ADMINISTRATIVE REPORT
Date: November 27, 1995
TO: Vancouver City Council
FROM: Director of Operations Support
SUBJECT: Staffing Needs - Internal Audit Division
RECOMMENDATION
THAT a regular full-time auditor position be established in the
Internal Audit Division, at an estimated annual cost of $65,200,
subject to classification by the General Manager of Human Resource
Services. The position is to be funded by a corresponding reduction
in the contract services account in the department's budget.
GENERAL MANAGER'S COMMENTS
The General Manager of Corporate Services RECOMMENDS approval of
the foregoing.
COUNCIL POLICY
City Council, on February 3, 1994, resolved that during the term of the
1994-1996 Budget Management Program, any proposed increases in program
and/or service levels be offset by corresponding spending reductions
elsewhere in the City's operating budget, or increases in non-taxation
revenues, subject to Council's discretion.
PURPOSE
Several weeks ago we reported to Council on a number of transitional
changes in the senior management structure of Corporate Services. That
report indicated Council would be receiving subsequent reports on
further changes to the organization structure of Corporate Services
arising from the process improvement work currently taking place.
This present report reflects our continuing work in that direction and
recommends the establishment of a permanent full-time auditor position
to deal with appropriate internal control safeguards for the City's
revised business procedures and practices associated with our Better
City Government initiative.BACKGROUND
As part of the 1994-1996 Budget Management Program, Council approved the
reduction and refocusing of the Internal Audit Division. The internal
audit staff are now directing their efforts to high risk and high
priority areas, with operating departments being responsible for
maintaining adequate internal control procedures over their ongoing
operations. Funds have been retained to pay for the use of external
resources, wherever it is appropriate, to supplement the work of city
staff. All these changes have been implemented and the Internal Audit
Division is now staffed by a team of two auditors.
DISCUSSION
At the time of the Budget Management actions, business systems in the
City were reasonably stable, with only a small number of changes made at
any time. Under these conditions, it was feasible to execute the
Internal Audit function with two staff, as stable systems require less
attention. However, on May 18, 1995, Council approved a package of four
reports dealing with initiatives to improve City services. One of the
four reports, the Better City Government - Next Steps, recommended a
work program which involves the review of 15 major processes in the
City. It is expected that as the result of these reviews, the ways the
City conducts its business will be radically changed, moving away from a
focus on internal control and more to a strong emphasis on improved
customer service. Because of these changes, many of the internal control
procedures used in City business processes will have to be re-designed
in order to allow for re-aligned responsibilities and new ways of
working. Re-designing control systems must be done in conjunction with
the re-design of the business process.
Corporate Services is one of the first business groups that embarked on
the re-engineering review of its operations. Since 1993, extensive
reviews have undertaken in Purchasing, Accounts Payable, Revenue &
Treasury, and Payroll. Our experience with the changes implemented to
date is that most processes can be improved, but improvements inevitably
change the internal control procedures and structures. This can range
from reducing the number of approvals required to eliminating redundant
record keeping.
It is important that during the change process, before steps are
eliminated from the current procedures, careful consideration be given
to ensure that an adequate control mechanisms are built into the new
procedures to safeguard the City's assets. These new procedures will
include methodologies to assist staff in assessing the adequacy of the
proposed actions and the controls that should be in place in order to
meet the business objectives. This is an on-going need which requires
the technical knowledge and skill of an experienced auditor or
accountant, and at the present time, cannot be performed either by the
redesign teams or by the existing staff resources in the Internal Audit
Division. The most cost effective solution is to establish an additional
auditor position in the division which will have the sole responsibility
to undertake this work, rather than using external contract services.
The cost of the position, estimated to be $65,200, can be funded within
the existing departmental budget, with a corresponding reduction to the
contract services budget.
CONCLUSION
The Better City Government program will lead to a significant number of
changes to City business processes. It is essential to ensure that
cost-effective internal control procedures are built into the new
systems. The level of activity in this area was not contemplated at the
time of the Budget Management Program when the current Internal Audit
office was reduced to two staff. In order to effectively deal with this
emerging issue, the General Manager of Corporate Services recommends
that a full-time auditor position be established, with funds to be taken
from offsets within the existing budget.
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