Audit of Fleet Management (AU 1113)

Reports 2011


 

Executive Summary

Introduction

Natural Resources Canada (NRCan) has a fleet of 311 vehicles that are used to support its operations across Canada. Within the National Capital Region (NCR), a vehicle pool has been created, and it currently consists of 63 vehicles. The remaining 248 vehicles are owned and operated by individual Sectors and Regions. Some of these vehicles are pooled while other vehicles are assigned to specific programs.

NRCan’s Fleet Management Policy was approved in March 2006 and is intended to reflect the Treasury Board Secretariat’s (TBS’s) current requirements with respect to fleet management. The policy reinforces NRCan’s commitment to reducing greenhouse gas emissions by acquiring the lowest-emitting vehicles available.

NRCan uses a Fleet Management System—ARI, a shared application/service arrangement through PWGSC. The Government of Canada has a contract with ARI to provide fleet credit cards. ARI also provides an electronic management system that has the ability to track all expenditures by specific vehicle. NRCan uses this system to track fleet information.

Departmental Risks

A detailed risk analysis was completed for the Audit of Fleet Management. Fleet management staff were asked to identify the controls in place to mitigate these risks. The audit team examined these controls and were able to conclude that the residual risk was low after existing controls were considered.

Audit Purpose and Objectives

The purpose of this audit was to assess NRCan’s fleet management control framework. Specifically, this audit was intended to provide reasonable assurance that:

  • NRCan has an effective planning process with respect to fleet management;
  • NRCan’s vehicle fleet is operated in compliance with both NRCan and TB policies on fleet management; and
  • reporting and monitoring of financial and operational information takes place to ensure optimal management of fleet assets.

Internal Audit Conclusion

Overall, the audit results provide reasonable assurance that fleet management is meeting the requirements of both the Treasury Board (TB) and NRCan policies, with only minor areas of non-compliance, such as the appropriate completion of log books. However, increased corporate oversight is required, particularly in relation to planning, monitoring and reporting. As well, the NRCan policy needs to be strengthened to further facilitate appropriate fleet management practices.

Management Response

The following textbox captures the summary findings, level of risk and related recommendations, as well as management’s response regarding the results of this audit.

 

Audit Findings Pg Recommendations Audit Risk Rating Management Response Timing

Compliance
Overall, the Department was compliant with the majority of policy requirements with respect to the management of fleet. Those areas that were identified as non-compliant were related to the use of log books and using loyalty programs. There is also a need to ensure compliance by strengthening the process for reconciling invoices.

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1. SSO and Sectors should ensure that log books are completed by drivers as required by the policy and to establish a permanent record of vehicle use.

Minor 1

CMSS Management agrees. SSO has implemented a practice to ensure that all vehicle log books are properly filled out—e.g. any fuel purchase transactions, latest odometer reading, etc.— prior to the release of the departmental vehicle to the employee.
 

Completed (April 7, 2011)

 

CFS Management agrees. The Canadian Forest Service supports Recommendation 1 and the members of CFS Management Committee will work collaboratively with CMSS Shared Services Office fleet manager to reinforce SSO practices and communications to ensure that drivers comply with the NRCan Fleet Policy to record information about each trip in the vehicle log book. CFS Directors General will work with SSO fleet managers to monitor compliance and, if necessary, take corrective actions with drivers who fail to comply with the Fleet Policy.
 

June 2011

 

 

The Earth Sciences Sector agrees.  ESS Managers and Directors will work collaboratively with CMSS Shared Services Office fleet managers to reinforce SSO practices and communications to ensure that drivers comply with the NRCan Fleet Policy to record information about each trip in the vehicle log book.

ESS Managers and directors accountable for Fleet vehicles will work with SSO fleet managers to monitor compliance and, as necessary, take corrective actions with drivers who fail to comply with the Fleet Policy.
 

April 2011

 

 

 

 

 

MMS accepts this recommendation. MMS will continue to work collaboratively with CMSS Shared Services Office Fleet Manager to reinforce SSO practices and communications to ensure that, upon use of NRCan vehicles, drivers record all information in vehicle log books as required by the NRCan Fleet Policy.
 

May 2011

 

 

    2. SSO and Sectors should ensure the use of loyalty programs is stopped immediately.  

CMSS Management agrees. SSO sent an e-mail communication [March 23, 2011] to all offices across the department (operating NRCan vehicles) for distribution, advising that any “employee use” of loyalty cards while fuelling departmental vehicles is strictly prohibited. Periodic monitoring of fuel purchase receipts will be implemented in the regional offices to ensure employee compliance.

The audit noted the use of loyalty programs in Sault Ste Marie, NCR, and Ste Foy, when reviewing fuel purchase receipts. On March 23rd 2011, SSO sent out a reminder of the policy to all offices operating vehicles underlining that any employee use of loyalty cards while fuelling departmental vehicles is strictly prohibited. Fuel invoices will be monitored periodically across the department to ensure loyalty card use is no longer an issue.
 

Completed (March 23, 2011)

 

CFS Management Agrees. The Canadian Forest Service supports Recommendation 2 and members of CFS Management Committee will work collaboratively with CMSS Shared Services Office fleet managers to reinforce recent SSO communications advising that any employee use of loyalty cards while fuelling departmental vehicles is strictly prohibited. Regional Directors General will work with Regional SSO fleet managers to monitor compliance through periodic review of fuel purchase receipts and as appropriate, take corrective actions with drivers who continue to use personal loyalty programs.
 
June 2011
The Earth Sciences Sector agrees. Members of ESS Executive Committee will work collaboratively with CMSS Shared Services Office fleet managers to reinforce recent SSO communications advising that any employee use of loyalty cards while fuelling departmental vehicles is strictly prohibited.  ESS Managers and Directors will continue to comply and work with the SSO fleet management unit to monitor compliance through periodic review of fuel purchase receipts and, as appropriate, take corrective actions with drivers who continue to use personal loyalty programs.
 
April 2011
MMS accepts this recommendation. MMS staff has been sent the appropriate section of Treasury Board’s Guide to Fleet Management on the use of fuel loyalty cards. In addition, MMS will continue to work collaboratively with CMSS Shared Services Office Fleet Manager to reinforce recent SSO communications advising that any employee use of loyalty cards while fuelling departmental vehicles is strictly prohibited.  MMS Managers and Directors will work with the SSO fleet management unit to monitor compliance through periodic review of fuel purchase receipts and, as appropriate, take corrective actions.
 
May 2011
 

 

3. While it may not be value added to reconcile ARI invoices on a monthly basis, SSO Managers should make certain that a formalized reconciliation process takes place to ensure compliance with Financial Administration Act Section 34 authority.

 

CMSS Management agrees. SSO Managers will formally reconcile Automotive Resources International (ARI) invoices every six months (twice each fiscal year) by matching the ARI receipts against each charge appearing on the ARI monthly invoice.

September 30, 2011

Corporate Oversight
While some corporate oversight takes place on an informal basis, it needs to be formalized and strengthened in several areas, including planning and performance—particularly in relation to risk assessment and management—monitoring and reporting, training, and ensuring the completeness of the NRCan Fleet Management Policy.

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4. Sectors (ESS and MMS) should complete a formal needs analysis for the purchase of new, or the replacement of, existing fleet vehicles.

 

 

 

 

 

 

 

Minor

The Earth Sciences Sector agrees with the findings and has instituted a formal process for Capital Investment Planning for goods over $10K which includes Fleet. Through a formal ESS internal process, reporting to ESS Executive Committee, a Working Group prepares and maintains the ESS Capital Planning process. The ESS Executive Committee approves the list of investments, priorities, and funding for acquisitions. Potential investments are submitted through a DG approved business case. Part of the business case addresses questions of ownership, replacement and other mechanisms for acquiring goods. ESS will work with the CMSS Shared Services Office fleet managers to discuss fleet management responsibilities and explore other options for managing Sector fleet needs.

Completed
Ongoing

 

 

 

 

 

 

 

 

 

MMS agrees. Working closely with CMSS Shared Services Office Fleet Manager in lease, purchase, and surplus decisions for its fleet, MMS will continue to conduct life cycle management of its vehicles. MMS will also work with the CMSS Shared Services Office Fleet Manager to implement a formalized approach to needs analysis for the purchase of new vehicles and replacement of existing vehicles. May 2011
 

 

5. SSO should establish a formal risk process to ensure that risk is being managed specifically with respect to accidents and recalls.

 

 

 

 

 

CMSS Management agrees. SSO will develop a formal risk process to:
– 1. Establish—in consultation with the Sectors—a definition of a “motor vehicle accident”, and an accident procedure that includes a mandatory reporting requirement. Specific accident trends involving individual drivers will be identified and managed from a “driver education” perspective.
– 2. Instruct NRCan offices how to access driver recalls [which are already being identified within the Automotive Resources International (ARI) Fleet System] and ensure that the necessary work owing to the recalls is performed.

September 30, 2011

 

 

 

 

 

 

 

6. SSO should develop the database that will be used for chargebacks in consultation with the Regions so that all Regions and the NCR can use the same system

 

 

 

 

CMSS Management agrees. SSO will install a new Vehicle Pool Information System (database) in the NCR by September 30, 2011. It will facilitate the billing of Sector clients for their utilization of SSO Pool vehicles and generate reports. SSO will subsequently visit each regional office to:
– 1. demonstrate the capabilities of the Vehicle Pool Information System database—to assess how it can be adapted to the Region’s existing chargeback system, once the system has been thoroughly tested (in November 2011) within the Booth Street Vehicle Pool environment; and
– 2. provide follow-up online training (each regional office will be provided with a link to the new Pool System).

September 30, 2011

 

 

 

 

 

 

 

 

7. The SSO should, in consultation with the Regions and Sectors, establish a model to be used for the calculation of per diem rates.

 

CMSS Management agrees. SSO will establish a flexible model to calculate per diem rates for vehicle utilization in order to address both the:
– NCR practice, in which SSO provides ground transportation to employees from every Sector,
and
– regional practice, in which utilization is specific to Sector employees.

September 30, 2011

 

 

 

 

8. SSO should monitor the information in the ARI database to ensure that it is complete and accurate.

 

 

 

CMSS Management agrees. SSO will undertake a thorough review of the existing Automotive Resources International (ARI) database to ensure the completeness and accuracy of all tombstone data. All relevant information related to a particular vehicle’s operating data will also be checked for consistency. The database monitoring will be conducted on a weekly basis over the course of the entire fiscal year.

September 30, 2011

 

 

 

9. SSO should provide regional SSO staff access and training to ARI so that they can update their information and use the reports available. CMSS Management agrees. SSO will deliver regional on-site training (by September 30, 2011) to familiarize regional staff with the ARI system. All the components of the system, including statistical analysis, operating costs, fuel consumption statistics and maintenance management will be explained and demonstrated.

September 30, 2011

 

 

 

 

10. SSO should ensure that NRCan’s policy provides the necessary direction for all significant aspects of fleet management.

 

CMSS Management agrees. NRCan’s Fleet Management Policy clearly defines the roles and responsibilities attributable to key components of departmental vehicle operations and provides direction on all key elements.  SSO will review now and amend the policy whenever operational requirements indicate the need for further clarification on a policy issue or when a new fleet policy direction is announced by Treasury Board.

NRCan operates a fleet of 302 vehicles to support the programs of five of its sectors. The number of vehicles will vary owing to monthly disposals / additions. NRCan has reduced its fleet inventory by 57% since it was originally created in 1995 (from 700 vehicles to 302). This represents the largest inventory reduction amongst all federal departments over the same period.

September 30, 2011 and ongoing

 

TABLE OF CONTENTS

Executive Summary

Introduction    

Departmental Risks 
Audit Purpose and Objectives
Internal Audit Conclusion
Management Response

Introduction 

Audit Purpose and Objectives 
Scope and Methodology
Criteria

Findings and Recommendations

Compliance
Corporate Oversight

APPENDIX A – AUDIT CRITERIA 
APPENDIX B – STANDARD AUDIT RISK RATING

Introduction

Obsolescence of real property and capital assets was identified as a high-risk area within Natural Resources Canada’s (NRCan’s) 2008-2009 Corporate Risk Profile. As a result, an internal audit of asset life-cycle management?real property and fleet?was included in the 2010-2013 Risk-based Audit Plan. However, due to the different nature of these assets and because of operational requirements of Real Property staff, it was decided to sever the audit to focus on real property and fleet separately.  This report reflects results of an audit of fleet management. An audit of real property was deferred to fiscal year 2011-2012.

NRCan has a fleet of 311 vehicles that are used to support its operations across Canada. Within the National Capital Region (NCR), there is a pool of 63 vehicles which is managed by the Corporate Management and Services Sector (CMSS)/Shared Services Office (SSO). The vehicles are rented out on a cost-recovery basis by the SSO to operational units of NRCan.

The remaining 248 vehicles are managed by the Sectors. Twenty-nine of these vehicles are managed by Sectors within the NCR, while 219 vehicles are located in the various Regions across Canada.

Vehicle procurements are budgeted by individual Sectors and/or cost centres that require vehicles. The requisitions are authorized by managers responsible for the budgets. However, the procurement and disposal of vehicles are managed centrally and NRCan relies upon a standing offer agreement for the disposal/sale of used vehicles. The financial system supports the tracking of capital values and depreciation for all vehicles, as well as the processing of sales/disposals.

NRCan uses a Fleet Management System—ARI, a shared application/service arrangement through PWGSC?that tracks vehicle usage and expenditures. An ARI credit card is issued for each vehicle and can only be used for purchases from ARI-registered vendors for gas, limited materials, and services relating only to the particular vehicle’s usage. The ARI application tracks the monthly mileage, gas consumption and servicing of each vehicle, and it provides reporting and analysis on the Department’s overall fleet management. With respect to the fleet vehicles, several database systems are used to calculate the daily billings (based on days used or kilometres driven). The processing of chargebacks is achieved by posting to accounts receivables and processing re-allocation of costs for NRCan clients or interdepartmental-settlements for other departments.

NRCan’s Fleet Management Policy was approved in March 2006 and is intended to reflect the Treasury Board Secretariat’s (TBS’s) current requirements regarding fleet management. The policy reinforces NRCan’s commitment to reducing greenhouse gas emissions by acquiring the lowest-emitting vehicles available. Life-cycle parameters were reduced to five years or 150,000 kilometres for passenger-class vehicles (including mini-vans) and seven years or 200,000 kilometres for light trucks to better improve efficiency and safety. Specialty vehicles are not assigned retention limits due to their enhanced durability. Specialty vehicles include:

  • hydro-type truck (with boom and bucket);
  • high-cube vans that are internally modified to carry sophisticated equipment (i.e., for seismic monitoring/radiation);
  • a fully electric truck (located at Bells Corners, ON and not suited for road use);
  • dump trucks, water tanker and fire truck (Petawawa); and
  • heavy-duty snow plow and sander truck.

Audit Purpose and Objectives

The purpose of this audit was to assess NRCan’s fleet management control framework. Specifically, this audit was intended to provide reasonable assurance that:

  • NRCan has an effective planning process with respect to fleet management;
  • NRCan’s vehicle fleet is operated in compliance with both NRCan and TB policies on fleet management; and
  • reporting and monitoring of financial and operational information takes place to ensure optimal management of fleet assets.

Scope and Methodology

The conduct of this audit conforms with Government of Canada Internal Auditing Standards, which incorporate the Institute of Internal Auditors International Standards for the Professional Practice of Internal Auditing.

The scope of the audit included all NRCan fleet assets recorded in the Financial Asset Module and related fleet activities between April 1, 2008 and December 31, 2010. The audit excluded specialty vehicles and executive vehicles.

The audit approach included:

  1. a review of key documents and relevant background documentation, including policies, directives and standards;
  2. interviews with key personnel with respect to fleet management and related activities;
  3. physical inspections based on information gathered from 1 and 2 above; and
  4. sampling techniques to examine the operation, use, mileage and expenses related to selected vehicles.

A physical check was completed for 26 pooled vehicles in the NCR, 6 non-pooled vehicles located in the NCR and 50 vehicles at three sites outside of the NCR. Information on vehicles included in the sample but not located in the NCR (38 vehicles) was received from the Regional Offices where the vehicles are located.

Note that Canadian Forest Services Sector (CFS), Earth Sciences Sector (ESS), and Minerals and Metals Sector (MMS) have the largest holding of fleet vehicles outside the SSO and as such in some cases have been required to respond to certain recommendations.

Criteria

Refer to Appendix A for the detailed audit criteria. The criteria were developed from the key controls set out in TBS’s Core Management Controls for Internal Auditors and relevant policies, procedures and directives associated with fleet management. The criteria guided the audit fieldwork and formed the basis for the overall audit conclusion.

Findings and Recommendations

Compliance

Summary Finding

Overall, the Department was compliant with the majority of policy requirements with respect to the management of fleet. Those areas that were identified as non-compliant were related to the use of log books, and using loyalty programs. There is also a need to ensure compliance by strengthening the process for reconciling invoices.

RISK AND IMPACT2
Risk Type Audit Risk Rating Impact

Compliance

Minor

A permanent record of vehicle use is not possible without the appropriate completion of log books. Incomplete information may undermine use and replacement needs analysis necessary to support and demonstrate good value for money.

Using loyalty programs may result in staff choosing service stations because of the loyalty program as opposed to trying to achieve the best value for Canadians.

Failing to formalize the reconciliation process may result in NRCan paying for goods that have not in fact been received.

Supporting Findings

Areas of Compliance

The Department is compliant in many areas with respect to the management of fleet vehicles. Generally, the NRCan fleet is life-cycle managed. Passenger class vehicles are replaced every five years or 150,000 kilometres and light trucks are replaced every seven years or 200,000 kilometres. Some Regions are not in compliance with the policy; however, they do have investment plans that show they will be compliant by 2014–2015.

Acquisitions and disposals are being completed using the PWGSC standing offer and are being managed through the SSO Corporate Office. When purchasing new vehicles, environmental issues are being considered. NRCan has worked with PWGSC to find a service station in the NCR that sells Ethanol 85 fuel and, where possible, this fuel is purchased.

Health and safety requirements are also being met. Vehicles examined had the necessary first aid kits and, where vehicles were used for transporting fuel, fire extinguishers were found in the vehicles. Each vehicle was assigned a number and all vehicles, except two, were identified with the NRCan logo on their doors. ARI cards are used where possible to purchase fuel and maintenance for vehicles. The ARI system is used to capture odometer readings and other required information.

Log Books

Section 7.5.7 of the NRCan Fleet Management Policy indicates that “Drivers/Operators are responsible for recording information about each trip in the vehicle log book, including date and operator name, time and odometer reading out and in, destination and purpose; and description and cost of expenses.”

All vehicles, except two, in our sample had some version of a log book in either the vehicle or available for the vehicle. The majority used an actual log book but some used chits or sheets to record information. While the chits and sheets included the same information requirements that are included in an actual log book, they are not a good permanent record of use because they could be misplaced or lost. In addition, it is often difficult to determine if a chit or sheet is lost because they are not pre-numbered.

As well, 76 of the 1084 vehicles’ log books examined did not contain complete information, as required. In some instances, it had not been recorded for some time, e.g. the kilometres driven had not been included, the driver was not identified and/or the fuel purchase was not recorded.

Loyalty Programs

When reconciling individual invoices the audit team noticed that, contrary to TBS guidelines, loyalty programs were being used by individuals who drive fleet vehicles. While this was common practice in the Regions, it was also noted on invoices in the NCR where non-fleet staff had refuelled certain vehicles.

Loyalty programs are designed by specific service centres to encourage users to purchase fuel from them on an ongoing basis. They offer points to users that can then be redeemed for travel or gifts. Both the NRCan and TB Policies are silent on the use of loyalty programs; however, the TBS Guide to Fleet Management specifically prohibits the use of loyalty programs:

In accordance with the principles of the Values and Ethics Code, government employees are not permitted to accumulate rewards and/or points on their own personal loyalty cards (e.g., Air Miles, Petrol-Points, or other types of reward points) for fuel purchases made using the government fleet credit card while operating a government vehicle for government business.5

Certification of Financial Administration Act (FAA) Section 34

Of the three sites visited by the audit team, only one was complying with the FAA Sect 34 requirement to reconcile the individual receipts to the monthly ARI invoices. At the one site where reconciliation was taking place, it was not evident that there was follow-up when fuel receipts were missing.

Certification of FAA Sect 34 requires that, before a payment can be made, someone with the appropriate signing authority must confirm that goods are received and prices are fair and in accordance with the contract.

Charges made against ARI credit cards are processed and billed monthly by ARI to each of the Regions and the NCR. Depending on the number of vehicles, there can be well over 100 individual charges for each site. Staff who fuel vehicles are required to return the receipts received at the service centre to the SSO staff.

SSO managers who receive the ARI invoices review the information and look for anomalies. For example, at one site the manager noticed that unleaded fuel had been purchased for a vehicle that uses diesel fuel. The purchase was questioned and it was confirmed that the ARI card had been used to purchase fuel for equipment rather than for the designated vehicle. The fuel was then charged back to the appropriate Responsibility Centre. This manager, like many of the fleet managers, has been doing the fleet management job for some time. They know the vehicles by number and can check at a glance if there is something irregular on the invoice. This informal process works because of the people who are currently in the positions. It may not work if someone new becomes a fleet manager.

It should be noted that the reconciliation, completed by the audit team, of one month’s invoices to receipts for the three locations, was time-consuming and not necessarily value-added. The receipts from the service stations do not indicate that the fuel was purchased for a specific vehicle nor do they indicate who made the purchase. They do indicate if a loyalty program was used and the type of fuel purchased (diesel vs. unleaded), as well as the date and time of the purchase.

While some form of reconciliation is required to confirm that the amounts being charged are for goods received, if the processes currently used by managers could be documented and formalized then this may be sufficient. Other more cost-effective options would be to review various ARI reports to look for anomalies.

Recommendations

  1. SSO and Sectors should ensure that log books are completed by drivers as required by policy, and to establish a permanent record of vehicle.
  2. SSO and Sectors should ensure that the use of loyalty programs is stopped immediately.
  3. While it may not be value added to reconcile ARI invoices on a monthly basis, SSO managers should make certain that a formalized reconciliation process takes place to ensure compliance with Financial Administration Act (FAA) Section 34 authority.

Management Action Plan and Time Frame

  1. CMSS Management agrees. SSO has implemented a practice to ensure that all vehicle log books are properly filled out—e.g. any fuel purchase transactions, latest odometer reading, etc.— prior to the release of the departmental vehicle to the employee.
    Time Frame: Completed April 7, 2011

    CFS Management Agrees. The Canadian Forest Service supports Recommendation 1 and the members of CFS Management Committee will work collaboratively with CMSS Shared Services Office fleet managers to reinforce SSO practices and communications to ensure that drivers comply with the NRCan Fleet Policy to record information about each trip in the vehicle log book.  CFS Directors General will work with SSO fleet managers to monitor compliance and, if necessary, take corrective actions with drivers who fail to comply with the Fleet Policy.
    Time Frame: June 2011

    The Earth Sciences Sector agrees. ESS Managers and Directors will work collaboratively with CMSS Shared Services Office fleet managers to reinforce SSO practices and communications to ensure that drivers comply with the NRCan Fleet Policy to record information about each trip in the vehicle log book.
    ESS Managers and directors accountable for Fleet vehicles will work with SSO fleet managers to monitor compliance and, as necessary, take corrective actions with drivers who fail to comply with the Fleet Policy. 
    Time Frame: April 2011

    MMS accepts this recommendation. MMS will continue to work collaboratively with CMSS Shared Services Office Fleet Manager to reinforce SSO practices and communications to ensure that, upon use of NRCan vehicles, drivers record all information in vehicle log books as required by the NRCan Fleet Policy.
    Time Frame: May 2011
  2. CMSS Management agrees. SSO has sent an e-mail communication [March 23, 2011] to all offices across the department (operating NRCan vehicles) for distribution, advising that any “employee use” of loyalty cards while fuelling departmental vehicles is strictly prohibited. Periodic monitoring of fuel purchase receipts will be implemented in the regional offices to ensure employee compliance.
    Time Frame: Completed March 23, 2011

    The audit noted the use of loyalty programs in Sault Ste Marie, NCR, and Ste Foy, when reviewing fuel purchase receipts. On March 23rd 2011, SSO sent out a reminder of the policy to all offices operating vehicles underlining that any employee use of loyalty cards while fuelling departmental vehicles is strictly prohibited. Fuel invoices will be monitored periodically across the department to ensure loyalty card use is no longer an issue.

    CFS Management Agrees. The Canadian Forest Service supports Recommendation 2 and members of CFS Management Committee will work collaboratively with CMSS Shared Services Office fleet managers to reinforce recent SSO communications advising that any employee use of loyalty cards while fuelling departmental vehicles is strictly prohibited. Regional Directors General will work with Regional SSO fleet managers to monitor compliance through periodic review of fuel purchase receipts and, if necessary, take corrective actions with drivers who continue to use personal loyalty programs.
    Time Frame: June 2011

    The Earth Sciences Sector agrees. Members of ESS Executive Committee will work collaboratively with CMSS Shared Services Office fleet managers to reinforce recent SSO communications advising that any employee use of loyalty cards while fuelling departmental vehicles is strictly prohibited. ESS Managers and Directors will continue to comply and work with the SSO fleet management unit to monitor compliance through periodic review of fuel purchase receipts and, if necessary, take corrective actions with drivers who continue to use personal loyalty programs.
    Time Frame: April 2011

    MMS accepts this recommendation. MMS staff has been sent the appropriate section of Treasury Board’s Guide to Fleet Management on the use of fuel loyalty cards. In addition, MMS will continue to work collaboratively with CMSS Shared Services Office Fleet Manager to reinforce recent SSO communications advising that any employee use of loyalty cards while fuelling departmental vehicles is strictly prohibited. MMS Managers and Directors will work with the SSO fleet management unit to monitor compliance through periodic review of fuel purchase receipts and, if necessary, take corrective actions.
    Time Frame: May 2011
  3. CMSS Management agrees. SSO Managers will formally reconcile ARI invoices every six months (twice each fiscal year) by matching the ARI receipts against each charge appearing on the ARI monthly invoice.
    Time Frame: September 30, 2011

Corporate Oversight

Summary Finding

While some corporate oversight takes place on an informal basis, it needs to be formalized and strengthened in several areas, including planning and performance—particularly in relation to risk assessment and management—monitoring and reporting, training, and ensuring the completeness of the NRCan Fleet Management Policy.

RISK AND IMPACT
Risk Type Audit Risk Rating Impact

Strategic

Minor

Unless planning is reviewed at all levels of the Department, there may be activities that do not promote the efficiency of the Department’s fleet.

Without a regular formal review of risk associated with the fleet, it is difficult to determine if risk is being managed.

Staff will not usually refer to more than one policy when looking for direction. Therefore, unless the policy is complete, staff will develop their own informal processes that may not be consistent with TBS guidance and may vary from region to region.

Operational

Minor

Unless common tools are available, staff will continue to duplicate efforts in establishing costing models and creating databases.

Without proper access and training, staff cannot use the ARI system to its full potential.

Monitoring

Minor

The ARI system is the only common fleet system for the Department. Unless the system is monitored for completeness and accuracy, the reporting information will not be reliable.

Supporting Findings

Planning and Performance

Life-Cycle Management

Overall, the planning and performance of the entire fleet is well-managed. SSO knows the level of greenhouse gas emissions that are being released and they ensure that, wherever possible, traditional vehicles are replaced with vehicles with lower-fuel emissions. SSO ensures that the life-cycle requirements are being met and, where they are not, they work with the Regions and Sectors to come up with plans to replace the vehicles.

According to the information provided by the SSO, 59% of NRCan’s vehicles either use ethanol or diesel or are hybrid. The Department has already achieved the federally proposed 2020 emissions reduction target of 17% and has reduced greenhouse gas emissions by 26% across its fleet.

The planning for and the performance of individual vehicles is less clear. While there appears to be much discussion prior to purchasing a new vehicle or replacing an existing one, this discussion is not formalized into a needs analysis. As a result, it is difficult to determine if specific vehicles are meeting the performance targets that were established for their purchase.

The audit did note one exception where the process for purchasing vehicles was formalized. CFS' Science and Technology and Vehicle Equipment (STAVE) Task Team was established in 2008/09. The STAVE Task Team is responsible for prioritizing investments needs in S&T equipment and fleet vehicles and providing recommendations to CFS Management Committee for financial approval. The STAVE task team, comprised of Directors from each of the CFS regional centres and Ottawa, meets on a regular basis to compile, assess and prioritize CFS’ scientific and technical equipment and fleet vehicles annual expenditures. The task team evaluates each of the assets against the CFS priorities to ensure the efficient allocation and alignment of capital assets with future science needs. Each year, STAVE develops a rolling three-year plan that identifies priority vehicle purchases to renew the sector’s fleet and support ongoing modernization.

Some regions do not comply with life-cycle management. Therefore, while there are plans to come into compliance by 2014–2015, there may be opportunities to reduce the number of vehicles that are located at specific sites. In one Region there were two vehicles that had exceeded the life-cycle requirements. One vehicle was a passenger vehicle that was clearly not being used in the winter months (there had only been 4,100 kilometres put on the vehicle in 2010). A second vehicle at the same site was a 2001 light truck that had only 2,800 kilometres driven on it in 2010, and it was being used as a backup to a snow plow.

Regions must continue to be conscious of finding ways to optimize their fleet. While there is a large demand for vehicles in the field season, (April–October) there is significantly less demand in the late fall and winter months.

Risk Assessment and Management

SSO has not completed a formal risk assessment for fleet vehicles. Based on interviews and discussions with fleet staff, it is clear that they are aware of risk and are continually working with the Regions to reduce risk. There is a need to formalize the fleet’s risk analysis and identified related actions to minimize risks, including the use of the ARI system’s potential for reporting and tracking accidents and vehicle recalls.

Accidents
A report can be generated by the ARI system with respect to accidents if the information has been input into the system. However, only some accident information has been identified and logged. In addition, interviews with regional staff have highlighted some confusion with respect to what constitutes an accident. Some staff believe that only incidents over a certain dollar value should be considered accidents, while others seem to think that it is an accident only if it involves another vehicle.

The risks aSSOciated with accidents can be significant; therefore, accident information should be captured consistently and reviewed regularly to identify trends and opportunities for remedial action.

Recalls
Out of the 11 recalled vehicles whose records were examined by the audit team, six had not been actioned as the Department was not aware that the vehicles had been recalled. In part, this is because, depending on which group initiated the purchase of a vehicle, the recall may go to PWGSC, SSO or directly to the Region where the vehicle is located. Nevertheless, to keep in touch with potential recalls, each group has only to log into ARI where all recall information is documented in the system. There is a risk to the Department should failure to action a recall result in an accident.

Chargebacks

Expenses associated with the fleet are charged back to individual responsibility centres. These chargebacks ensure that each responsibility centre has a vested interest in making sure that the vehicles are used economically and efficiently.

Each Region has its own approach to calculating chargebacks as does the NCR. One region visited looks at total expenses to operate the fleet from the previous year and divides it by the projected use in the current year. Another Region uses information based on the Office of Energy Efficiency’s website for vehicle fuel consumption as well as the Canadian Automobile Association's cost of maintenance. Neither region charges any portion for capital back to the responsibility centres.

The NCR calculates their chargeback based on the estimated cost of maintenance, tire replacement and fuel consumption. A charge for capital is also included in the cost. The NCR pool is designed to be revenue neutral however salaries are not explicitly included in the cost, nor is there an offset for re-sale revenue of fleet vehicles.

The Regions do not charge a portion of capital to their programs as they fund vehicles from ongoing base funding. The NCR pool does not have base funding and is designed to be revenue neutral, as a result it needs to ensure that it recovers the cost entirely and this should be clearly documented in the costing model.

It is somewhat redundant that Regions and the NCR calculate their costs each year when in fact a costing model that allows Regions to select which components they want to include in their chargeback would provide at least some common factors for vehicle chargebacks. While the Regions do not want to charge salaries and capital to their ongoing programs this should be included in the cost for vehicles used by programs that do not have ongoing funding.

Databases
Each Region visited has a different database to record chargebacks. One site uses Microsoft Excel, while another site uses Microsoft Access. The NCR uses a different system.

While the ARI system records kilometres, fuel consumption and maintenance, it does not have a chargeback component. The NCR is in the process of developing a new chargeback database for NCR use that will have an interface with the financial system. However, the NCR has not consulted with the Regions to determine if this one system could meet the needs of all users.

Monitoring and Reporting

The ARI system is used by the Department to assist with the monitoring of, and to produce reports on, the fleet vehicles. It is designed to capture certain tombstone information about the vehicle including its identification number, fuel type, size of the fuel tank and licence number. Each vehicle is assigned a credit card and, based on the information on each card, fuel and maintenance charges are assigned to that vehicle. ARI is also used to keep track of accident and recall information and kilometres driven on a monthly basis.

In terms of tombstone information, the audit team identified some gaps, specifically with respect to fuel type and fuel tank size. As well, kilometres driven were not always up to date. This information is critical when looking for anomalies with respect to monthly invoices in terms of knowing:

  • that a vehicle takes unleaded fuel, because that information allows managers to easily identify diesel charges against that vehicle; and
  • the size of the fuel tank, because a manager can then easily identify if more fuel than the capacity of the vehicle was purchased.

Furthermore, there was no evidence that the information in ARI was being monitored at either the regional or corporate level.

One location has not recorded the usage and type of fuel for several years because it is located in a remote area and purchases fuel in large quantities to fuel its vehicles. This information is not included in fuel consumption and, as such, reporting on fuel emissions may not be complete. In other locations ARI credit cards assigned to specific vehicles are being used to purchase non-fleet fuel. This is giving a false reading to the fuel consumption for that vehicle. Monitoring at the SSO corporate level would identify many of these shortfalls and result in more accurate reporting.

ARI Use and Training

Regions capture their odometer readings using an Excel spreadsheet and send them to the NCR where they are manually entered into the ARI system. This constitutes a duplication of effort. At the time of the audit, regional staff had read-only access to ARI and could not enter their own information into the system. In addition the Regions have not received any formal training on the system and, therefore, are not aware of its full potential, including reporting.

In terms of driving skills, while there is no specific training for drivers from SSO corporately, regional offices do provide some training for their staff. One regional office noted that there were multiple accidents when vehicles were reversing, and a course on safe reversing was initiated for drivers. Another location indicated that they provide training for all-terrain vehicle drivers prior to the commencement of each field season.

Communication

Regional staff indicated that if they have questions with respect to fleet, SSO staff are available to help them and provide the necessary guidance. This information is provided mostly on an informal basis—either face-to-face or through telephone communications or emails. However, there was no evidence of formal communications to advise all regional staff about fleet issues or best practices?both of which would better ensure efficiency and effectiveness.

Fleet Policy

NRCan has its own fleet policy, and it is generally consistent with the TBS Directive on Fleet Management. The roles and responsibilities in the NRCan policy are thorough and clearly defined; however, there are some additional areas that should be included in the NRCan policy, such as the leasing of vehicles from third parties, use of non-specific credit cards and reporting of non-ARI expenditures. Augmenting the policy would eliminate the need for staff to review both the NRCan policy and the TBS directive.

Leasing Vehicles

The NRCan policy does not address the leasing of vehicles from third parties, yet there is a demand for leased vehicles in the summer months when fieldwork is at its peak. The audit team noted that while two Regions had leased vehicles over the summer months, they had little direction on how to complete the leases. In addition, a third Region reported that it had also leased vehicles and had used a process to purchase insurance at what appeared to be a high cost in relation to the value of the lease. The leasing of vehicles may be a reasonable alternative to purchasing vehicles that are only required for a few months. Nevertheless, clear direction needs to be provided with respect to using this approach.

Non-specific Cards

While the use of non-specific credit cards is addressed in the TBS directive, it is not in the NRCan policy. ARI issues a card that is specifically assigned to each vehicle. This allows for the tracking of expenditures associated with each vehicle. ARI can also issue cards that are not specific to a vehicle. Although the TBS directive permits this practice, it does not encourage it. At the time of the audit, NRCan had 52 active non-specific cards. They are used to purchase fuel for leased vehicles and non-fleet vehicles, as well as for equipment (i.e., all-terrain vehicles, skidoos, chainsaws, and generators).

One Region indicated that it does not use non-specific cards for non-fleet purchases but rather it uses the acquisition card issued by the Department. In addition, it would appear that, when non-specific cards are used for non-fleet fuel, this fuel consumption is included in the total fuel consumption figure that is used to calculate greenhouse gas emissions with respect to the on-road fuel used for reporting to Parliament. As such, the consumption reported is not accurate.

Reporting Non-ARI Expenditures

Some transactions were identified where the vehicle-specific card was used to purchase non-fleet fuel. There were also transactions noted where non-specific or acquisition cards were used to make purchases for a specific vehicle. The TBS directive indicates that, where this occurs, these transactions should be manually adjusted in ARI so that the information specific to a vehicle is accurate. The NRCan policy does not address this issue.

Recommendations

  1. Sectors (ESS and MMS) should complete a formal needs analysis for the purchase of new, or the replacement of, existing fleet vehicles.
  2. SSO should establish a formal risk process to ensure that risk is being managed specifically with respect to accidents and recalls.
  3. SSO should develop the database that will be used for chargebacks in consultation with the Regions so that all Regions and the NCR can use the same system.
  4. The SSO should, in consultation with the Regions and Sectors, establish a model to be used for the calculation of per diem rates.
  5. SSO should monitor the information in the ARI database to ensure that it is complete and accurate.
  6. SSO should provide regional SSO staff access and training to ARI so that they can update their information and use the reports available.
  7. SSO should ensure that NRCan’s policy provides the necessary direction for all significant aspects of fleet management.

Management Action Plan and Time Frame

  1. The Earth Sciences Sector agrees with the findings and has instituted a formal process for Capital Investment Planning for goods over $10K which includes Fleet. Through a formal ESS internal process, reporting to ESS Executive Committee, a Working Group prepares and maintains the ESS Capital Planning process. The ESS Executive Committee approves the list of investments, priorities, and funding for acquisitions. Potential investments are submitted through a DG approved business case. Part of the business case addresses questions of ownership, replacement and other mechanisms for acquiring goods. ESS will work with the CMSS Shared Services Office fleet managers to discuss fleet management responsibilities and explore other options for managing Sector fleet needs.
    Time Frame: Completed/Ongoing

    MMS agrees. Working closely with CMSS Shared Services Office Fleet Manager in lease, purchase, and surplus decisions for its fleet, MMS will continue to conduct life cycle management of its vehicles. MMS will also work with the CMSS Shared Services Office Fleet Manager to implement a formalized approach to needs analysis for the purchase of new vehicles and replacement of existing vehicles.
    Time Frame: May 2011
  2. CMSS Management agrees. SSO will develop a formal risk process to: 
    1. Establish—in consultation with the Sectors—a definition of a “motor vehicle accident”, and an accident procedure that includes a mandatory reporting requirement. Specific accident trends involving individual drivers will be identified and managed from a “driver education” perspective.
    2. Instruct NRCan offices how to access driver recalls [which are already being identified within the Automotive Resources International (ARI) Fleet System] and ensure that the necessary work owing to the recalls is performed.
    Time Frame: September 30, 2011
     
  3. CMSS Management agrees. SSO will install a new Vehicle Pool Information System (database) in the NCR by September 30, 2011. It will facilitate the billing of Sector clients for their utilization of SSO Pool vehicles and generate reports. SSO will subsequently visit each regional office to:
    1. demonstrate the capabilities of the Vehicle Pool Information System database—to assess how it can be adapted to the Region’s existing chargeback system, once the system has been thoroughly tested (in November 2011) within the Booth Street Vehicle Pool environment; and
    2. provide follow-up online training (each regional office will be provided with a link to the new Pool System).
    Time Frame: September 30, 2011
     
  4. CMSS Management agrees. SSO will establish a flexible model to calculate per diem rates in order to address both the:
    – NCR practice, in which SSO provides ground transportation to employees from every Sector,
    and
    – regional practice, in which utilization is specific to Sector employees.        
    Time Frame: September 30, 2011
     
  5. CMSS Management agrees. SSO will undertake a thorough review of the existing ARI database to ensure the completeness and accuracy of all tombstone data. All relevant information related to a particular vehicle’s operating data will also be checked for consistency. The database monitoring will be conducted on an every week basis over the course of the entire fiscal year.
    Time Frame: September 30, 2011

  6. CMSS Management agrees. SSO will deliver regional on-site training (by September 30, 2011) to familiarize regional staff with the ARI system. All the components of the system, including statistical analysis, operating costs, fuel consumption statistics and maintenance management will be explained and demonstrated.    
    Time Frame: September 30, 2011

  7. CMSS Management agrees. NRCan’s Fleet Management Policy clearly defines the roles and responsibilities attributable to key components of departmental vehicle operations and provides direction on all key elements. SSO will review now and amend the policy whenever operational requirements indicate the need for further clarification on a policy issue or when a new fleet policy direction is announced by Treasury Board.

    NRCan operates a fleet of 302 vehicles to support the programs of five of its sectors. The number of vehicles will vary owing to monthly disposals / additions. NRCan has reduced its fleet inventory by 57% since it was originally created in 1995 (from 700 vehicles to 302). This represents the largest inventory reduction amongst all federal departments over the same period.
    Time Frame: September 30, 2011 and ongoing

APPENDIX A – AUDIT CRITERIA

Objectives Audit Criteria
  1. The fleet at NRCan is operated in compliance with both NRCan and TBS policies, related directives, and guidance on fleet management.

 

1.1 NRCan has a policy instrument on Fleet management that is consistent with the TBS policy.

1.2 Authorities, accountabilities, roles, and responsibilities are clearly defined and understood.

1.3 Training is provided to staff to effectively discharge their responsibilities.

1.4 Fleet is Life-Cycle Managed.

1.5 Fleet vehicles are assigned sequential numbers.

1.6 Vehicles are only used by employees and others who have a valid Driver’s licence and the vehicle is used only for authorized official business. 

1.7 Personal use of Departmental vehicles is treated as required by the Income tax Act.

1.8 All fleet vehicles include an individual log book and Credit card.

1.9 Departmental Fleet Management System meets TBS requirements:

  • System generates single, coherent, department wide view of all maintenance, operating and repair costs related to fleet management;
  • System includes mandatory data fields per Appendix B of TBS Guidelines;
  • One manager is assigned accountability maintaining a complete data base;
  • Vehicle odometer readings are regularly input into the system; and
  • R&M expenses that are charged to the ARI card or from another source are input into the data base.

1.10 Requests for Replacement vehicles used by RCMs or requests for disposals are processed through the Fleet Management Group.

1.11 Manufacturer Warranties are used to the fullest extent for vehicle maintenance and repairs to ensure minimum costs to the Department.

  1. NRCan has an effective planning process with respect to fleet management.

 

2.1 Risk is identified and monitored.

2.2 Risk is incorporated into resource planning.

2.3 Acquisitions of new departmental vehicles are supported by needs analysis.

2.4 Budgets reflect resource requirements.

2.5 Performance measures linked to planned results6 have been identified and are monitored for effectiveness.

2.6 The volume of usage of NRCan’s Vehicle Pool by Other Government Departments (OGDs) justifies NRCan’s Vehicle Pool program design and offsets any costs to NRCan.

 

  1. Reporting and Monitoring of operational and financial information takes place to ensure optimal management of fleet assets.

3.1 Data in the fleet management system is analyzed on a regular basis.

3.2 Management monitors planned results and performance to ensure vehicle usage and costs are consistent with needs analysis justifying their acquisition.

3.3 Revenues received for rental of fleet vehicles covers the fleet cost.

3.4 Financial and operational information on fleet management is reliable and is used in fleet management reporting, monitoring, planning and decision making.

3.5 Formal Lines of Communication exist which promote efficiency and effectiveness of NRCan Fleet Management.

APPENDIX B – STANDARD AUDIT RISK RATING

The audit criteria were derived from widely recognized control models (e.g. CICA Criteria of Control - CoCo). Actual performance was assessed against the audit criteria resulting in either a positive finding or the identification of an area of improvement. The following audit criteria were used to conduct the audit:

Standard Risk Types
Our standard risk types are classified based on the COSO7 Internal Control-Integrated Framework as follows:

Strategy – High-level goals, aligned with and supporting the Department's mission.
Operations – Effective and efficient use of resources.
Monitoring – Accurate assessments or evaluation of activities.
Reporting – Reliability of operational and financial reporting.
Compliance – Compliance with applicable laws, regulations, policies and procedures.

Standard Audit Risk Ratings
Audit findings are rated as follows:

Major: A key control does not exist, is poorly designed or is not operating as intended and the related risk is potentially significant. The objective to which the control relates is unlikely to be achieved. Corrective action is needed to ensure controls are cost effective and/or objectives are achieved.

Moderate: A key control does not exist, is poorly designed or is not operating as intended and the related risk 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.


1Refer to Appendix B for standard internal audit risk types.

2Refer to Appendix B for standard internal audit conclusion classifications.

4 While 120 vehicles were in our sample we had access to only 108 log books. Two vehicles did not have log books and 10 log books were not available when we checked the vehicles.

5 http://www.tbs-sct.gc.ca/mm-gm/doc/gfm-ggpa/c1-05-eng.aspx#5.5.4

6 Note under Section 3.2.3 of Natural Resources Canada's Sustainable Development Strategy (SDS), Achieving Results (2007-2009), NRCan has committed to “Improvement of the environmental performance of NRCan’s vehicle fleet and promotion of sustainable transportation.”

7 COSO defines internal control as a process, effected by an entity’s board of directors, management and other personnel. This process is designed to provide reasonable assurance regarding the achievement of objectives in effectiveness and efficiency of operations, reliability of financial reporting, and compliance with applicable laws and regulations.
Source : http://www.coso.org/resources.htm