2. Findings and Recommendations – 2022 Audit of Financial Management by Returning Officers

Objective 1: Assess the adequacy and effectiveness of the financial management control framework over returning officer activities

2.1.1. Governance

Across Canada, 338 returning officers (RO) are responsible for delivering all aspects of a general election in their own electoral districts. A multitude of directorates, divisions and units within Elections Canada's Electoral Events and Innovation Branch support ROs by creating policies, procedures, training, manuals and other guidance for the various functions they must carry out during an election period. The operational group that communicates directly with ROs is Field Governance and Operations (FGOR).

A key finding of this audit is that the multiple communication streams and sources of information make it difficult for ROs to determine if they are following the right path.

All guidance and training related specifically to financial management is created within the Field Services (FS) division of Accounting Operations. FS provides information to FGOR to integrate with other guidance provided to ROs and FOs. While the majority of RO communication with headquarters is through the FGOR governance structure, on financial matters, such as expense payments and payroll, ROs as well as FOs may communicate directly with FS.

This lack of clarity is best exemplified with the implementation of overtime pay following the introduction of the new provision in the Federal Elections Fees Tariff. In March 2021, a joint Finance and FGOR communication was published for ROs, promising additional information in the RO manual. Detailed information about overtime was then published in the March 2021 Delivery Plan on the RO intranet site. The RO manual mentioned overtime, as did the FO manual, which also contained instructions on how to enter time. Despite having these resources, the ROs interviewed described varying ways they thought overtime had been implemented. In the interviews with ROs, they expressed their confusion with regard to these multiple sources of guidance, which they sometimes felt were conflicting.

Recommendation 1

To ensure common understanding, it is recommended that all instructions related to financial transactions be communicated through a single authoritative source, no matter if the origin is operational or financial.

2.1.2. Financial Management Controls

In line with financial policies, ROs make most purchases with an acquisition card. Small purchases may be made using an accountable advance (also known as petty cash). For very large purchases, or where vendors do not accept the acquisition card, the RO requests payment through a special account form. FGOR and FS have a system of controls in place over all of these financial transactions that relies heavily on manual processes both in the field and at headquarters. ROs provide their authorization for FGOR to proceed with the processing and payment of all types of expenses incurred through physical signatures on printed reports. This action is similar to the execution of FAA sections 32 and 34. The reports are scanned and returned to headquarters through email or by uploading to a system called the Field Assignments Management Tool. Most documents are eventually saved in shared network folders, where they can be accessed by both FGOR and FS.

Once received at headquarters, payment submissions are reviewed for completeness by FGOR and additional information requested from the RO, if required. Then each expense is verified by both FGOR and FS before finally being entered and processed in the corporate financial system.

The design of the controls is such that a portion is performed by each group to create a thorough and complete review of transactions. In practice, however, with a larger team, FS works ahead of FGOR and consequently often does a pre-review of transactions, adding more steps to an already lengthy review process.

The following example (figure 1) illustrates the timeline and number of reviews undertaken for one randomly selected election expense submitted on a special account form. The expense incurred was security services in the amount of $386.40.

Figure 1: Example of review process for an election expense submitted through a special account form

In this case, the amount was authorized, reviewed and approved at least four times before being paid to the vendor approximately three and a half months after the election. Management clarified that 67% of all special account forms are paid within their documented service standards of three weeks. However, the example illustrates that there is a disproportionate number of controls in place for a small payment.

Conversely, the review and approval process for payroll transactions is less detailed. The review and analysis of payroll transactions at headquarters are done at an aggregate level. Subject matter experts at headquarters may also perform supplemental analysis to monitor the number of hours worked in the different functional areas. However, the submitted hours of individual electoral districts or the hours of specific election officers are only reviewed on an ad hoc basis, such as if there is an inquiry or complaint by a worker.

Recommendation 2

To improve efficiency in the review of financial transactions, it is recommended that control activities be commensurate with the risks associated with the consequences of a control failure, that is, reduce/streamline the number of checks on small purchase transactions and increase review of payroll transactions.

2.1.3. Performance Management

To complete the governance cycle, FGOR has a performance management review process for ROs. The process allows for feedback to be provided to the RO against certain identified objectives and also gives the RO the opportunity to provide feedback to Elections Canada on the tools and resources they provide. The consequence for not achieving financial management objectives (such as submitting ineligible expenses or failing to submit receipts and reconciliations) includes withholding of pay and/or creation of a payable to Elections Canada to reimburse for ineligible payments. However, due to the processing time for expense transactions as described above, FS is not prepared to provide accurate feedback on financial management performance until several months after the RO evaluations.

Despite the consequences of not meeting performance expectations for financial management, five months after the 44th general election, nearly $1 million (approximately 6%) of acquisition card expenses, which were already paid centrally, had not been reconciled and submitted by ROs with proper supporting documentation. In addition, it was noted that in the audit testing subsample, one petty cash register and one signed lease also had not been submitted. As a result, FS had to undertake their own process to obtain documentation, from either ROs or vendors, and process the expenses on behalf of ROs to ensure proper controls were in place.

Recommendation 3

To improve the efficiency and effectiveness of the RO performance management process, it is recommended that:

the timing of the performance management assessment exercise for ROs be reviewed to ensure that feedback from Field Services can be adequately incorporated
the performance management framework for ROs be clarified to set out more effective consequences for poor financial management during and after an election

Objective 2: Determine if returning officers' financial activities are undertaken in accordance with applicable policies, procedures, acts and regulations

2.2.1. Financial Transactions

An RO's primary responsibility is to deliver an election in their electoral district, which requires the initiation of a large number of expenditures in a short period of time. To accomplish this, the CEA provides for ROs to be financial managers with authority to incur expenditures from their own budgets. Typical expenditures managed during an election include office and polling-site leases, furniture rentals, purchases of supplies, travel expenses and payroll.

During interviews, ROs demonstrated that they understood the importance of diligent review and control of the finances within their responsibilities.

Although not bound by the FAA like public servants throughout the Government of Canada, Elections Canada has implemented processes and expectations for ROs that mirror those in the FAA. For instance, ROs have authority to initiate spending and certify the purchase for payment (similar to FAA sections 32 and 34), while the payment of purchases is authorized within the headquarters finance function (similar to FAA section 33). As such, the audit examined whether ROs exercised their due diligence when making expenditures, expenditures were eligible in consideration of the CEA and other guiding acts and directives, and a review process was in place to verify overall compliance.

Transactions made by the 35 selected ROs were sampled, both randomly and through auditor judgement. For non-payroll transactions, the purchases tested were found to be authorized, allowable and in compliance with applicable acts and directives, with only minor exceptions. However, it was noted that FGOR, the unit responsible for verifying RO expenses, often had to make multiple requests to obtain all of the required documentation and explanations not included with the original submission.

2.2.2. Financial Officers

The audit found that there are opportunities for FOs to make an even more valuable contribution to the effective financial management in the electoral districts.

The FO's guiding document, the FO manual, sets out the expectation that FOs play a key role in helping the ROs manage all aspects of financial-related transactions, such as leases, purchases, budgets and payroll. The manual indicates that the FO play a control function that should ensure that submissions to headquarters have minimal errors.

While ROs did confirm that their FOs were a critical part of their team for delivering the election, it was clear from the information gathered that the FOs' main function was to enter large amounts of data into the Returning Officer Payment System (ROPS) and other systems, leaving limited time for performing quality review on transactions to be submitted.

Compounding the FO's limited control function in practice was the lack of position-specific training received. FOs could access online training modules and read the FO manual as early as the first day of the writ period. However, it was reported that most FOs did not start training until the computer equipment was installed in their office – which was several days later, or in some cases more than a week. By that time, it was difficult for some FOs to find time to complete the training.

In the survey of FOs, only 41% felt their training was at least adequate, and another 41% said they did not use the training resources (figure 2). FGOR's training unit confirmed that only 62% of FOs completed the online training module that was available (figure 3).

In addition, FOs were retained for only a short period after the election, leaving ROs to deal with the remaining acquisition card and petty cash expenses and payroll inquiries. FS, which allocates the budget for FO hours, explained that there is no requirement to terminate the FOs at a specified time if the RO can justify the additional hours needed to finish work related to financial transactions, but this did not translate to actual practice by RO.

Recommendation 4

To optimize the value of the FO role, it is recommended to:

realign duties currently being performed by FOs, such as considering the addition or reassignment of a clerk position with appropriate security clearance to complete data entry tasks until systems can be updated to reduce these tasks
reinforce the FO role as a control and compliance function as per the FO manual
make the FO training mandatory and explore possibilities to facilitate compliance by starting training prior to the writ

2.2.3. Payroll Analysis

Issues around payroll transactions for hourly staff, which includes most office workers and all polling-day workers, were more significant than other types of expenses.

Payroll is the most significant expense incurred by ROs during the election. In 2020, Elections Canada initiated a review of the Federal Elections Fees Tariff which provides for the determination of fees, costs, allowances and expenses to be paid and allowed to ROs and other persons employed at or in relation to elections under the CEA. A key recommendation coming from this review was a transition from a set fee to an hourly rate for a number of election worker positions.

Various data analysis techniques were used to identify potentially unusual payroll transactions for testing, in addition to a random selection of workers from the population of the 35 selected electoral districts. Since ROs are required to submit only one summarized pay action request each pay period, copies of original timesheets were requested from the ROs for the sampled transactions. Results of the testing are outlined in figure 4.

Even though only half of the requested timesheets were obtained for testing, a number of unusual payroll entries were identified which required follow-up and further action by FS. For example, 20% of the timesheets had minor errors as a result of manual calculations. Given the large number of workers employed for a very short period of time, minor errors may be expected. However, data analysis could be used during and after the election period to identify both common and unusual errors. Without such analysis, management does not have the information to understand, address and work to improve common sources of errors.

Recommendation 5

To identify unusual transactions and common errors for review and process improvement, it is recommended that management employ data analytics and/or continuous monitoring of payroll transactions.

2.2.4. Overtime

The introduction of hourly pay rates in the Federal Election Fees Tariff allowed for the payment of an overtime rate (see figure 5) for the first time.

Communications and instructions regarding overtime were published in several places, although no specific training was provided. Even though the information was available, sources of confusion included who was eligible for overtime, how it was to be entered and whether the budget had been adjusted to account for overtime.

Of significant note was RO concerns over the application of overtime for polling-day workers. Elections Canada's documentation states that these election workers are eligible for overtime pay after working 8 hours in "one position." However, it is possible for workers to change positions over the course of a polling day, depending on the needs of the poll. Sometimes the rate of pay remains the same, or it may change. Because of the "one position" distinction, workers who filled multiple positions did not get paid overtime despite working shifts greater than 8 hours in one day, while other workers with the same shift in only one position were paid the overtime rate after 8 hours.

Figure 5: Overtime pay provisions in the Federal Elections Fees Tariff

Overtime pay

32 (1) An election worker – other than a person appointed by an RO under section 61 of the Act – who is required to work more than eight hours in one day is entitled to be paid at a rate of one and one-half times their regular hourly rate for each hour worked in excess of eight hours in one day.

Overtime pay — staff

32 (2) A person appointed by an RO under section 61 of the Act who is required to work more than 40 hours in one week in one position is entitled to be paid at a rate of one and one-half times their regular hourly rate for each hour worked in excess of 40 hours in one week in that position.

Federal Elections Fees Tariff (justice.gc.ca)

The "one position" rule was put in place because of a system limitation that cannot accommodate an overtime calculation when there is a change in position, but it is not consistent with the wording in the Federal Elections Fees Tariff (see figure 5).

Some ROs recognized that the system prevented certain workers from being paid overtime when they worked more than 8 hours in multiple positions. As a result, there was at least one report of an RO manipulating time entry into the payroll system to "make up" for the lost overtime. It is unknown how widespread this practice might have been.

In another case, a worker called headquarters after the election to complain that they had not been paid for overtime hours to which they felt entitled. The situation was one in which more than one position was worked on election day. The RO was then contacted by a member of the finance call centre team and asked to create, sign and submit an additional timesheet that would compensate the worker for the overtime they did not receive, causing what the RO identified as a significant ethical dilemma. During audit testing, FS management later confirmed that this response was not supported and reached out to the RO to discuss further. Once again, it is not known it this was a widespread practice or an isolated event.

Recommendation 6

To ensure appropriate and consistent application of overtime provisions across all electoral districts, it is recommended to:

review Elections Canada's overtime policy as per the Federal Election Fees Tariff
provide training and guidance to election officers and support staff during the next electoral event, clarifying who qualifies for overtime and in what context and explaining how overtime is to be submitted, especially when two positions are worked in the same day

Objective 3: Determine if the training and tools provided to returning officers are adequate to support the efficient exercise of their authorities

2.3.1. Training

RO should have easy access to all the training and tools required to carry out the general election, including their financial responsibilities. Because ROs remain actively engaged with Elections Canada on a part-time basis during non-election periods, they are able to participate in training and other preparatory activities prior to a general election.

54% of ROs rated their training as a financial manager as both timely and useful; during interviews with the selected ROs, 68% stated that they were adequately trained and ready at the start of the election period. Newer ROs were less likely to feel prepared.

A variety of tools and resources are available to assist ROs in exercising their financial authorities (figure 6). ROs thought that the online tools ECDocs and Event+ were the most helpful in assisting them in managing their tasks. They referred to their RO Manual (88%), their FOs (72%) and the help desk, known as the Field Support Network (FSN) (64%), when they needed answers to financial management questions.

2.3.2. Information Systems

Surveys and interview comments repeatedly focused on dissatisfaction with some of the systems, particularly those that operated too slowly or required redundant data entry and had limited reporting capabilities.

The survey revealed that ROs rated the effectiveness of the overall suite of information technology and systems in helping to manage financial activities as only "fairly effective" (43%) or "somewhat ineffective" (29%). For example, 43% of RO survey comments and 49% of FO survey comments received about the effectiveness of systems specifically mentioned issues with ROPS. To supplement system capabilities, about half of ROs were found to have created one or more of their own reports, such as Excel workbooks, to manage their financial position.

Other systems may not have created specific problems because of their functionality, but the number of stand-alone systems contributes to general inefficiency in processes. As discussed in Objective 1, there are manual processes that require keying information (such as acquisition card transactions, timesheets), printing, signing, scanning, and uploading or emailing documents to headquarters. These documents are then downloaded at headquarters and stored on a shared network drive or other shared repository. Given that Elections Canada's field workforce is comprised almost entirely of very short-term workers who are employed only once every two to four years, having to learn multiple systems and performing manual tasks may be contributing to frustration and errors.

Recommendation 7

To streamline the field financial processes, it is recommended that management prioritize the renewal of the payment system. An ideal solution would feature a single user interface and integration between different functions (such as recruitment, payroll and automated timekeeping, financial transactions and the software SAP) with a goal to:

improve efficiency
provide better reporting
eliminate the possibility of workarounds
reduce errors and manual processes for field staff and polling-day workers

2.3.3. Support

In the event that systems or processes are unclear, support should be available to supplement any gaps in knowledge. The general help desk is FGOR's FSN, which ROs or FOs can access via email, phone or online self-service. Financial inquiries during the election period are routed directly to a separate call centre within FS, called FSN Finance.

ROs and FOs commented that they were frustrated with the FSN when they called with complex issues because the people they spoke to responded only with information from the manual. However, once the officer connected with a more specialized member of the Field Payment Team, they were happy with the quality of responses they received. Additional concerns about timeliness and completeness of communication were determined to be attributable, in part, to system design and were outside the scope of this audit. Management has been provided with specific comments from ROs and FOs regarding their experiences with the FSN.

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