecast including all the planned overtime, whether compensated in time or in
money, should be included in the CWP.

In terms of managing overtime, managers interviewed recognized the need for standard practices
for monitoring overtime to ensure transparency and equitable treatment of all employees. A number
of the branches have, or are planning, to introduce more effective monitoring practices for travel
and overtime work at missions. Travel arrangements are supported by detailed travel itineraries and
local work plans at missions, where advance documents are provided for planning purposes. These
plans are approved in advance. Overtime claims are reviewed against these plans and trip reports
upon the employees return to work. Managers are becoming increasingly aware of the need to
effectively monitor and manage overtime.

Recommendation

It is recommended that:

8. CPAG, in consultation with the Branches, should modify the Instructions and
Definitions to require that Costed Work Plans include a separate forecast for
overtime compensated in time and money

Managements Response

8. CPAG is in the process of reassessing the current Costed Work Planning exercise to
streamline the approach for fiscal year 2008-09. In this context, the new approach
will consider introducing the requirement to include a forecast overtime budget for
each branch. CPAG will consult with the branches and their FMAs on the
feasibility of forecasting overtime in both time and compensation within this
approach.








28
Management Information on Overtime (SAP)

Criterion 2.3.2 CIDA managers have access to complete, accurate and timely overtime
information from SAP.

Findings

The SAP system maintains data on recorded overtime but this information is not easily accessible.
Managers are not able to readily access SAP overtime data for monitoring and planning purposes.
The SAP system is not considered user-friendly. HRD does not provide regular reports to
managers on overtime performance, trends or results against planned activity.


Analysis

Managers and employees expressed some frustration with the SAP system, as it was not responsive
to their needs or user-friendly.

SAPs Employee Self Service System (ESS) is used by the employee to request overtime and
other leave and by the manager to certify and/ or approve requests for overtime and leave.

Each employee has access to a screen showing the outstanding overtime requests, the request
certified, the amount of overtime paid or payable and the compensatory time in bank. The
manager can access this screen for each of his/her employees to obtain information on individual
employee OT utilization rates and compensation commitments, either in cash or time. Presently,
the SAP system does not provide regular summary reports / information at the cost-centre level.
The manager must add up all employees OT records to obtain a total figure for his/her area of
responsibility. This manual approach is considered neither practical nor efficient. Of the managers
interviewed, very few undertook this effort.

Managers can specifically request ad hoc reports from the SAP system but the system does not
regularly provide managers with reports on OT utilization, commitments and performance against
planned expenditures. Managers interviewed indicated that they rarely request ad hoc overtime
reports due to the length of time to obtain the reports and their limited management utility. A
number of managers expressed interest in receiving reports on overtime usage at the Directorate and
Agency level for comparison and planning purposes.

Recommendation

It is recommended that:

9. HRD in consultation with IMTB and Branches determine how the SAP system can be
enhanced to meet overtime information needs and make the necessary adjustments



29
Managements Response

9. The Agency Information Systems (AIS) SAP HR team has already developed
reports that will provide managers with the ability to obtain the necessary overtime
information. There will be three reports available to managers with overtime
informationestimates of overtime payable, i.e. time in the bank; overtime paid in
time; and overtime paid in money.

This system functionality depends on the implementation of Service Request 1370,
which is outlined in the management response to recommendation 6. It is therefore
expected that these reports will be available to managers by the end of the current
fiscal year.


Audit Objective:

2.4 EFFICIENT AND EFFECTIVE USE OF HUMAN RESOURCES

Criterion 2.4.1 Cost-effective alternative solutions are considered by managers to mitigate
the need for overtime expenditures.

Criterion 2.4.2 The rights of the employees as defined in TB Overtime Policy, CIDA
Overtime Directive and collective agreements are consistently applied across the Agency.

Finding

Based on the audit team interviews of managers and employees and the analysis of overtime data in
SAP from 2003-04 to 2005-06, the use of overtime in branches and divisions in headquarters varies
considerably in scope, demand and compensatory practices.
Analysis

Hours of Work

Based on interviews it was reported that prior to 2001 employees working for CIDA generally
worked long hours without claiming overtime. In some cases, this also included not claiming travel
overtime. However, in 2001, the then President of CIDA directed that employees could claim travel
overtime. Based on audit interviews and observations, employees, particularly in the professional
ranks, are becoming more aware of their compensation entitlements and generally wish to be
compensated for all hours worked outside the normal workday in accordance with the CIDA
Overtime Directive and the provisions of their collective agreements. Work- life balance is also a
growing concern for both managers and employees relative to the amount of overtime worked.

Work demands at CIDA are such that the normal 7.5-hour day is not always enough to meet current
and projected workload demands. Based on the interviews of managers and employees, it is
projected that the amount of overtime worked, but not claimed, each year approximates 30%
($900,000) of the overtime that is claimed and compensated in cash and time. This projection is
30
based on the employees interviewed guesstimate of how much overtime is worked but not claimed.
This approximates 2-3 hours a day generally for professionals and less so for support staff. The
unclaimed overtime is not recorded in SAP.
13



Graph 2 presents the overtime claimed as a percentage of entitled salaries for fiscal years 2003-04
to 2005-06 for all branches.
Graph 2
CIDA -- Management of Overtime
Overtime as Percent of Entitled Salaries
For the years ended March 31, 2004, 2005 and 2006
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
M
I
N
E
P
R
E
S
P
O
L
P
K
M
B
C
P
B
M
U
L
T
I
E
M
M
A
F
R
A
M
E
R
A
S
I
A
H
R
C
S
I
M
T
B
C
O
M
M
C
I
D
A
2004
2005
2006


Source of Data: SAP HR salary system (2003-04, 2004-05, 2005-06)



Remote Access Capability

The CGI - Remote Access Facility Cost/Benefit Report, April 10, 2000 found that employees use
remote access for a variety of reasons, from telecommuting to working while sick to connecting
while traveling abroad.


13
Summary of Interviews CIDA, 2006
31
The largest proportion of work done remotely is for checking e-mails and for utilizing standard
office software (Word Processing, Spreadsheets, Lotus Notes applications). Specialized work such
as risk application, IT support, and utilizing CIDAs Intranet is also being carried out.
14


The study group noted there is currently (2000) a gross tangible benefit to CIDA of $1,087,178 by
operating the remote access facility. This includes $466,000 in actual time spent while connected,
an estimated $489,300 in benefit by people working at home while ill, and estimated $131,878 in
time saved by people not having to catch up upon return from foreign travel.
15


The intangibles include improved productivity on both an individual and cumulative level. It also
affects CIDAs ability to hire and retain permanent and contract staff. Through remote access,
telecommuters working in remote parts of Canada are delivering a service to CIDA that otherwise
would not be delivered. The net derived benefit to CIDA is $903,305, representing a benefit per
user per day of $6.75.
16
It is noted that CGI qualified these statements regarding the benefits
achieved via remote sensing in stating, it should be made clear that insufficient data exists to
accurately measure the benefits achieved from the remote access facility. Approximations have been
made by extrapolating from a relatively small sample of log data.
17


The report also identified a number of issues with the current remote access implementation,
including:

There is a perception from employees that, with the availability of remote access, overtime
is now expected. This is a perception that should be addressed.
18


The degree to which CIDA should compensate those individuals connecting from home
should be resolved.
19


The extent to which this continues to be an issue for employees connecting from home and
regularly working extra hours each day needs further study. Based on the interviews of employees
and managers, policy direction is not clear with respect to overtime consideration in these cases.



Overtime Drivers

Managers and employees interviewed mentioned several factors, which influence the use of
overtime such as long-distance travel, last minute requests, staffing delays and vacant positions; aid
fund increases with no corresponding Full Time Equivalent employee increases, and tighter
deadlines.


14
CGI, Remote Access Facility Cost/Benefit Report, April, 2000, Findings, pg. i
15
CGI, Remote Access Facility Cost/Benefit Report, April, 2000, Operational Benefits, pg. iii
16
Ibid, pg. iii
17
Ibid, pg. iii
18
Ibid, Issues with Current Remote Access Implementation, pg. v
19
Ibid, pg. v
32
However, the absence, in most cases, of written pre-approved overtime records reduces the ability
of CIDA management and of auditors to objectively and rigorously analyze the circumstances under
which overtime was approved or not and whether alternatives existed or were fully considered.

Graph 3 presents the overtime intensity for the last three fiscal years where OT usage is lower in the
summer months and peaks around April and October. The opportunity exists to examine more fully
the reason for these trends.

Graph 3
CIDA Monthly Overtime
Overtime as % of salaries of employees entitled to OT
For the years ended March 31, 2004, 2005 and 2006
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
4.50%
5.00%
A
P
R
M
A
Y
J
U
N
E
J
U
L
Y
A
U
G
S
E
P
O
C
T
N
O
V
D
E
C
J
A
N
F
E
B
M
A
R
Y
E
A
R
2004
2005
2006

Source of Data: SAP HR salary system (2003-04, 2004-05, 2005-06)


TB Overtime Policy and CIDA Overtime Directive lack broad principles and guidance on what
activities must be considered as work or official travel eligible for overtime compensation.

The attitude varies among employees and managers as to what constitutes time worked by an
employee in excess of the standard daily or weekly hours of work. Some employees and their
representatives mentioned activities such as attending a work-related social event or seminar that
were considered eligible for overtime by some managers and not by others.

Some employees indicated they did not count their hours and did not expect any compensation other
than their own satisfaction and the recognition of their dedication. Others believed they should be
compensated but were concerned they would be identified as greedy or unprofessional if they asked
for compensation especially if their peers did not do so. Still others followed the terms and
conditions of their collective agreement.

Some managers believe that long hours are normal and are compensated by travel opportunities and
the satisfaction of contributing to the mission of CIDA. Other managers encourage or impose
33
unofficial, unrecorded arrangements and some insist that overtime be recorded and compensated in
compliance with the TB Overtime Policy, CIDA Overtime Directive and collective agreements.
There are examples where a change of manager has modified the way overtime was handled in a
cost centre.

The 2005 Public Service Employee Survey supports the findings of the interviews. CIDA
participants revealed that 44% of them complete their assigned workload during their regular
working hours (Public Service of Canada (PSC): 59%; DFAIT: 42%); that 30% feel pressured by
others to work more than their regular hours (PSC: 22%; DFAIT: 37%); 63% of CIDA employees
who completed the survey feel they can claim overtime compensation (cash or leave) (PSC: 61%;
DFAIT: 66%). During the last year, 45% were compensated for overtime (cash or leave), which is
a 5% increase compared to the 2002 Survey (PSC: 50%, no variation; DFAIT: 54%, diminution of
1%).

CIDAs Centre for Workplace Effectiveness and Well-Being deals with conflict and serves
employees and managers. The Centre informed the auditors that few employees seek its services
solely on the subject of overtime but rather within other aspects of a conflicting relationship with a
manager. There have been no overtime grievances in the last three years.

Recommendations

It is recommended that:

10. HRD, in consultation with the Branches, amend the CIDA Overtime Directive to
clarify the types of activities eligible for overtime compensation


Managements Response

10. As noted above, CIDAs Overtime Guidelines are currently being revised and the
target date for finalization and dissemination of the proposed guidelines is September
2007. The guidelines will contain direction and clarification surrounding the overtime
issue overall. System enhancements outlined in recommendation 6 will also align
determination of reasons for overtime with those allowed for in respective collective
agreements. It is anticipated that these 2 changes will provide managers with clear and
consistent direction on the management of overtime. While there will always remain the
need for managers to retain the appropriate flexibility, the clear and well-established
framework will support managers in determining what their employees need to do to
meet their business objectives, and how and when these activities should be undertaken.
Consultation has already taken place with HRMC. Unions and other stakeholders will
be consulted to finalize of the Guidelines.





34
3.0 CONCLUSIONS


Generally, CIDA is in compliance with the applicable TB Overtime Policy, CIDA Overtime
Directive and collective agreements. Clear Agency policy direction is required for pre-approval
of overtime and the recording of this information;

Managers must ensure proper exercising of delegated signing authority under s.33 and s.34 of
the Financial Administration Act respecting the approval, recording and certifying of overtime
compensation for employees working overtime;

Management needs complete, accurate and timely information from the SAP to effectively
manage overtime;

Consistent management practices for the use and monitoring of overtime would help to ensure
transparency and equitable treatment of all employees.



4.0 AUDITORS OPINION

In our opinion, based on an examination of the oral and documented evidence provided, we support
with a high level of assurance the above conclusions on the management of overtime in CIDA.























35

Table 1a is a summary of overtime data by employees entitled to claim overtime by numbers and
salaries for fiscal years ended March 31, 2004, 2005, and 2006 compensated in cash and by time
off (Note: This table does not record unreported overtime compensated by time off).


TABLE 1a

Source of Data: SAP HR salary system (FYs 2003-04, 2004-05, 2005-06)

Table 1a demonstrates that the % of employees by #s and the % of employees by salaries
entitled to claim overtime has remained relatively constant over the three fiscal years examined.








Summary of Overtime Data by
Employees entitled to Claim Overtime
for fiscal years ended
March 31, 2004, 2005, and 2006
Description Fiscal Year Ended
March 31, 2004
Fiscal Year Ended
March 31, 2005
Fiscal Year Ended
March 31, 2006
Total # of
employees 1,709 1,687 1,723
Total salaries $112,858,717 $114,582,053 $119,893,428
# of employees
entitled to
claim OT 1,562 1,541 1,594
% of
employees
entitled to
claim OT 91.4% 91.3% 92.5%
Salaries of
employees
entitled to
claim OT $98,057,149 $99,590,029 $105,582,416
% by salaries
of employees
entitled to
claim OT to #
of total
employees 86.9% 86.9% 88.1%
36

Table1b is a summary of overtime by employees who submitted claims for overtime for fiscal
years ended March 31, 2004, 2005, and 2006 compensated in cash and by time off (Note: This table
does not record unreported overtime compensated by time off).

TABLE 1b

Source of Data: SAP HR salary system (FYs 2003-04, 2004-05, 2005-06)



Table 1b demonstrates that the number of employees who submitted overtime has increased marginally
from 934, to 980 to 1,014 respectively over the 3 fiscal years. Using 2004 as the base year, this increase is
46 (4.9 %) and 80 (8.6%), respectively and demonstrates an upward trend. Similarly, the total value of
claims using the same base year demonstrates a marginal growth trend in overtime compensation of 0.1%
and 0.03%.
Summary of Overtime Claims
by Compensation Type
For fiscal years ended
March 31, 2004, 2005, and 2006
ITEM
Fiscal Year Ended
March 31, 2004
Fiscal Year Ended
March 31, 2005
Fiscal Year Ended
March 31, 2006

Comp.
Type
Paid
in
Cash
Paid
in
Time Total
Paid
in
Cash
Paid
in
Time

Total
Paid
in
Cash
Paid
in
Time Total
1.
# of
employees
who
submitted
OT claims 391 543 934 422 558 980


411

603 1,014
2.
# of OT
claims
submitted 6,584 6,655 13,239 6,650 6,843 13,493


5,230 7,196 12,426
3.
Value of
OT claims
submitted $1,280,205 $1,565,805 2,846,010 $1,368,522 $1,709,311 $3,077,833


$1,123,616

$1,818,525 $2,942,141
SUMMARY TOTALS

Total
value of
OT claims
submitted $2,846,010 $3,077,833 $2,942,141

Total %
of salaries
for
employees
entitled to
claim OT 2.9% 3.1% 2.8%
37
Table1c is a summary of overtime by employees who submitted 20 claims (or more) for overtime for
fiscal years ended March 31, 2004, 2005, and 2006 compensated in cash and by time off (Note: This table
does not record unreported overtime compensated by time off).


TABLE 1c

Source of Data: SAP HR salary system (FYs 2003-04, 2004-05, 2005-06)




















Summary of Overtime Data
Employees 20 claims per year
For fiscal years ended
March 31, 2004, 2005, and 2006
Description Fiscal Year Ended
March 31, 2004
Fiscal Year Ended
March 31, 2005
Fiscal Year Ended
March 31, 2006

Paid
in
Cash
Paid
in
Time Total
Paid
in
Cash
Paid
in
Time

Total
Paid
in
Cash
Paid
in
Time Total
# of employees
who submitted
20 OT claims 67


105 172 86 105 191 86 102 188
# of OT claims
submitted by
these employees 2,947

3,540 6,487 4,210 3,628 7,838 4,382 3,549 7,931
Value of these
claims for OT $557,393

$848,739 $1,406,132 $794,527 $815,620 $1,610,147 $764,673 $732,083 $1,496,756
Total value of
these claims $1,406,132 $1,610,147 $1,496,756
# in
Report
Recommendation
Addressed
to
Management Response

Target date
1 Human Resources
Directorate obtain
approval of the Corporate
Resources Committee to
amend the CIDA
Overtime Directive to
include a mandatory
requirement to pre-
approve, in writing, all
overtime work at
Headquarters and
missions.
HRD
The Human Resources Directorate agrees with the recommendation and acknowledges the
importance of a mandatory requirement to pre-approve all overtime work in writing. To
this end, the CIDA Overtime Guidelines are currently being revised. The Human
Resources Management Committee (HRMC) reviewed the draft on May 8, 2007. It will be
presented to Unions at the next Labour Management Consultation Committee meeting
scheduled for June 20, 2007. Once this is done, the final draft will be sent for presidential
approval. It is expected that the revised CIDA Overtime Guidelines will be ready for
release by September 2007.
The proposed Guidelines will require the pre-approval of all overtime work at
Headquarters and missions, except in extraordinary circumstances where there is
insufficient notice to do so.
Sept. 2007
2 Human Resources
Directorate monitor
performance and report to
Corporate Resources
Committee on
compliance with the
mandatory requirement to
pre-approve overtime in
writing.
HRD
Finance
CIDAs Financial Services Section and Human Resources Directorate are currently
elaborating an overtime pre-approval monitoring process that will be systematically
implemented by the Post-Payment Verification Unit (PPVU). This unit will perform
statistically-based testing of overtime payments and of the related pre-approvals that were
granted during a given fiscal year, and report on the results of this work through an annual
compliance report to the Business Management Committee.
The tools enabling the monitoring process will be developed by October 2007 and
monitoring will commence on overtime payment transactions incurred in the last half of
fiscal year 2007-08.
It is not felt that reports need to be made to the CRC on such issues unless there are
significant problems identified in the monitoring process.
Oct. 2007
38
39
# in
Report
Recommendation
Addressed
to
Management Response

Target date
3 Human Resources
Directorate (HRD) in
consultation with Finance
Branch should review
CIDA Overtime
Directive and Account
Verification Policy
(Financial Bulletin 94-7),
including management
controls for assuring
Agency compliance with
Treasury Board
Comptrollership Policy
on Pay Administration.
HRD
Finance
The HRD agrees with the recommendation and acknowledges the importance of including
management controls for assuring Agency compliance with Treasury Board
Comptrollership Policy on Pay Administration. To this end, and as mentioned earlier,
HRD is currently revising the CIDA Overtime Guidelines, which are expected to be ready
for release by September 2007. Further, the Account Verification Policy (Financial
Bulletin 94-7) will be reviewed in order to include the roles and responsibilities for the
HRD as for the expenditures process related to overtime. This is expected to be completed
by November 2007. The approval process related to the authority under Section 34 of the
FAA granted to HRD will be reviewed in order to ensure that it is in line with Treasury
Board policies.
Nov. 2007
4 Human Resources
Directorate (HRD) in
consultation with
Branches should ensure
that the CIDA Overtime
Directive clearly
describes manager
accountability, including:
Certifying the
accuracy of employee
requests for overtime
and overtime claims;
and
Ensuring that the
authorized signing
delegation under S34
of the FAA is affixed.
HRD
Finance
HRD agrees that the CIDA Overtime Guidelines should clearly describe manager
accountability regarding employee requests for overtime and overtime claims.
Consequently, and as noted above, CIDAs Overtime Guidelines are currently being
revised. As a result of HRMC consultation regarding this matter, a communications
strategy highlighting key responsibilities will accompany the release of the Guidelines to
ensure that all CIDA employees, including managers, are well aware of their
responsibilities. Management responsibilities regarding the determination, authorization,
and conditions surrounding overtime are clearly spelled out in the guidelines.
Being revised
40
# in
Report
Recommendation
Addressed
to
Management Response

Target date
5 Pursuant to s.33 of the
FAA, Finance Division
should approve overtime
payments and certify the
proper exercising of s.34
responsibilities by HR
pay specialists for all
overtime miscalculations.
Finance
Branches
As the TB Policy on Pay Administration enables the Finance Division to delegate approval
of salary, including overtime payments, under Section 33 of the FAA to HRD, the Finance
Division will continue to delegate this authority to HRD.
A committee, comprised of Finance and HR members, will develop options and propose
recommendations: for the proper process to confirm the exercising of Section 34
certification; and its verification. Recommendations will be presented to senior
management by March 31, 2008.
Mar. 2008
6
Human Resources
Directorate and Finance
Division monitor the
progress of the
integration of the HR and
Finance modules of SAP
and report to the
Corporate Resources
Committee on the success
in reducing the number of
manual interventions to
correct pay transaction
errors.
HRD
Finance
IMTB
The Agency Information Systems (AIS) SAP-HR team is working closely with IMTB to
implement functionality that will mitigate the risks associated with this issue. HR is
working to leverage the use of self-service technology, by incorporating the collective
agreement rules regarding overtime compensation for each group into the current AIS.
Among other things, this will reduce the number of codes for types and reasons for
overtime, matching them to those that are actually covered by collective agreements. It
will also ensure the system drives the payment in accordance with collective agreement
rates and conditions, reducing the possibility of errors. Internally, this particular correction
is known as Service Request Number 1370. It is expected that this functionality will be
implemented by the end of the fiscal year, subject to Agency pressures and priorities. CRC
reporting on this issue is not seen to be necessary to fulfill the intent of this
recommendation, nor is it an effective use of limited resources to prepare reports to a
senior committee on this level of detail.
Mar. 2008
41
# in
Report
Recommendation
Addressed
to
Management Response

Target date
7
HRD, in consultation
with Finance and the
Branches, develop a
consistent approach for
recording the cost of
overtime compensated in
time and monitor
compliance.
HRD
Finance
The SAP entries for overtime compensation directly identify whether overtime is to be
claimed in cash or in compensatory time, and HRD is therefore able to identify and report
on overtime claimed
Additionally, the CIDA Overtime Guidelines will remind managers that overtime
compensation is normally to be paid in cash, in accordance with Central Agency directives.
This will reduce the organizations risk of overtime compensatory time producing a need
for on-going overtime, as well as the risk of employees using compensatory time in lieu of
annual leave vacation time and requiring the department to cash out annual leave in excess
of the carry-over allowable limits.
There will also be new system reports available to managers to track overtime usage and
costs. (See recommendation 9)

8
CPAG, in consultation
with the Branches, should
modify the Instructions
and Definitions to require
that Costed Work Plans
include a separate
forecast for overtime
compensated in time and
money.
CPAG
Branches
CPAG is in the process of reassessing the current Costed Work Planning exercise to
streamline the approach for fiscal year 2008-09. In this context, the new approach will
consider introducing the requirement to include a forecast overtime budget for each branch.
CPAG will consult with the branches and their FMAs on the feasibility of forecasting
overtime in both time and compensation within this approach.
FY 2008/09
9
HRD in consultation with
IMTB and Branches
determine how the SAP
system can be enhanced
to meet overtime
information needs and
make the necessary
adjustments.
HRD
IMTB
Branches
The Agency Information Systems (AIS) SAP HR team has already developed reports that
will provide managers with the ability to obtain the necessary overtime information. There
will be three reports available to managers with overtime informationestimates of
overtime payable, i.e. time in the bank; overtime paid in time; and overtime paid in money.
This system functionality depends on the implementation of Service Request 1370, which
is outlined in the management response to recommendation 6. It is therefore expected that
these reports will be available to managers by the end of the current fiscal year.
Mar. 2008
42
# in
Report
Recommendation
Addressed
to
Management Response

Target date
10
HRD, in consultation
with the Branches, amend
the CIDA Overtime
Directive to clarify the
types of activities eligible
for overtime
compensation.
HRD
Branches
As noted above, CIDAs Overtime Guidelines are currently being revised and the target
date for finalization and dissemination of the proposed guidelines is September 2007. The
guidelines will contain direction and clarification surrounding the overtime issue overall.
System enhancements outlined in recommendation 6 will also align determination of
reasons for overtime with those allowed for in respective collective agreements. It is
anticipated that these 2 changes will provide managers with clear and consistent direction
on the management of overtime. While there will always remain the need for managers to
retain the appropriate flexibility, the clear and well-established framework will support
managers in determining what their employees need to do to meet their business
objectives, and how and when these activities should be undertaken.
Consultation has already taken place with HRMC. Unions and other stakeholders will be
consulted to finalize of the Guidelines.
Sept. 2007