Cash Management
Final Audit Report
Report Nr. 18/12
January 9, 2013
Distribution:
To:
President & CEO
Senior Vice President & Chief Financial Officer
Vice President & Corporate Controller
Assistant Corporate Controller
Manager, Accounts Payable
CC:
Senior Vice President, Corporate Affairs and Secretary
Senior Vice President, Human Resources and Communications
Senior Vice President, Business Development
Senior Vice President, Insurance
Senior Vice President, Financing
Senior Vice President, Business Solutions & Innovation
Senior Vice President and Chief Risk Officer
Vice President & Treasurer
Vice President, Corporate Services
Deputy Treasurer
Director, Loans Services
Director, Real Estate and Corporate Services
Team Lead, Taxation and Insurance
Manager, Corporate Banking
Director, Planning & External Relations
Principal, Office of the Auditor General
Director, Office of the Auditor General
Audit Team:
Allison Coons
Allison Lowe
Vice President, Internal Audit
Monica Ryan
Table of Contents
Introduction ................................................................................................................... 3
Audit Objectives & Scope ............................................................................................. 3
Internal Audit Opinion................................................................................................... 3
Audit Findings & Recommendations........................................................................... 4
Conclusion ..................................................................................................................... 4
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Introduction
In accordance with our FY 2012 Audit Plan, EDC Internal Audit performed an audit of the Cash
Management process. On an annual basis, EDC seeks approval for its commercial paper program from
the Minister of Finance. The short term borrowing limit for fiscal 2012 was set at $8.0B USD. As at
June 30, 2012, the outstanding commercial paper balance was approximately $3.7B CAD. Cash
Management at EDC also encompasses investments in marketable securities, such as treasury bills, term
deposits, and banker’s acceptances. The cash and marketable securities balance as at June 30, 2012 was
approximately $5.1B CAD.
Audit Objectives & Scope
The overall objective of this audit was to evaluate the design and operating effectiveness of controls
surrounding the Cash Management process. The scope of this audit included detailed testing of the
controls regarding the issuance and recording of short term debt and the purchase of short term
investments and related derivatives as well as the monitoring of these trades. Cash controls relating to
these activities, such as bank reconciliations, were also reviewed. Excluded from the scope of this audit
was an evaluation of the design and operating effectiveness of controls relating to cash forecasting and
liquidity measures.
Internal Audit Opinion
In our opinion, controls surrounding the Cash Management process are Well Controlled1. Through our
detailed transaction testing, we have verified that key controls designed to ensure the existence and
accuracy of short term borrowing and investing trades in the Universal Financial Server (UFS) were
effectively designed and operating as intended and that appropriate monitoring controls are in place to
oversee the process. One moderate2 issue was noted regarding the design of controls surrounding the
preparation and review of bank reconciliations.
1
Our standard audit opinions are as follows:
Strong Controls: Key controls are effectively designed and operating as intended. Best in class internal controls exist. Objectives
of the audited process are most likely to be achieved.
- Well Controlled: Key controls are effectively designed and operating as intended. Objectives of the audited process are likely to
be achieved.
- Opportunities Exist to Improve Controls: One or more key controls do not exist, are not designed properly or are not operating
as intended. Objectives of the process may not be achieved. The financial and/or reputation impact to the audited process is
more than inconsequential. Timely action is required.
- Not Controlled: Multiple key controls do not exist, are not designed properly or are not operating as intended. Objectives of the
process are unlikely to be achieved. The financial and/or reputation impact to the audited process is material. Action must follow
immediately.
-
2
The ratings of our audit findings are as follows:
Major: a key control does not exist, is poorly designed or is not operating as intended and the financial and/or reputation risk is
more than inconsequential. The process objective to which the control relates is unlikely to be achieved. Corrective action is
needed to ensure controls are cost effective and/or process objectives are achieved.
−
Moderate: a key control does not exist, is poorly designed or is not operating as intended and the financial and/or reputation
risk to the process is more than inconsequential. However, a compensating control exists. Corrective action is needed to avoid
sole reliance on compensating controls and/or ensure controls are cost effective.
−
Minor: a weakness in the design and/or operation of a non-key process control. Ability to achieve process objectives is unlikely
to be impacted. Corrective action is suggested to ensure controls are cost effective.
−
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Audit Findings & Recommendations
1. Bank Reconciliations
Timely and properly completed bank reconciliations help to detect fraud or errors relating to cash flows,
decrease the likelihood of timing errors in the financial statements and provide a key monitoring control
for management. Testing of a sample of bank reconciliations during the audit found that those related to
Treasury cash flows were consistently prepared on a timely basis. There were however different
approaches to completing bank reconciliations for accounts not impacted by Treasury cash flows which
could not be re-performed as they did not appropriately reconcile the general ledger balance to the
balance per the month-end bank statement. As a result, we have recommended that management provide
training to employees responsible for preparing bank reconciliations. This training should be based on the
existing standards for the preparation and review of bank reconciliations. In addition, bank
reconciliations should be prepared and reviewed for all bank accounts on a monthly basis.
Rating of Audit Finding – Moderate
Action Owner – Assistant Corporate Controller, Corporate Finance in collaboration with Manager,
Accounts Payable
Due Dates - All actions to be implemented by Q2 2013
Conclusion
The audit findings and recommendations have been communicated to and agreed by management, who
has developed action plans that are scheduled for implementation no later than Q2 2013.
We would like to thank management for their support throughout the audit.
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