INTERNAL AUDIT REPORT

Internal Audit Report

Audit of Overtime Management

Project 6B274
June 17, 2016

TABLE OF CONTENTS

1.0 EXECUTIVE SUMMARY

As one of the largest federal departments, Fisheries and Oceans Canada (DFO), including the Canadian Coast Guard (CCG), has over 10,000 employees across Canada in more than 38 occupational groups, with 85 percent of employees located outside of the National Capital Region. The Department’s mandate includes programs and services that are required to be available 24 hours a day, 7 days a week. This operational requirement creates complex resourcing and scheduling demands and as a result, overtime is often required to meet the Department’s operational needs and to respect service standards.

This assurance engagement was approved as part of the DFO Multi-year Risk-based Audit Plan for 2015-2018. The audit objective was to provide assurance that the Department’s governance, management processes, practices, and controls in place are adequate to ensure overtime activities are managed effectively, efficiently, and economically.

Based on the audit findings, the overall conclusion is that, while the Department has governance, management processes, practices and controls in place to ensure overtime activities are managed effectively, efficiently, and economically, there are opportunities for improvement in defining roles and responsibilities; providing consistent guidance and enhancing controls over overtime management. Recommended improvements are as follows:

  • Clearly define roles and responsibilities of those involved in the management of overtime, as well as setting out procedures and processes for initiating, approving and processing overtime;
  • Provide guidance to managers on what reports are available to them; what should be included as overtime expenditures; the key elements that should be considered when examining overtime reports, e.g., high earners; equitable distribution of overtime; trends; and when overtime should be brought to the attention of a more senior level of management;
  • Strengthen financial controls related to compensation (overtime) transactions per the TBS Directive on Financial Management of Pay Administration;
  • Re-enforce the requirement that all overtime be properly authorized and compensated for in accordance with Collective Bargaining Agreements; and
  • Include a reference in the revised DFO Guidelines on the Management of Overtime to state that the use of informal arrangements for compensating employees for overtime worked is not acceptable.

Management Response

Management is in agreement with the audit findings, has accepted the recommendations included in this report, and has developed a management action plan to address them. The management action plan has been integrated in this report.

Approvals

The Internal Audit Report “Audit of Overtime Management” was presented at the Departmental Audit Committee on June 17, 2016. The Report was recommended for approval by the Departmental Audit Committee and approved by the Deputy Minister.

2.0 BACKGROUND

As one of the largest federal departments, DFO, including the CCG, has over 10,000 employees across Canada with 85 percent of employees located outside of the National Capital Region. As the Department includes operational programs and services that operate 24 hours a day, 7 days a week, often from remote locations, the requirement and duration of overtime is unpredictable due to the nature of work carried out. Also, the complexity of overtime is augmented by the numerous collective agreements that the Department must abide by.

The operational requirement of the Department creates complex resourcing and scheduling demands and as a result, overtime is often required to meet the Department’s operational needs. The Department employs more than 38 different occupational groups, including many operational and technical groups. The ten largest occupational groups in terms of paid overtime represent almost 70 percent of all employees and over 90 percent of paid overtime expenditures.

The DFO Guidelines on the Management of Overtime, last updated in 2011, defines overtime as authorized work and extra duty performed by an employee in excess of the employee’s scheduled hours or work. Overtime may be authorized when management is satisfied that the work is essential and that it is the most appropriate and cost-effective solution to completing the required workload. It is the manager’s responsibility to ensure that all conditions prescribed for entitlement to overtime compensation under the terms of the relevant collective agreement are properly met. Each occupational group is bound by its corresponding collective agreement which has its own provisions stipulating how overtime should be applied.

For the processing of overtime worked and reporting of overtime usage, the Department uses a number of human resources management systems such as Public Services and Procurement Canada’ (PSPC) Compensation Web Applications (CWA) and the PeopleSoft Enterprise Human Resources Management System (PeopleSoft).

In addition, financial information systems are utilized in the Department’s management of overtime. PSPC’s Regional Pay System is used in the processing of overtime requests and DFO’s Salary Management Information System (SMIS) is used to record and track overtime expenditures. During 2015-16, the Department began using the Phoenix System that was implemented under the Pay Transformation Initiative. Phoenix, which replaced the Regional Pay System, is an automated self-serve system that processes pay related transactions, including overtime, for Departmental employees.

Because of the scheduling complexities involved in the CCG’s vessel operating requirements, the MariTime Fleet Management Systems (MariTime) is used to record overtime transactions that involve compensatory leave for sea-going personnel. Overtime transactions for sea-going personnel are also processed through the Regional Pay System, now the Phoenix System.

Adding to the complexities is the fact that approximately 25 percent of Departmental employees work for programs and services that operate from remote locations for which there is limited or no computer access.

Table 1 provides a high-level summary of the Department’s total overtime and salary expenditures for the Department over the fiscal years 2012-13 to 2014-15.

Table 1: Departmental Overtime and Salary Expenditures
Expenditures FY 2012-13 FY 2013-14 FY 2014-15
Paid Overtime $43,819,253 $46,288,467 $46,672,081
Salaries and Wages $784,526,683 $813,680,365 $726,488,358
Overtime as a percentage of Salaries and Wages 5.6% 5.7% 6.4%

Source: MRS Warehouse (Cube) Updated 2015-09-23

Due to the operational nature of their programs and services, the largest users of overtime during the period 2012-13 to 2014-15 are the CCG; Ecosystems and Fisheries Management (EFM); and Ecosystems and Oceans Science (EOS) (see Chart 1):

  • The CCG has experienced an increase in overtime usage during that period, due in part to its reorganization in 2012-13 and the consolidation of Marine Communications and Traffic Service (MCTS) Centres;
  • Ecosystem and Fisheries Management saw a slight decrease in 2014-15; and
  • Ecosystems and Oceans Science remained constant during the three year period.

Chart 1: Overtime Expenditures for top users of overtime

Chart 1: Overtime Expenditures for top users of overtime This chart illustrates that the largest users of overtime in DFO during the period 2012-13 to 2014-15 were the Canadian Coast Guard; Ecosystems and Fisheries Management Sector; and the Ecosystems and Oceans Science Sector.

Source: MRS Warehouse (Cube) Updated 2015-09-23

Overtime is categorized as operational and non-operational. Based on the definition used by the Chief Financial Officer (CFO) Sector in 2014 for an analysis of overtime usage, operational overtime was considered to be that overtime incurred by all of the CCG and the Conservation and Protection Branch of the EFM Sector. Based on this definition, operational overtime makes up approximately 80% of all overtime. A position put forward by the EOS was that operational overtime would also include overtime incurred by the regional science operations. This would increase the operational overtime to approximately 90%.

For 2014-15, the equivalent cash value of compensatory leave was approximate $13 Million (see Chart 2).

Chart 2: Compensatory overtime value for FY 2014-15

Chart 2: Compensatory overtime value for FY 2014-15 This chart indicates that for 2014-15, the equivalent cash value of compensatory leave earned was approximately $13M. The chart provides a breakdown of the compensatory leave used ($8.75M), as well as the value of unpaid and unused compensatory time (($4.25M) for the Canadian Coast Guard and DFO Sectors.

Source: MRS Warehouse (Impromptu) as of May 2015

3.0 AUDIT OBJECTIVE

The audit objective was to provide assurance that the Department’s governance, management processes, practices, and controls in place are adequate to ensure overtime activities are managed effectively, efficiently, and economically.

4.0 AUDIT SCOPE

Based on the results of the risk assessment carried out during the engagement planning phase, the audit team focused their examination on the following areas:

  • Governance;
  • Internal Controls; and
  • Financial & Human Resources Management.

The audit was carried out at National Headquarters (NHQ) with interviews conducted via teleconference with individuals in selected DFO and CCG regions and included representatives from the CCG, EFM and EOS due to the highly operational nature of their programs and services.

The audit examined overtime expenditures for fiscal years 2012-13 to 2014-15, with a sample selected from fiscal year 2014-15 for file review and analysis.

5.0 AUDIT APPROACH

The audit team carried out its mandate in accordance with Treasury Board’s Policy on Internal Audit and the Internal Audit Standards for the Government of Canada. The audit employed various techniques including a risk assessment of the audit entity, interviews with management and personnel across the regions, process mapping, file review, as well as reviews and analyses of documentation and information.

6.0 AUDIT FINDINGS

This section provides the observations and recommendations resulting from the audit work carried out. While the audit was conducted based on the lines of enquiry and audit criteria identified in the planning phase, this report is structured along the following main themes:

  • 6.1 Governance:
    • Roles and Responsibilities;
    • Guidance; and
    • Monitoring and Reporting.
  • 6.2 Controls;
  • 6.3 Risks – Human Resources Implications for Overtime; and
  • 6.4 Overtime Initiatives.

For conclusions by audit criterion, please refer to Appendix A.

Based on the audit work performed and our professional judgment, the risk associated with each observation was rated using a three-point scale. The risk ranking (high, moderate, low) is based on the level of potential risk exposure we feel may have an impact on the achievement of Fisheries and Oceans Canada objectives, and is indicative of the priority Management should give to the recommendations associated with that observation. The following criteria were used in determining the risk exposure level:

risk definitions
High Controls are not in place or are inadequate.
Compliance with legislation and regulations is inadequate.
Important issues are identified that could negatively impact the achievement of program/operational objectives.
Moderate Controls are in place but are not being sufficiently complied with.
Compliance with central agency/departmental policies and established procedures is inadequate.
Issues are identified that could negatively impact the efficiency and effectiveness of operations.
Low Controls are in place but the level of compliance varies.
Compliance with central agency/departmental policies and established procedures varies.
Issues identified are less significant but opportunities that could enhance operations exist.

6.1 Governance

Governance over an activity includes a combination of processes and structures implemented to manage and monitor that activity or function. A proper governance structure is key for the management of an activity and includes, among other things, clearly defined roles and responsibilities; appropriate guidance; and, monitoring and reporting on the activity.

Observations 6.1.1
Observations – Roles and Responsibilities
Moderate 6.1.1 Roles and responsibilities for all those involved in the management of overtime are not clearly defined and communicated.

In accordance with the Treasury Board Secretariat’s Directive on Pay Administration, the chief financial officer is responsible for the effectiveness of the financial controls related to pay administration and payroll accounting, as well as payment requisitions. The head of human resources is responsible for the compensation policies and function. In DFO, the CFO and the Assistant Deputy Minister (ADM), Human Resources and Corporate Services (HRCS) share the responsibility for pay administration.

DFO’s overtime management process involves multiple groups, such as the CFO Sector; HRCS; and individual Responsibility Centre (RC) managers and employees. Roles, responsibilities and accountabilities for the management of overtime are defined, in general terms, in various documents, internal and external to the Department. With the introduction of the Pay Transformation Initiative, some of these documents, such as the DFO Financial Policy, No 423: Pay Administration are no longer applicable.

The DFO Guidelines on the Management of Overtime state that it is the manager’s responsibility to ensure that all conditions prescribed for entitlement to overtime compensation, under the terms of the relevant collective agreement, are properly met. The Guidelines do not identify who should be exercising an oversight role or providing guidance in the overtime process.

DFO national and regional intranet sites set out roles and descriptions for certain groups involved in the overtime management process, such as Labour Relations, but they are in general terms only and do not give the extent of their involvement in overtime management or processing.

Roles and responsibilities have changed with the implementation of the Pay Transformation Initiative. For example, the DFO Guidelines on the Management of Overtime make reference to Compensation Advisors; however, those positions have been eliminated and no longer play a role in the overtime process.

With the transformation of pay administration in the Department, it is important that staff is aware of the roles, responsibilities and accountabilities with respect to overtime management. With information on roles and responsibilities coming from a number of sources, within the Department and externally, clear communication of the respective duties of stakeholders involved in the overtime management process would enhance the ability of key players to carry them out.

Observations 6.1.2
Observations Overtime - Guidance
Moderate 6.1.2 There is limited guidance available for employees and managers regarding the management of overtime within the Department thereby increasing the risk of misinterpreting the terms of collective agreements and inconsistent treatment of employees.

In line with the TBS Directive, DFO’s Guidelines on the Management of Overtime defines overtime as authorized work and extra duty performed by an employee in excess of the employee’s scheduled hours of work. However, rules and interpretations of overtime for employees within different occupational groups vary, especially between operational and non-operational groups. With some 38 collective agreements to administer and with limited guidance, managers are faced with a formidable task. Interviews during the audit indicated that managers are often left to rely on their own experience or that of their administrative staff to help in processing overtime transactions. The DFO Guidelines are limited in the extent of guidance they provide to managers and employees and do not address key steps in the processing of overtime, such as, pre-authorization, overtime approval, as well as monitoring, and reporting overtime. For example:

  • There is no detailed guidance on how overtime requests should be submitted in different situations;
  • The Guidelines state that all overtime must be authorized in advance by the appropriate manager. The audit found that there are various mechanisms to approve overtime in advance. Some guidance on what is acceptable as pre-approval of overtime is required; and
  • The Guidelines do not provide guidance on the steps that RC managers must carry out to assure themselves that overtime had in fact been worked in order to sign-off under Section 34 of the FAA. In the past, an audit trail existed through timesheets or log books but with the introduction of the Pay Transformation Initiative, employees enter overtime directly into the system. DFO’s Directive on Account Verification outlines procedures to be followed for certifying under Section 34 but there is no specific reference to overtime transactions.

In the absence of detailed guidance at the national level, some sectors and branches at Headquarters and in the regions have developed their own guidance to support the management of overtime. For example, the Pacific Region’s Conservation and Protection Branch developed guidelines on overtime, including the principles and compensation process, and circulated it to employees. Additionally, the Newfoundland and Labrador Region’s Science Branch has developed their own overtime guidelines.

For the CCG, protocols have been established for individual Marine Communications and Traffic Service (MCTS) Centres that outline processes for overtime management, while in other areas, guidance has not been formalized.

The creation of regional guidance documents, while good initiatives, highlights the need for national guidance that meets the needs of National Headquarters and regions to ensure the consistent management of overtime as well as provide for the equitable treatment of employees. While creating a guidance document that covers all potential scenarios of overtime situations may not be feasible or practical, some general guidance on the main aspects of overtime would be appropriate.

Observations 6.1.3
Observations – Monitoring and Reporting
Moderate 6.1.3 There is a lack of clarity on what is to be included when reporting on overtime expenditures.

Monitoring of overtime is taking place but not on a consistent basis.

Monitoring of overtime is taking place at varying levels across the Department but primarily at the RC manager level. As a general practice, overtime expenditures are reviewed as part of the overall monitoring of salary budgets.

Overtime expenditures are included in the monthly departmental financial reports that are generated by the Department’s Management Reporting System (MRS) and are available for RC managers. These reports contain salary expenditures, including overtime information for individual employees but it is up to individual managers to access these reports. In addition, the Chief Financial Officer (CFO) Sector has developed overtime-specific reports for RC managers; however, these reports are not consistently made available across the Department.

Guidance could be provided to managers on what reports are available to them from the MRS, as well as key areas that should be considered when reviewing reports, such as: identifying high overtime earners; ensuring that there is equitable distribution among employees; and identifying employees who may potentially be adversely affected from working considerable amounts of overtime.

Guidance could also be included on when overtime usage should be brought to the attention of a higher level of management, such as when an individual employee reaches a certain threshold in the amount of overtime earned.

Accessibility and Reliability of Data

Concerns were identified during the audit with the accuracy of the overtime data in the various systems used for processing overtime transactions as well as the ability to access the data in the systems. To effectively monitor overtime, reporting of overtime must be accurate and consistent.

The audit found that information pertaining to overtime transactions in SMIS cannot be easily reconciled to systems involved in overtime processing as they do not record overtime transactions consistently. For example, PeopleSoft and RPS capture the actual dates of overtime transactions, whereas SMIS reporting tools only include a date range.

Although most employees have access to a computer, some of the Departmental programs and services operate from locations for which there is limited or no computer access. Thus, although the Department uses various information systems such as CWA and PeopleSoft for the processing of overtime, many transactions within the Department are manually processed.

Due to the nature of CCG’s operations, certain CCG vessels are in operation 24 hours a day, 7 days a week. Therefore, certain sea-going personnel, mainly Ships’ Crew and Ships’ Officers, have different types of work schedules such as the Lay-Day Operational Crewing System. The Lay-Day system is used by sea-going personnel who are at sea for extended periods of time.

CCG has separate processes for recording and cashing out Lay-Days versus cashing out Compensatory Leave, which is earned by working overtime or earning overtime premiums.

CCG sea-going personnel also have their overtime information entered in to the MariTime System. Employees submit their paper overtime forms to their Regional Marine Unit (Fleet/Operations Branch) for review and entry into the system prior to forwarding them to their timekeepers (newly created position) for input into the Phoenix System.

Furthermore, after the timekeepers input the approved overtime into the Regional Pay System (now Phoenix), there is no subsequent feedback to the Regional Marine Unit to reconcile the data. These factors contribute to the MariTimes System’s level of data integrity and the potential impact on CCG’s operational planning, scheduling, and costing of sea-going personnel.

Lay-Day expenses are maintained separately from overtime expenses when recorded in the CCG’s MariTime System and the Regional Pay System. Lay-Days are days off work with pay to which an individual becomes entitled by working on the Lay-Day Crewing System. Lay-Days are considered a part of the work cycle and as such, are not considered as a day of leave with pay nor are they considered as earned overtime or compensatory time off.

The value of accumulated Lay-Days, that had been cashed out, for sea-going personnel had been included in Departmental overtime expenditures in the Salary Management Information System (SMIS). This resulted in some CCG employees being identified in the listing of the Department’s top overtime earners when, in fact, they had earned time through the use of the Lay-Day system. SMIS reports included approximately $4 million of Lay-Day expenditures in overtime amounts for fiscal year 2014-15 (see Chart 3).

Another factor that impacts the accuracy and consistency of information is the lack of clarity over what constitutes overtime. In addition to Lay-Day transactions, there is a lack of clarity on whether other items should be included in the reporting of Departmental overtime. These items include allowances such as stand-by; call-back; and shift premiums. This has led to inconsistent and inflated reporting of overtime.

Chart 3: Paid Overtime by Line Object: Overtime expenditures by line object

Chart 3: Paid Overtime by Line Object: Overtime expenditures by line object This chart illustrates a breakdown of payments of overtime and other categories of expenditures, such as pay for Lay days and standby allowances. The purpose of the chart is to demonstrate that all expenditures reported as overtime in the Salary Management Information System (SMIS) are not necessarily overtime.

Source: MRS Warehouse (Cube) Updated 2015-09-23

Recommendation and action plan
Recommendation Management Action Plan
R-1 The ADM, HRCS, in consultation with the Chief Financial Officer, should update the DFO Guidelines on the Management of Overtime to:

The ADM, HRCS will:

1.1
clearly define roles and responsibilities of those involved in the management of overtime, as well as setting out procedures and processes for initiating, approving and processing overtime; and
1.1
Provide updated guidelines on management of overtime.
1.2
provide guidance to managers on what reports are available to them; what should be included as overtime expenditures; the key elements that should be considered when examining overtime reports, e.g., high earners; equitable distribution of overtime; trends; and when overtime should be brought to the attention of a more senior level of management.
1.2
Update the DFO Compensation Services Guide.

HRCS will disseminate any information regarding overtime provided to them by the centralised enterprise services (PeopleSoft & Phoenix).
Office of Primary Interest: ADM, HRCS
Due Date: October 2016 and ongoing

6.2 Controls

Both the Treasury Board Secretariat and the DFO directives on Account Verification provide guidance on the application of controls. In accordance with the DFO Directive, the Director General, Financial and Materiel Management Operations, is responsible for providing leadership and direction for account verification.

There are key control activities in place for overtime:

  • Pre-authorization of overtime by a manager;
  • Section 32 of the Financial Administration Act (FAA) – Availability of funds;
  • Section 34 of the FAA – Manager’s certification that overtime claimed is accurate and had been authorized. It is also a certification that the overtime is in compliance with the appropriate collective agreements; and
  • Section 33 of the FAA – certification that the payment of overtime is a lawful charge against the appropriation.
Observations 6.2.1
Observations - Controls
Low 6.2.1 Some controls are in place over the payment of overtime claims; however guidance and clarification are required to provide assurance that they are consistently applied.

Pre-Approval of Overtime

DFO’s Guidelines on the Management of Overtime states that “All overtime must be authorized in advance by the appropriate manager who must ensure that the work is performed. This requirement was reiterated in sector and regional overtime guidance documents and was clearly understood by all individuals that the audit team interviewed during the course of the audit. The audit did not identify any significant findings with respect to pre-approval of overtime for the sample items examined.

The audit found that there is no one standard process or practice that managers follow to provide for pre-authorization of individual transactions. Some branches at NHQ and in the regions have put in place various tools to pre-authorize the use of overtime.

Some of the mechanisms considered as pre-authorization of overtime include:

  • Trip Report (Science) – this applies to Science staff that go aboard vessels to carry out scientific work such as surveys. It specifies the hours of work for the employees when at sea. It specifically states that hours over and above what is in the trip report must be authorized.
  • Pre-approval/Rationale (Science) – A form that must be approved, before overtime can be worked, including a rationale as to why it is necessary;
  • E-mail approval of overtime; and
  • Project Overtime - If overtime is incurred as part of a project, then project approval implies pre-authorization of overtime (e.g., CCG work related to new communication control system).

Given the nature of the work carried out within the Department, particularly by CCG and Conservation and Protection staff, it is understood that, it may not always be possible or practical to obtain pre-authorization of overtime either verbally or in writing.

However, there are risks associated with pre-authorization of overtime not being obtained or documented. These could include miscommunication over the amount of overtime claimed or whether or not the overtime was actually required. In addition, there is always the risk of injury on duty of the employee during periods of unauthorized overtime.

FAA Section 34 Certification

The Treasury Board Secretariat Directive on Account Verification requires that a “sufficient audit trail” exist to support the accuracy of transactions before certifying them under section 34 of the FAA.

Further to the TBS Directive, DFO’s Directive on Account Verification states that “The requirements to verify the individual payment transactions is to ensure that there is “auditable evidence” demonstrating that account verification has taken place and has been certified by an individual with delegated financial signing authorities pursuant to section 34 of the FAA and as per the DFO Delegation of Authorities instrument.

For the sample items examined during the audit, there was evidence that Section 34 of the FAA had been certified by a person with appropriate authority.

FAA Section 33 Payment Authority

Payments for overtime in cash are made from Departmental funding through the authority of section 33 of the FAA. Section 33 is signed by a Financial Officer with delegated authority. For the sample items examined during the audit, there was evidence that Section 33 was signed off by a person with delegated authority.

It was explained to the audit team that there is no verification of overtime transactions prior to payments being approved since there are controls embedded into the system, additional verification is not required.

DFO has a National Account Verification Plan that was approved by the CFO in 2012. Transactions are categorized as high, medium and low risk. Depending on the risk rating, expenditures are subject to a pre or post payment review. Transactions related to compensation are excluded from the entire account verification process. However, other departments include compensation related payments in their account verification process.

It was explained that the review of compensation transactions is under the functional responsibility of Human Resources and Corporate Services. While the review of compensation transactions may be under the functional responsibility of Human Resources and Corporate Services, the TBS Directive on Financial Management of Pay Administration (under which overtime is included) states that the CFO is responsible for the effectiveness of the financial controls related to pay administration and payroll accounting, as well as payment requisition. Given that the authority for signing under section 33 of the FAA has not been delegated to any individuals outside of the CFO Sector, one would expect that overtime transactions would be subject to the payment verification requirements set out in the National Verification Plan.

Recommendation and action plan
Recommendation Management Action Plan
R-2 The CFO should strengthen financial controls related to compensation (overtime) transactions per the TBS Directive on Financial Management of Pay Administration. R-2 The CFO, agrees with the recommendation and will strengthen its financial controls by developing a Pay control framework which will include a risk based approach to review compensation (overtime) transactions.
Office of Primary Interest: R-2 – Chief Financial Officer
Due Date: December 31 2016

6.3 Risks - Human Resources Implication for Overtime

DFO’s Corporate Risk Profile (CRP) provides a summary of key risks that can potentially impact the operations of the Department. The CRP is evidence‐based; with input from several areas of risk management from across the organization; and in‐depth analysis of risk information at the program, regional, and corporate levels. The 2015-16 CRP identified two key risks that influence overtime management in the Department:

  • Marine Sector and Specialized Profession Recruitment Risk; and
  • Recruitment and Retention Risk.

In addition, a third area of risk that impacts overtime management was identified during the audit, that being unreported overtime.

Observations – Risk
Observations – Risk
Moderate Corporate Risk Profile

The DFO Corporate Risk Profile 2015-16 states that two Human Resources (HR)-related risks for the Department are Marine Sector Specialized Profession Recruitment Risk and Recruitment and Retention Risk. Some controls to manage these risks have been identified in the CRP. These include formal career progression programs such as the Fishery Officer Career Progression Program and initiatives led by the Office of the Comptroller General as well as recruiting through the CCG College.

The Department’s HR planning has a large potential impact on overtime management. Currently, a new departmental HR planning approach is in progress and a draft Interim Report on the Strategic Workforce Planning was developed to identify the most significant workforce and workplace issues within the sectors and regions to identify their key positions, roles, and corresponding succession plans. Other DFO and CCG HR planning documents such as the DFO Human Resources Environment Scan and the CCG Integrated Business and Human Resources Plan (IBHRP) emphasize the importance of recruitment and retention of competent and qualified resources. In particular, the CCG IBHRP includes a section on effective workforce planning, which specifies the classifications which have the highest rate of attrition.

Despite having several recruitment and retention strategies in place, risks to specialized recruitment and retention remain. While overtime remains a short-term mitigation strategy to staffing shortages, longer-term solutions need to be developed to address specialized recruitment and retention risks. By 2020, a third of the indeterminate workforce (31%) would be eligible to retire with the most at risk groups being Scientific Research (SE), Executives (EX), SC, EG, SO and GT Footnote 1. Recruitment of sufficient qualified personnel is vital for the delivery of the Department’s programs and services and to reduce the Department’s reliance on overtime.

Unreported Overtime

In addition to the risks identified in the Corporate Risk Profile, a third area was identified during the audit. Interviews revealed that some overtime being worked by employees across the Department was not always being reported.

Although it is not possible to determine the magnitude of unreported overtime usage with any level of certainty, the 2014 Public Service Employees Survey (PSES) results indicated that 25 % of DFO and 17 percent of CCG respondents did not feel they could claim overtime compensation (in money or in leave) for the overtime hours they worked, which is actually lower than the Public Service average of 27%.

The following tables show the percentage of employees in each region who felt they could not claim overtime. As the tables indicate, there are wide fluctuations between CCG and DFO and particularly among DFO regions.

Table 2 - Percentage of employees in DFO regions who felt they could not claim overtime
NHQ NL Maritimes Gulf Quebec C&A Pacific
32% 21% 34% 26% 17% 36% 38%
Table 3 - Percentage of employees in CCG regions who felt they could not claim overtime
NHQ Atlantic C&A Western
19% 19% 12% 21%

There are a number of reasons why overtime is sometimes not claimed and reported:

  • An employee’s commitment to the work that they do. This is supported by the results of the 2014 PSES which indicated that 93 percent of all employees, DFO and CCG, were willing to put in the extra effort to get the job done;
  • Informal arrangements are sometimes made between managers and employees to compensate employees for time worked with time off; and
  • Some employees may not feel that they are able to claim compensation for their overtime worked, as evidenced by the PSES results, and consequently do not submit an overtime claim even though they may have worked the extra time.

Failing to report overtime or entering into informal arrangements puts both the employee and the Department at risk. These risks include:

  • being in contravention of the provision of collective agreements;
  • having no record of an employee being authorized to work overtime in the event of an on the job injury;
  • having no record of an employee being on authorized leave if time off is taken as a result of an informal arrangement; and
  • having no records to monitor whether employees are working excessive hours which may affect the health and safety of not only the employee but his/her co-workers.

In addition, by not reporting overtime, the amount of time it takes to carry out Departmental activities is understated. This impacts the planning for future years and the potential need for additional resources.

There are limited ways to mitigate the risk of unreported overtime. If individuals want to work extra hours without compensation, it is difficult to stop them but there are steps that can be taken to discourage this practice.

It is the responsibility of the manager to monitor when employees are working and ensure that the provisions of the collective agreements are being adhered to. In one region, a Regional Director, when providing overtime guidance to employees, took the opportunity to remind them that “black booking” overtime is not an appropriate practice and the Collective Bargaining Agreement should be followed.

Recommendation and action plan
Recommendation Management Action Plan

R-3 The ADM, HRCS, in consultation with the Chief Financial Officer, should:

3.1 re-enforce the requirement that all overtime be properly authorized and compensated for in accordance with the Collective Bargaining Agreements; and

3.2 include a reference in the revised DFO Guidelines on the Management of Overtime to state that the use of informal arrangements for compensating employees for overtime worked is not acceptable.

The ADM, HRCS will:

3.1 Provide guidance to managers on the controls for proper overtime management.

3.2 The revised DFO guidelines on the management of overtime will state that the use of informal arrangements for compensating employees for overtime worked is not acceptable.

Office of Primary Interest: R-3 – ADM, HRCS
Due Date: October 2016

6.4 Overtime Initiatives

Observations
Observation
6.4.1 Some sectors and regions have identified a number of practices to reduce or at least provide for greater controls over their overtime costs.

Conservation and Protection

Conservation and Protection has put in place a number of initiatives that enhance controls over overtime as well as help minimize overtime expenditures.

  • Some collective agreements allow for employees to work shift work. Conservation and Protection branches in the regions operate on a shift work schedule for their Fishery Officers. Rather than Fishery Officers working on a day schedule, they work on a shift schedule during key times of the year, such as when the risk of illegal activities is greatest. This means that employees could work nights or during the weekend. This provides for savings in overtime in that Fishery Officers are scheduled to work when the need is greatest.
  • Another practice being used by Conservation and Protection in the Pacific Region is a layered approval of overtime. This is known as the 6-8-10 rule whereby as overtime is utilized and accumulated, the level of oversight and approval is sent to a higher supervisory level as employees reach a designated dollar value threshold (up to $6.0K – approval by Field Supervisor; up to $8.0K - Detachment Supervisor; up to $10.0K - Area Chief; and over $10.0K approval at the C&P Regional Director level). This enhances controls over overtime, as well as raises awareness for management as to who is working overtime and the amount of overtime they are claiming.
  • In April 2015, a reminder was sent to Pacific C&P staff reminding them of the regional guidelines for overtime. While there was no change to the guidance issued in the previous year, the reminder helped to re-enforce the regional guidance on overtime.

Pre-approval of Overtime (Newfoundland and Labrador Region - Science Branch)

  • The overtime guidelines prepared by individual branches in the regions all had the requirement for pre-approval of overtime. The guidelines for overtime by the Science Branch in the Newfoundland and Labrador Region were particularly well stated and even provided specific instructions of what documentation would be sufficient as evidence of pre-approval. The Guidelines went on to say that “On occasions when circumstances are such that written pre-authorization is not possible, verbal pre-authorization must be granted by the Division Manager who is then responsible for immediately completing an “Overtime Requirement and Authorization” form indicating that verbal approval has been given including the date and time of approval.

MCTS Overtime Protocols

  • The audit found that in the CCG, overtime protocols were in place at MCTS Centres. These protocols were designed to make the distribution of overtime equitable for qualified MCTS Centre staff. This policy ensures compliance with the Collective Agreement Article 21.10 (in this case the Radio Operators (RO) agreement) which states:

    “the employer shall make every reasonable effort to allocate overtime work on an equitable basis amongst readily available qualified officers”.

The examples noted above are provided for their potential applicability to other areas in the Department.

7.0 AUDIT OPINION

Based on the audit findings, our opinion is that while the Department has governance, management processes, practices and controls in place to ensure overtime activities are managed effectively, efficiently, and economically, there are opportunities for improvement in defining roles and responsibilities; providing consistent guidance; and enhancing controls over overtime management.

8.0 STATEMENT OF CONFORMANCE

In my professional judgment as Chief Audit Executive, sufficient and appropriate audit procedures have been conducted and evidence gathered to support the accuracy of the opinion provided and contained in this report. The extent of the examination was planned to provide a reasonable level of assurance with respect to the audit criteria. The opinion is based on a comparison of the conditions, as they existed at the time, against pre-established audit criteria that were agreed on with Management. The opinion is applicable only to the entity examined and within the scope described herein. The evidence was gathered in compliance with the Treasury Board Policy and Directive on Internal Audit. The audit conforms with the Internal Auditing Standards for the Government of Canada, as supported by the results of the Quality Assurance and Improvement Program (QAIP). The procedures used meet the professional standards of the Institute of Internal Auditors. The evidence gathered was sufficient to provide senior management with proof of the opinion derived from the internal audit.

APPENDIX A – AUDIT CRITERIA

Based on a combination of the evidence gathered through documentation examination, analysis and interviews, each of the audit criteria listed below was assessed and a conclusion for the audit criteria was determined using the following definitions:

Conclusion on Audit Criteria Definition of Opinion
1 Criteria Met – Well Controlled Well managed or no material weaknesses noted, controls are effective.
2 Criteria Met with Exceptions – Controlled Requires minor improvements.
3 Criteria Met with Exceptions – Moderate Issues Requires improvements in the areas of material financial adjustments, some risk exposure.
4 Criteria Not Met – High Impact – Significant Improvements Needed Requires significant improvements in the area of material financial adjustments, serious risk exposure.

The following are the audit criteria and examples of key evidence and/or observations noted which were analyzed and against which conclusions were drawn. In cases where significant improvements and/or moderate issues were observed, these were reported in the audit report.

Line of Enquiry 1 – Governance
Audit Criteria Conclusion on Audit Criteria Examples of Key Evidence/ Observations
Criterion 1.1: Adequate oversight and governance functions are in place to ensure the sound management of overtime throughout the Department. 3 6.1.
Criterion 1.2: Accountability, roles, and responsibilities of key stakeholders for the management of overtime are clearly defined, communicated, and understood. 3 6.1.1
Criterion 1.3: Departmental policies and guidelines that are aligned with government-wide policies and collective bargaining agreements are established, accessible, communicated, and understood by key stakeholders. 3 6.1.2
Line of Enquiry 2 – Internal Controls
Audit Criteria Conclusion on Audit Criteria Examples of Key Evidence/ Observations
Criterion 2.1: Overtime is planned, scheduled, pre-approved, and approved in compliance with governmental and Departmental policies, and collective agreements. 2 6.2.1
Criterion 2.2: The use of overtime is consistently reported, tracked, and monitored across the Department to support informed decision-making. 3 6.1.3
Line of Enquiry 3 – Financial & Human Resources Management
Audit Criteria Conclusion on Audit Criteria Examples of Key Evidence/ Observations
Criterion 3.1: Financial controls for overtime processing are in place to ensure compliance with government-wide and Departmental overtime policies and guidelines, as well as collective bargaining agreements. 2 6.2.1
Criterion 3.2: The Department has adequate resource strategies to ensure sufficient qualified personnel are available to address resource and competency needs for program or service delivery. 2 6.3
Criterion 3.3: The Department’s HR strategies consider alternatives to overtime to manage available resources while taking into account total salary costs. 2 6.3