EMBASSY AUDITS FIND DUBIOUS PAYMENTS

‘Higher fraud-risk’ Canadian outposts probed

• Audits of five Canadian embassies operating in “higher fraud- risk environments” have found cases of questionable procurement practices, undocumented payments for work, and sky- high levels of overtime for drivers.

The audits were ordered after a 2016 investigation discovered that Canada’s embassy in Haiti was defrauded of $ 1.7 million over 12 years through inflated supply contracts and diverted materials. The government fired 17 locally recruited employees over the case.

Management audits were conducted on Canadian embassies in Nigeria, Algeria, Russia, India and Kenya, as well as on Canada’s embassy in South Korea as a low-risk environment for comparison purposes.

The audit results were posted online in November, except for the Kenya embassy; Global Affairs says “new information” was found at the last minute and that audit has been delayed. The other high- risk embassies, however, were all found to have major problems.

The audit on t he Nigeria embassy was the most damning, concluding that protocols around “finance, procurement, contracting, revenues, and asset management were not consistently followed and some key controls were not in place or were circumvented.”

Embassy managers were not being consistently provided procurement information, and “the majority of contracts were not entered into the departmental financial and administrative system,” meaning invoices couldn’t be matched up to purchase orders, and contracts over $10,000 were not being proactively disclosed as required.

Several dubious payments were found, including one case where the contract was signed after the work had already commenced, another where the overtime was paid at a higher rate than in the contract, and another where the value of the contract was “significantly exceeded without a contract amendment.”

The embassy’s vehicle fleet was also being poorly monitored. When auditors examined the records, “instances were found where the fuel purchased for a vehicle was not reasonable compared to the mileage incurred,” and the frequency of maintenance was too high.

The audit found excessive amounts of overtime being claimed by drivers of the fleet. “Specifically, records indicated some drivers worked between 10 and 18 hours per day, sometimes for several months and including days of rest,” it said.

Auditors found a lack of controls everywhere, including no certification of work performed or goods received, and no formal mechanism to manage and monitor inventory. In a review of petty cash transactions, “some supporting documentation was incomplete or missing.”

The other audits were less severe, but all highlighted significant problems.

At the Algiers embassy, auditors found poor recording of contracts and cases where no invoices had been submitted for work performed. In a sampling of 36 contracts examined, the audit found that “16 were not linked to a needs assessment, and for 11 of them, there was no evidence of prior approval (before work was started).”

Canada’s embassy in Moscow was found to have problems with its pool of vendors, with the audit noting it was frequently using one foreign vendor despite its much higher costs, and that a comprehensive review of local vendors had not been undertaken to expand the pool.

“Furthermore, it was found that several transactions were not supported by appropriate documentation and procurement processes were not followed,” the audit says. It found a lack of inventory tracking and poor monitoring of overtime for drivers, who on average were getting 26 per cent of their salary through overtime payouts.

The audit in India found most procurement was being done appropriately, but still found questionable purchases including “a sole- source purchase of custom furniture that appeared above market rates, and a real estate commission of $9,381 which was paid without a contract outlining the terms of service.”

One redacted section noted a security risk with “a lack of monitoring by management with regard to the safeguarding and control of diplomatic plates.”

The conclusions of the audits contain redactions, making it unclear whether disciplinary actions were taken as a result. (Global Affairs says it doesn’t speak to individual cases for privacy reasons.) The audits all say the ambassadors and embassy managers were debriefed, and measures have been taken to fix the problems found.