Audit of Payments in Lieu of Severance Pay. Archived information. Archived information is provided for reference, research or recordkeeping purposes. It is not subject to the Government of Canada Web Standards and has not been altered or updated since it was archived. Please contact us to request a format other than those available. Prepared by. Internal Audit and Evaluation.
Department of Finance Canada. Approved by the Deputy Minister of Finance on the recommendation of the. Audit and Evaluation Committee on March 1, 2.
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Table of Contents. Executive Summary. Background. Audit Objective and Scope Statement of Conformance and Audit Approach. Conclusion. Findings by Audit Criteria Recommendation and Management Action Plan. Appendix A - List of Departmental Employees Interviewed. Appendix B - Key Information Reviewed. Appendix C - Sampling Methodology.
Appendix D - Members of the Audit Team Executive Summary The Government of Canada’s decision to eliminate the accrual of severance benefits for resignation or retirement was first announced in Budget 2. Budget 2. 01. 2. The policy rationale for this elimination was to bring “public service compensation more in line with the private sector, where severance benefits for voluntary separation are typically not offered.”To implement this policy, a payout strategy was established to allow employees the option of 1) an immediate full cash- out of their accrued severance to date, 2) deferring their severance payout until retirement or resignation, or 3) an immediate partial payment of their accrued severance, with the remainder to be paid upon retirement or resignation. At the Department of Finance, the Compensation and Benefits Unit (C& B) within the Human Resources, Security, and Planning Directorate, Corporate Services Branch is responsible for processing payments in lieu of severance pay in accordance with the employee’s chosen option. The objective of the audit was to provide reasonable assurance that payments in lieu of severance pay were made accurately and complied with relevant agreements and policies. The audit concluded that payments in lieu of severance pay were made accurately and complied with relevant agreements and policies. In addition, it is worth noting the proactive approach taken by C& B to process the payments in a timely fashion. This approach compared favourably with the practices noted in some other departments.
Background The Audit of Payments in Lieu of Severance Pay was approved as part of the Department of Finance Canada’s three- year risk- based audit plan, which was tabled at the departmental Audit and Evaluation Committee meeting of March 2, 2. Deputy Minister. The Government of Canada’s decision to eliminate the accrual of severance benefits for resignation or retirement was first announced in Budget 2. Budget 2. 01. 2. The policy rationale was to bring “public service compensation more in line with the private sector, where severance benefits for voluntary separation are typically not offered.”To implement this policy, a payout strategy was negotiated and included in the collective agreements signed with various bargaining agents and subsequently applied to non- represented and excluded employees as well as executives in fiscal 2. The payout strategy allowed employees the option of 1) an immediate full cash- out of their accrued severance to date, 2) deferring their severance payout until retirement or resignation, or 3) an immediate partial payment of their accrued severance, with the remainder to be paid upon retirement or resignation. To date, all eligible Department of Finance employees’ options (within the scope of this audit) have been processed. At the Department of Finance, the Compensation and Benefits Unit (C& B) within the Human Resources, Security, and Planning Directorate, Corporate Services Branch is responsible for processing payments in lieu of severance pay in accordance with the employee’s chosen option. C& B is also responsible for ensuring that departmental employees receive the compensation and benefits to which they are entitled in a timely manner and in accordance with applicable policies and regulations.
C& B’s funding is approximately $7. Audit Objective and Scope Objective. To provide reasonable assurance that payments made in lieu of severance pay were made accurately and complied with relevant agreements and policies. Scope. The audit scope included activities under the responsibilities of the Department related to the processing of payments in lieu of severance pay between March 2. August 2. 01. 2. The scope included and was limited to the following employee categories and groups and severance options: Categories and Groups. Program and Administrative Services (PA) - includes Administrative Services (AS), Information Services (IS), Programme Administration (PM), Clerical and Regulatory (CR) and Secretarial, Stenographic and Typing (ST) groups. Education and Library Services (EB) – includes Library Science (LS) group.
Personnel Administration (PE) group. Executive (EX) group. Severance Pay Options. Full cash- out immediately. Partial payment (with the remainder payable upon retirement or resignation)Payable at termination (upon retirement or resignation)The scope did not include eligible employees whose payments in lieu of severance pay options and payments were processed after September 1, 2.
Economics and Social Science Services (EC), Computer Systems (CS) and Financial Management (FI), among others). Statement of Conformance and Audit Approach Statement of Conformance.
The audit was conducted in accordance with the Internal Auditing Standards for the Government of Canada, as supported by the results of the Quality Assurance and Improvement Program. Audit Approach. The audit was planned and performed in such a way as to obtain reasonable assurance that the audit objective was achieved. The findings are based on a comparison of the conditions, as they existed at the time of the audit, against the audit criteria identified in this report, which were accepted by management. The opinion is applicable only to the entity examined. Audit procedures included, but were not limited to, interviews, observations, a review of supporting documentation and analytical testing. The audit criteria used to develop the required audit tests were based on (1) relevant elements of the Office of the Comptroller General’s Audit Criteria Related to the Management Accountability Framework, (2) relevant sections of collective agreements, and (3) Treasury Board of Canada Secretariat (TBS) information bulletins and notices, and Public Works and Government Services Canada (PWGSC) compensation directives related to the administration of options and payments in lieu of severance pay.
Four individuals were interviewed for this audit (a list of interviewees is provided in Appendix A). These departmental employees were consulted on one or more criteria, and with different levels of depth, depending on their role related to the processing of payments in lieu of severance pay. The audit team also conducted a review and analysis of applicable authorities and policies, as well as financial and non- financial documents from various relevant sources (a list of key information reviewed is provided in Appendix B). The audit approach allowed for the audit results to be communicated in such a manner as to enable management to review and provide feedback on the findings and conclusions before they were finalized. Conclusion The audit concluded that payments in lieu of severance pay were made accurately and complied with relevant agreements and policies.
In addition, it is worth noting the proactive approach taken by the Compensation and Benefits Unit to process the payments in lieu of severance pay in a timely fashion. This approach compared favourably with practices noted in some other departments. Findings by Audit Criteria The assessment in the findings by audit criteria summarizes the audit observations based on the factual evidence gathered and analyzed during the audit. Based on these assessments, issues and themes along with potential causes, impacts, management initiatives and recommendations are summarized in the “Recommendation and Management Action Plan” section. The Findings by Audit Criteria section includes the approach used for the assessment of risk exposure in audit reports. Taking into consideration audit findings and mitigating controls in place in relation to the audit criteria, residual risk exposure for each audit criteria is categorized as high, medium or low. These risk ranking levels correspond to the residual risk exposure auditors believe may influence organizational objectives.
The risk levels also take into consideration the levels of resources required to successfully implement corrective action(s). Low Employees eligible for payments in lieu of severance pay were properly solicited. However, an opportunity for improvement was identified in recording the severance pay options chosen and the estimated payable amounts. Complete and accurate recording of information related to severance options and payments issued to employees is essential to ensure that all eligible employees have had their options and payments processed. In addition, reliable information that is readily accessible facilitates reporting to senior management on progress to date with respect to options processed and payments issued.
To assess whether eligible employees were properly solicited, the audit team reviewed communications to departmental employees in the form of announcements, emails and information sessions, and how option packages were mailed out. In addition, People. Soft and Regional Pay System (RPS) reports as well as a sample of 3. The audit found that eligible employees were properly solicited and that their options and payouts were, in general, appropriately recorded on file and in the RPS.