Introduction – Audit of Supply Inventory Management

Authority for the Audit

The mission of the Internal Audit function of the Chief Planning and Audit Officer Branch is to provide independent and objective assurance services. These services are designed to add value and improve operations at Elections Canada (EC). Internal Audit helps EC accomplish its objectives by implementing a systematic, disciplined approach to assessing and improving the effectiveness of risk management, control and governance.

The audit of EC's supply inventory management is part of the risk-based audit plan for the 2021–2023 period. The Audit Committee recommended the approval of this audit to the Chief Electoral Officer in February of 2021.

This internal audit is a follow-up to annual audits performed by the Office of the Auditor General of Canada (OAG). It fulfills a commitment that the Chief Electoral Officer made in June 2022.

Context

EC's core responsibility is to prepare for, deliver, and report on federal elections, by-elections and referendums in accordance with the legislative framework, while ensuring integrity throughout the electoral process and promoting regulatory compliance.

To be in a position to deliver an electoral event at any time, EC must maintain a certain level of readiness. This includes being ready to provide the necessary material inventory required for poll administration during a general election or by-election.

The Distribution Centre and the material management team are responsible for the management and administrative control of electoral materials, from planning, procurement, and production to receipt, assembly, distribution, recovery, and disposal. These teams provide a critical service to the 338 electoral districts across Canada and oversee an inventory of approximately 345 items, with an average volume of approximately 12,000 m3 during the cycle of a general election.

As of October 2022, the Distribution Centre employs four indeterminate staff and approximately 20 term employees. In addition, nearly 20 business owners from various branches or divisions within the Electoral Events and Innovation sector are responsible for the management of electoral materials, including acquisition, revision and lifecycle.

It should be noted that Canada's minority government environment, which has been in place since 2019, poses significant challenges in managing electoral materials, as do the disruptions and shortages currently affecting global supply chains.

Legislative and Policy Requirements

EC is governed by the Canada Elections Act. This audit essentially focuses on sections 113, 114 and 115 of the Act, which deal with the delivery of election materials to returning officers; and on section 119, which describes the election materials to be provided to election officers.

In addition, EC is subject to Treasury Board policies. Relevant to this audit is the Policy on the Planning and Management of Investments, with the following expected outcomes:

The assets and services are well-managed.
Decisions are based on full lifecycle costing and demonstrate value for money and sound stewardship.
Governance and oversight are effective.
Integrated and collaborative practices are in place.
The workforce has the necessary knowledge, experience and skills.

As an agent of Parliament, EC is responsible for monitoring and ensuring compliance with policy requirements and responding to all instances of non-compliance.

Scope

The scope of this audit included reviewing the governance mechanisms in place, the internal control over supply inventory counts, material management decisions (including procurement, lifecycle and divestment), and the oversight mechanisms supporting supply inventory management. The audit was limited to the management of inventory, electoral materials and other items in the SMS, and did not include financial statements or contracts with vendors.

Approach and Methodology

The audit methodology was guided by the Government of Canada's Policy on Internal Audit and related policy instruments, which include conducting audits in accordance with the Institute of Internal Auditors' Standards for the Professional Practice of Internal Auditing.

The audit was conducted between June and November 2022. Scheduled visits were made to the warehouse at 440 Coventry Road in Ottawa on October 5, 6, 7, and 12, 2022, when a site inspection and a physical count of 30 items were conducted. An electronic and printed version (both from the SMS) of the inventory at this warehouse and a printed version of the inventory stored at Royal Moving and Storage company in Ottawa were reviewed.

The auditor audited a randomly selected sample of 30 miscellaneous items that included stationery (envelopes and letterhead), forms, ballots, flyers, posters, videos, flash drives, training books, plastic and paper bags, manuals and booklets, voting booths, promotional items, and first aid kits.

The auditor also conducted 16 interviews between October 5 and November 16, 2022, with senior officers, managers, team leaders, business owners (assistant and associate directors), and warehouse workers, all of whom had responsibilities related to inventory and electoral materials.

Following the conclusion of the audit fieldwork and analysis, recommendations for management were developed in areas where opportunities for control improvements were identified.

The detailed list of audit objectives and criteria can be found in Appendix A. Appendix B presents the selected sample and the results of its inventory, as well as the discrepancies noted between the physical count and the data recorded in the SMS. It also presents financial discrepancies.