Item - 2011.AU4.2

The Auditor General’s 2011 Annual Work Plan includes the development and application of a system of continuous controls monitoring for various operations throughout the City.  This process is conducted using specific audit data extraction software.  Continuous controls monitoring involves the ongoing and regular identification of unusual transactions throughout the City’s financial information system.

The advantages of continuous controls monitoring is the ability to:

-         Monitor every transaction throughout the City

-         Automate routine audit testing

-         Detect anomalies that may trace fraud, abuse or errors

-         Identify areas where internal controls are inadequate or need to be improved

-         Track and escalate exceptions for immediate remediation

During the early part of 2011, the first set of transactions selected for the application of continuous controls monitoring was employee overtime.  In order to ensure that the results of the process were manageable, we set a relatively high benchmark in terms of the identification of unusual levels of overtime.  Our initial criteria required that our software identify all overtime amounts throughout the City which were in excess of 50 per cent of annual base salary.  The criteria will be adjusted to a lower threshold as we continue to evaluate data extraction results.

We are currently in the process of completing our second quarter analysis of employee overtime and in doing so have reduced our criteria to 40 per cent.

Our analysis of all overtime information extracted from the City’s SAP financial information system identified areas for follow-up by the City Manager and Senior Staff.  The information provided to the City Manager included the employee’s name, Division, the annual approved salary and the extent of overtime earned.

The City Manager was requested to report back on whether there were opportunities to better manage and reduce overtime.