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HomeMy WebLinkAboutFCS-12-025 - 1Q Audit Status Report & PresentationREPORT TO:Audit Committee DATE OF MEETING: March 5, 2012 SUBMITTED BY: Corina Tasker, Internal Auditor, 519-741-2361 PREPARED BY: Corina Tasker, Internal Auditor, 519-741-2361 WARD(S) INVOLVED: ALL DATE OF REPORT: February 14, 2012 REPORT NO.: FCS-12-025 SUBJECT: 1st QUARTER AUDIT STATUS REPORT RECOMMENDATION: For information only. EXECUTIVE SUMMARY: The following report provides a summary of the Internal Audit activities completed during the period of December 2011 to March 2012. The chart below shows the audits and other work contained in this report. AUDIT Division / Topic Scope Legislated Services division Comprehensive audit Infrastructure Stimulus Funding Projects Controls audit Hiring Transparency Controls / Compliance audit The following 2012 work plan items are currently in progress: Stores follow-up audit Operations review Emergency Plan audit BACKGROUND: The Internal Audit 2012 work plan was approved during the audit committee meeting held on November 14, 2011. Since that meeting the internal auditor has completed three items from the 2011 work plan and has begun the 2012 work plan as scheduled. This report provides a summary of the work completed. î óï REPORT: 1. Legislated Services Division Comprehensive Audit Status: Complete, January 12, 2012 Objective The objective of this review was to examine the mandate, processes, resourcing and culture within the division and its four sections, namely Licensing, Office of the City Clerk, Corporate Records and Archive Services, and the Mail Room. The audit assessed the positive aspects of each section which should continue, as well as possible areas for improvement in order to adapt to a new corporate internal service strategy, improve efficiency, and to support corporate objectives and legislated requirements. Methodology The following research and analysis was undertaken for this review: Employee interviews - 18 Legislated Services staff were interviewed to gain an understanding of the work performed, the goals and priorities of the division, the strengths of the division as well as areas for improvement. Internal customer interviews – 29 interviews were held with customers including a cross- section from all departments, management and staff levels, and members of council to obtain their feedback regarding the strengths of the division and areas for improvement. External stakeholder surveys – 5 external stakeholders (clients of Licensing) were contacted for comment on their relationship and interactions with the Legislated Services division; however, none of them agreed to participate in an interview or complete a short survey. Quantitative analysis of current service priority and performance ratings to identify gaps between Legislated Services staff and customer perceptions which may need to be addressed. Review of division’s strategic planning documents, goals and directions. Literature review of relevant internal and external research, reports, internal correspondence, and Employee Culture Survey results. Review of processes which had been identified by staff or customers as possible areas for improvement. Review of capacity and resourcing requirements Benchmarking with 3 other lower-tier municipalities of similar size or scope of services including Burlington, Markham and Vaughan. Pickering, Oakville, St.Catharines and Oshawa were also contacted but they declined to participate. Key Findings and Recommendations Performance and Priorities Overall the findings were very positive and the division is to be commended for their results. Based on feedback through the staff and customer interviews as well as the performance rating data, it can be concluded that the staff are very knowledgeable in their areas of expertise and provide excellent customer service which is timely and helpful. In terms of priorities, both staff and customers chose the same service attributes as their number one priority which shows alignment of priorities. Performance ratings were high across the board with particularly high marks going to Corporate Records and Archive Services. î óî Strategy and Structure There is no overall divisional plan and staff feel there is a lack of unifying elements that would tie the sections together. Although they do participate in divisional events many felt that the sections operated independently and not as a cohesive division. Some even questioned whether Licensing and Corporate Records and Archive Services belonged in the division. Recommendation: Management should coordinate a discussion around the goal of the division, engaging front line staff where they see appropriate. The intent of such discussion is to determine what the unifying elements are between the sections, if any, to be used as a basis for decisions around organizational structure. Structure should follow strategy. The goal should align with the internal service strategy which is under development. The goal should be shared with all staff to ensure they see how their role fits into supporting the goal. Process Review Through the interview process both staff and customers provided input on which processes seemed inefficient and could be improved. The following processes were reviewed in detail: Front counter cash drawers – the use of two drawers vs. one License issuance – overall cycle time License renewals - annual renewals at year end vs. based on issue date Leveraging AMANDA capabilities Committee of Adjustment – process of preparing courtesy notices Burial Permits – cycle time Licensing Tribunal - cycle time in arranging the tribunal date Courier – security risk of delivering directly to customers Council / committee support – cycle time, customer education Mailroom – consolidation with Revenue division mail function The recommendations focus on small improvements in order to make processes as efficient and effective as possible. There were no major changes recommended. Staffing Levels At the start of this audit there were perceptions from those outside of the division that the division had extra capacity, particularly in the Office of the City Clerk area. In the past the division had handled all phone calls related to the work of the division as well as acting as the general inquiry line for the city. With the introduction of the corporate contact centre the volume of calls being directed to the division has diminished significantly. This led to the perception that staff must therefore have excess capacity. Observations from staff passing through the office area also added to this perception. In order to investigate the issue, the following areas were examined: Actual staffing levels since the implementation of the corporate contact centre Job duties of the Office of the City Clerk section staff and percentage of time spent on each Review of specific tasks (covered in the process review section above) to see if there were any major inefficiencies Interviews with staff and management about capacity levels Casual observation of the staff throughout the course of the audit î óí Historical staffing levels: Over the past 3 years since the corporate contact centre was implemented, staff in the division have actually decreased by 2 FTE. First, the position responsible for birth registrations in the Office of the City Clerk was deemed redundant when the province took over vital statistics and birth registrations. Second, when one Licensing employee transferred to another division the vacant position was not filled. This was manageable given the decrease in call volumes. More recently, the division is down by two staff due to a sick leave and a retirement. The sick leave position has been backfilled with a temporary contract position. Two staff have been promoted in order to fill the position vacated by the retirement, leaving a vacant entry level position. The director intends to fill this position with a contract staff person in the short term during a period of several maternity leaves in the division. Once all staff are back from their leaves then this position will be left vacant to see whether staff can handle the increased workload. Job Duties: Office of the City Clerk staff have prepared and continue to update a complete listing of tasks performed within their section and the average time spent on each one. The calculations take into account regular hours less vacation, holidays, and sick time and the average amount of time spent on each type of transaction or task. The time to complete transactional based tasks are based on a 5 year rolling average of past volumes multiplied by the average time to complete one transaction. For the Office of the City Clerk the data shows that the three existing front line staff positions are operating at between 91 and 94% of capacity based on regular assigned duties and average transaction volumes. This includes managing the workload of the fourth vacant position. These tasks are administrative in nature and consume a large amount of time. Without actually performing the tasks it is difficult to ascertain if they could be done more efficiently outside of the minor recommendations made in the process review section. On the surface, however, it appears that there is a full slate of work to be done by the staff and the time calculations prepared by staff are very thorough. The Licensing section is currently in the process of gathering data related to transactional volumes and average processing times. This will be further analyzed by the division when complete in order to ascertain if there is excess capacity in that section. Interviews: Interviews with the Office of the City Clerk staff indicate that they feel they are working at capacity, especially with the recent move to redistribute tasks and leave one position vacant. They do not work any over time. There may be excess capacity in the Licensing section. Two of the five staff indicated that they felt there was extra capacity within the section. They currently operate with an average of 2-3 days of sick leave being taken per month across all staff as well as 4-5+ weeks of vacation for each person. Even with these large amounts of absences they still have indicated they have capacity to take on more work. It was felt that this area could potentially be decreased by ½ to 1 FTE. As mentioned above they are currently undergoing an exercise to quantify their capacity. î óì In Corporate Records and Archive Services core work is not being done due to a shortfall in staff. There is a risk to the organization in that the city is not in compliance with records management legislation. Having one additional records clerk would help to alleviate the backlog of work and position the section more strategically to actively tackle electronic records management. This area is relatively new and something that has the potential to get out of control very quickly if resources are not dedicated to it in order to appropriately staff the area and manage the data. Casual Observations: Throughout the course of the audit, the auditor observed the general state of the front counter area to determine if staff looked busy, what they were working on, etc. Staff were either busy typing on their computers, helping customers at the front counter or talking with each other. Conversations overhead were mostly related to work issues as staff consulted with each other on how to do a task. Occasionally the conversations were non-work related. However, this is common in any work area and did not seem excessive. Conclusion Overall it is unlikely that the division as a whole could reduce staffing levels. However, with several upcoming retirements there may be an opportunity to reassign FTE’s between sections, providing more support to Corporate Records and Archive Services and fewer resources in either Licensing and / or Office of the City Clerk. The director should continue as planned and not fill the position vacated by the recent retirement in order to determine if workload can be shifted and accommodated in the current reduced complement. Licensing should continue to assess their capacity. If an excess FTE is identified through the actions above, it should be transferred to the Corporate Records and Archive Services section. Culture The working environment within the division is observed to be a relatively good place to work. Staff are friendly and courteous. Most staff get along well and staff make an effort to plan fun activities together. Support is provided by management for training (where budget allows) and career development. Most staff are focused on continuous improvement and strive to make their tasks more efficient. As noted previously a few staff commented that given the diverse nature of the sections within the division there wasn’t really any unifying elements that gave them a sense of team. In addition, the requirement to always have someone available to attend to the front counter makes it difficult to have divisional team building events. During the interviews staff did mention that they felt they did not receive enough recognition for doing their day to day jobs well. Performance management was mentioned as an issue in regards to management holding people accountable for their performance. In addition, some mentioned that they were not receiving regular Let’s Talk feedback from their supervisors / managers. The Employee Culture Survey results did show that some staff were experiencing disrespectful or negative workplace behaviours from their co-workers or management. Discussions with management have indicated that this issue was taken seriously and HR staff provided human rights and diversity training to the division as a whole. This brought understanding to some on how to handle and react to other’s differences. There are still some personality conflicts but staff have noted that the overall culture is better than it was. The upcoming 2012 Employee Culture Survey will be a good indicator to determine the extent of the improvement. î óë Management should be held accountable to help improve the culture of the division. Management can influence morale in a number of ways such as through the decisions they make, their own personal attitudes and actions, team-building activities, and educating the team on issues and actions. Recommendations: Once the strategy work has been completed staff and management should use that as a catalyst for team building around the division’s common goals. Management should ensure that Let’s Talk sessions are being performed semi-annually with all staff. Regular feedback (both positive and negative) should be given as well to ensure that staff know which behaviours to continue and which they need to change. Progressive discipline should be implemented, documented, and adhered to. Management should be held accountable as part of their Let’s Talk sessions to ensure this is happening within their areas. Conclusion Through the use of various techniques the auditor examined the strengths and weaknesses of the Legislated Services division. Overall the findings were very positive and the recommendations focus on small improvements in order to make processes as efficient and effective as possible and to improve the direction and culture of the division. Through many retirements within the division there will be opportunity to re-align headcount with current priorities. The director of the division will be required to submit a formal response to this audit within 3 months of receipt. The response should indicate what actions have or will be taken to address each recommendation. If a recommendation will not be implemented reasons must be explained in detail. A follow up audit will then be conducted not sooner than 1 year following the original audit to determine the status of the recommendations and the impact they have had on the division. 2. Infrastructure Stimulus Funding (ISF) Projects – Controls Review Status: Complete, December 6, 2011 Objectives and Scope On January 27, 2009, as part of an Economic Stimulus plan, the Federal Government designated significant funding allocations over two years for provincial, territorial and municipal infrastructure projects under Canada’s Economic Action Plan. The City received funding for 16 projects under this funding plan. The objectives of this review were two-fold. First, some of the cost estimates for certain projects were lower than subsequent tenders. Therefore one objective was to assess the estimation process. Second, there were repeated errors in progress payment certificates received from contractors and consultants. The second objective was to review the billing verification process. The intent of both objectives was to make recommendations for future construction projects in order to avoid such errors. î óê This review included the following for a sample from the 16 projects: analysis of the original project applications and cost estimates vs. actual costs to determine root cause of variances analysis of progress payment certificate verification process This review did not assess the overall success or failure of any project or project management processes other than those listed above. Methodology The following activities were undertaken as part of this audit: External research on construction audit techniques Interview with the city ISF project analyst Interviews with ISF project managers Interviews with directors of Engineering and Facilities Management Review of project applications and original business cases (where applicable) for a sample of projects Review of correspondence related to billing errors Review of tender amounts Key Findings Cost Estimation The sample chosen for this portion of the audit included the following three projects which had tenders come in significantly higher than the original project estimates: Storm Water Management Sewer and Water main Bridgeport Community Centre An analysis of the data found that the large differences between the cost estimates and tender amounts were caused by the unique environment created by the program. The introduction of the ISF funding program injected a huge amount of cash into the economy leading to increased demand for contractor and consultant services which in turn drove prices up well beyond their historical levels. The short construction deadline also caused prices to climb. The short turn around times for application submissions meant that cost estimates did not receive the time or detail normally provided in construction projects. Some of the project applications contained uninformed estimates based on outdated figures and / or roughly defined requirements. They also did not take into account the rising prices caused by the higher demand. It can be concluded that these conditions will not be replicated again unless the government injects more stimulus funding into the economy. Staff have indicated that if that happens they will be less likely to jump at the chance to receive the funding, placing more thought into what is realistically achievable given the timelines provided. Otherwise, the normal cost estimation process appears to be sound, although no testing was done on regular projects to confirm this. There are no recommendations from an audit perspective at this time. î óé Billing Errors The sample chosen for this portion of the audit included the following three projects which had billing errors which were identified by the ISF analyst: McLennan Park Storm Water Management King St. Based on the interview data, billing errors are common occurrences which are caught by project managers. The ISF projects were more complex and thus led to more errors. The errors were caught by the city ISF analyst simply because she was looking at the invoices before the project manager had a chance to. Engineering has indicated that they have been working on service delivery improvements including reviewing the project management processes, roles and responsibilities. Work is continuing on this. Outcomes of the engineering review should be shared with other areas in the City who participate in large projects such as Facilities Management and Parks. Of larger concern is the fact that we are paying consultants large sums to, among other things, administer our contracts with contractors. However there are always billing errors to be found. Staff have indicated that they regularly meet with consultants to go over common errors in order to bring awareness to the problem. In addition, a copy of this audit report has been shared with the Grand River Chapter of Consulting Engineers Ontario. Conclusion In conclusion, the ISF program created a unique environment which is not typical for regular projects. It was structured around unrealistic time lines, created drastically inflated prices, and required complex paperwork. The problems related to inaccurate cost estimates and billing errors were largely a product of this unique environment and not something that will be replicated in the normal projects conducted at the City. The project management processes in place regarding estimating and progress payments appear to be adequate. A follow up audit will be conducted not sooner than one year based on a sample of regular engineering, facilities management and parks projects. The purpose of the follow up audit will be to ensure that the regular project management processes are working as intended, with only small variances between cost estimates and tender amounts and minimal billing errors. 3. Hiring Transparency Status: Complete, December 22, 2011 Objectives and Scope This review was recommended by the Internal Auditor as part of the 2008 comprehensive audit of the Human Resources division. It was recommended specifically that “a periodic review by Internal Audit of the HR resume screening process be implemented to ensure fairness”. This review is intended to fulfill that recommendation. Further, Council requested that a review of compliance with the City’s “employment of relatives” policy be included in this audit when the 2011 internal audit work plan was approved. î óè The first objective of this review was to assess the transparency and fairness of the City’s hiring process through testing compliance with corporate policies, procedures and best practice. The second objective was to review compliance with the City’s employment of relatives policy. This review does not provide comment on the suitability of the chosen candidates in hiring decisions. Methodology The following activities were undertaken as part of this audit: Review of the City’s hiring policies including: II-125 Hiring – Notice of Job Vacancy o II-130 Hiring – Senior Management – Vacancy o II-155 Inclusive recruitment and hiring practices o II-180 Multiple Jobs o II-110 Employment of Relatives of Staff Members and Elected Officials o Review of HR’s recruitment and selection process documents for full time, part time, student, and temporary positions Review of hiring process flows for fully HR assisted positions and for positions filled by the hiring departments with limited HR involvement Interviews with HR recruitment staff Random audit of job competition files from the period of September 2010 to September 2011 to check for fairness, transparency, and evidence to support the hiring decision; the audit sample consisted of 10 competitions where HR assisted with the hiring process from start to finish and 16 competitions which were conducted by the hiring department only with only minimal assistance from the recruitment team; the sample represented 8% of total hires for the year Compliance review of policy II-110 Employment of Relatives of Staff Members and Elected Officials for all employees residing at the same address Review of hiring transparency audits performed at Toronto, Hamilton, Ottawa and Oakland (Canadian audits received through Municipal Internal Auditors Association contacts; US audit found through internet search) Benchmarking regarding hiring of relatives policies including Toronto, Hamilton, Vaughan and Ottawa (policies requested from Canadian audit contacts as noted above) Fair and Transparent Hiring Criteria As a government entity it is important for the City of Kitchener to maintain public confidence in the integrity of the City’s hiring and employment practices. In order for the hiring process to be considered fair and transparent best practice and common sense indicate that the following components need to be present: Job openings must be posted to allow equal opportunity to the position and posted in a variety of locations in order to attract a diverse selection of candidates Criteria for screening resumes should be based first on meeting the minimum posted requirements of the position, and then on equivalencies (if applicable) and other preferred skills, experience or training for the job Resumes should be screened by a minimum of two people to help avoid personal biases Interviews should be conducted by a minimum of two people to help avoid personal biases Evidence to support the hiring decision should be retained î óç Findings and Recommendations Of the 316 job competitions performed in the past year only 26 of them (or 8%) received full assistance from recruitment staff. Assistance can come in the form of help with job postings, screening resumes, creating interview questions, sitting in the interview, testing, reference checks and providing advice on the final hiring decision. The degree of help provided is decided between the recruitment team and the hiring manager in a pre-hire meeting. The types of jobs which receive full HR recruitment assistance in hiring are usually full time permanent positions (19 of the 26). These types of positions are typically higher graded jobs with more complex skill requirements which are hired on a less frequent basis. Hiring managers for other types of positions may also ask for assistance if required. Last year there were also 5 full time temporary and 2 part time permanent positions for which full HR recruitment assistance was provided. A summary all of the hires from the past year is provided below. Total job competitions:316 Fully HR assisted:268% Partially HR assisted:29092% Full Time, Regula258%19 fully HR assisted, 6 partial HR assisted r Full Time, Temporary12640%5 fully HR assisted, 121 partial HR assisted Part Time, Regular16552%2 fully HR assisted, 163 partial HR assisted Part Time, Temporary00% 316100% Full assistance is not automatically provided to all hiring managers for two reasons. First, the recruitment team consists of only 1 full time recruiter, and 1 manager and 1 administrative assistant both of whom have other job duties. The sheer volume of competitions throughout the year makes it impossible for the recruitment team to fully assist in every single one. Second, many of the competitions are routine, uncomplicated and occur regularly. For example, hiring managers are very familiar with the process of hiring seasonal staff and do not require full assistance but often ask for help in posting the position, preparing offer letters or checking references. HR focus is placed instead on the ones which are more complex, where the hiring manager may not regularly hire staff, and where HR can add value to the process. The reason that the distinction between fully HR assisted and partially HR assisted job competitions is important is that it was found that while the HR assisted samples were fair and transparent, the partially HR assisted samples did not follow a consistent process. Most of the hiring managers had their own system for ranking candidates based on minimum criteria and other skills and experience, which is a positive finding. However, there was evidence that hiring managers were not using two or more people to screen resumes and conduct interviews potentially allowing personal bias to shape their decisions. In addition, adequate evidence to support the hiring decisions were not always kept. While the City appears to have good intentions related to fair and transparent hiring practices, the lack of a standardized and consistent process across all departments has led to some weaknesses. It appears that most of the permanent full time positions are being handled fairly. Where there is greater vulnerability is with the part time and temporary positions. Ensuring that those positions are hired in a fair process is important. While it is not feasible to require that all job competitions be fully handled by HR, if training were delivered to all hiring managers this would ensure that everyone is aware of the corporate î óïð expectations and the reason why this is so important. Without this consistent approach the City runs the risk of claims against the City for unfair hiring practices. Specifically, the following changes should be made to the existing practices. HR should develop and deliver mandatory training to all management staff to inform them of the following: the City’s overall objective of fair and transparent hiring o posting requirements (which jobs need to be posted and when it is appropriate to o not post a job) how to post a job o what services HR has to offer and when it is appropriate to use their services o how to use HireDesk o how to screen resumes and interview objectively (i.e. having more than 2 people) o the importance of a fully executed offer letter o what needs to be included in the job competition files and personnel files o This would be delivered once to all managers and then as needed as part of the new manager orientation. In conjunction with the mandatory training an annual training update should be developed to ensure new staff receive the training and existing staff are reminded of their responsibilities. The record series for job competition files should be updated to indicate the following records MUST be included in the file: Interview notes o Screening criteria and associated candidate rankings o Original job posting (if not submitted through HireDesk) o Advertisements (to prove where the job was posted) o Other records that MAY be included if applicable would include: Applications and resumes (if not submitted through HireDesk) o Testing results (of unsuccessful candidates) o Interview schedules o Correspondence o In addition to the job competition file, the following documents should be filed in the successful candidate’s personnel file: Fully executed offer letter o Reference checks (if applicable) o HR should create a job competition file checklist based on the record series requirements listed above which would be emailed to the hiring manager along with approval for the request to hire. Ideally HR should retain all of the files for consistency and ease of access in the case of a complaint or for auditing purposes. Given the lack of filing space, HR should work with Records Management staff to create an online storage process to scan all related documents. This is also important to ensure that all records are adequately protected since they contain personal information. If stored within the hiring departments there is the risk that the files may not be properly safeguarded. Hiring managers who utilize search agencies should ensure that the City’s agreement with the agency states that the firm will retain the records in accordance with the City’s retention schedule. î óïï All job vacancies should be posted unless there are circumstances which make this impractical. These exceptions should be fully documented in the personnel file and reviewed with the HR recruitment team. All divisions should use HireDesk to manage their job vacancies, with the exception of Fire because they continue to be part of the joint recruit with other municipalities. Hiring of Relatives The purpose of this part of the audit was to review the adequacy of the City’s employment of relatives policy and then test for compliance in order to either confirm or refute the perception of favouritism in hiring practices. Policy Review The City of Kitchener’s policy was compared against four other municipalities to determine similarities, differences and potential areas for improvement. The cities included Toronto, Hamilton, Vaughan and Ottawa. Purpose and Intent The purpose of the City’s employment of relatives policy (Policy II-110) is “to provide rules with respect to hiring and promotion which are intended to avoid conflicts of interest.” Toronto has a more broad based statement of purpose which is “to avoid situations where conflict and bias can arise from relatives working together”. Hamilton, Vaughan and Ottawa had identical purpose statements: “to ensure that employment related decisions concerning existing or potential employees are free from any real or perceived improper influence or conflict of interest based on familial relationships and to maintain confidence in the integrity of the City’s hiring and employment practices”. It is the auditor’s opinion that Kitchener’s policy intent is too narrowly defined as it only applies to hiring and promotion. The purpose should be to avoid conflicts of interest with regards to all employment related situations which includes not only hiring and promotions but also discipline, termination, decisions related to pay, vacation or leaves of absence. The purpose outlined by Hamilton is very good and could be adopted. Recommendation: Amend Kitchener’s Employment of Relatives policy purpose to reflect a broader application of conflict of interest to include all aspects of employment. Policy Statement Kitchener’s policy states that “the immediate relatives of staff of the Human Resources division, all directors, general managers (deputy CAO’s) or the Chief Administrative Officer and Elected Officials shall not be employed by the City in any capacity.” And further that “the immediate relatives of all other management personnel shall not be employed where such employment would be within the same department (full time, part time) or within the same division (students).” This policy is much more prescriptive than the other cities benchmarked as it specifically names positions which can not have relatives working at the City and states that other employees can not be in the same department or division. Other cities simply state that relatives can not work in supervisory relationships. The wordings all differ slightly from city to city. î óïî The intent of the second part of Kitchener’s policy relating to all other management is misguided. Specifically saying that the staff can not be in the same department is intended to ensure that there will be no supervisory relationships. However, in the case of a re-organization (as the city has just recently been through) it is possible for relatives who were previously in different departments to now reside in the same department, thus creating a conflict where no conflict existed previously. This does not make sense and seems arbitrary. Rather than be based on labels such as department or division it should simply state that no employee shall supervise or be supervised by a family member or be placed in a position of influence over a family member. Recommendation: Amend Kitchener’s Employment of Relatives policy to remove reference to departments and divisions and replace with wording indicating that no employee shall supervise or be supervised by a family member or be placed in a position of influence over a family member. Another anomaly in Kitchener’s policy is the mention of HR staff. The primary intent of including HR staff in the category where no relatives may be hired is to ensure that they have no influence over the hiring process. The policy has been interpreted so that relatives are allowed to be hired into HR if their relative already has a position elsewhere at the City. Relatives are not, however, allowed to be hired in other divisions if their relative already works in HR. It is the auditor’s opinion that this still presents a risk to the city. HR staff have access to personnel files. It could be possible for the HR staff person to alter or destroy disciplinary letters within their relative’s file. Family members may also not want their relative in HR to view the contents of their file. There is the risk of breach of privacy on this issue. There is no evidence to suggest that this has happened in the past, however, the City should not place employees in this situation. Recommendation: Amend Kitchener’s Employment of Relatives policy to add clarification to the intention and application of statement around HR employees and their relatives. It should be a conflict of interest regardless of who was hired first. Definition of Immediate Relative The City of Kitchener defines an immediate relative as a “parent, spouse, child, sister, brother, sister-in-law, brother-in-law, mother-in-law or father-in-law”. Other cities were similar but some also included any family member who lives with the employee on a permanent basis. Policy Compliance There was no evidence found of any situations where familial relationships were used to influence hiring or promotion decisions. In order to review the degree of compliance with the employment of relatives policy a report was run from PeopleSoft which listed all employees from the past year who lived at the same address. Although this is not proof that the employees are immediate relatives as per the definition, it was a good starting point from which to gather this data. There may also be situations where family members live at different addresses which were not captured by this report. î óïí The report generated a list of 411 employees which equates to 190 relationships (some addresses had 3 or 4 employees living there). That equates to roughly 19% of the 2144 employees at the City potentially being related. 219 were part-time regular staff (53%) and 67 were full-time temporary staff (17%), while only 125 were full-time regular staff (30%). On further examination and validation against the policy, only 7 conflicts were found, 3 of which were identified at the time they arose and mitigated. Only one of the conflicts presents a situation where one employee would be in a position to influence employment related decisions about their relative. This situation arose after one party was promoted. The situation was documented and a protocol put in place to remove the conflict of interest. The employment of relatives policy acknowledges that conflicts can arise, for example through marriage, promotion or reorganizations. It requires that the situation be reviewed in order to find a solution which is consistent with the intent of the policy. The remaining six conflicts were not situations where the employees were in supervisory or influential relationships with their relatives but simply conflicts because the employees were in the same department. Of the remaining relationships, there were 111 situations which did not violate the policy directly because neither employee was management staff. However, both employees worked in the same division. While this does not pose a problem in terms of supervisory conflicts it begs the question whether the hiring decisions in these divisions are being influenced by recommendations or suggestions from current staff rather than being completely open, transparent and unbiased. As was found in the preceding section many areas do not have a fair and transparent hiring process in place. Many only utilized one staff person to screen resumes and conduct interviews. Furthermore, very little documentation existed to support the hiring decision even though the records retention series indicates that competition files must be kept for 2 years. The previous section listed several recommendations which would ensure the hiring process is fair and transparent, eliminating the risk of candidates being hired because their relatives work at the city in some capacity and have recommended them to the hiring manager. It is a common occurrence in both private and public sector firms to find relatives working at the same company. A study by Statistics Canada found that 40% of men work at the same company their father did at some point in their career. A report on Global News in February stated that on average 40% of employees date within their workplace and 30% of employees marry a co-worker. In addition, some private sector firms even make having a parent at the company a job requirement for summer student positions. At the City of Kitchener relatives of current staff will naturally be more aware of the dates of recruitment campaigns and the requirements of the city. They may also really want to work at the city based on positive feedback from their family about the culture and work atmosphere. It is a not a bad thing to have relatives working at the city as long as it does not pose a conflict of interest and so long as the hiring process ensures that the best candidate for the job was hired. As stated in the City of Ottawa’s audit, “while the general responsibility for assuring adherence to the policy must rest with those responsible for appointment and assignments, a particular responsibility for sensitivity to the potential conflicts falls on family members to report any perceived conflict.” HR has implemented a process whereby applicants are required to î óïì disclose any relationships with current City employees at the time of the interview as part of the references form. Conclusion In conclusion, although staff appear to have good intentions, the hiring competitions which do not receive full HR support are not consistently transparent and fair. There are no standard hiring rules which must be followed by all hiring managers and managers lack the necessary training to know how to conduct a fair process. Record keeping is lax and none of the hiring managers in the sample were aware of the records retention schedule. Opportunities exist for bias. These appear to be common themes in the other cities who conducted hiring transparency audits as well. Having said all this, the auditor stresses that there were no cases found where employees were hired by their relatives, and the one supervisory conflict of interest which has arisen due to promotion has been mitigated. Given the risk that the lack of consistent processes poses to the corporation, a follow up audit will be conducted in not less than a year. The purpose of the audit will be to check if audit recommendations have been implemented, what impact they have had and any further areas for improvement. A second sample of hiring decisions will be tested for evidence to support the hiring decision. ALIGNMENT WITH CITY OF KITCHENER STRATEGIC PLAN: Work falls within the Efficient and Effective Government plan foundation area of the Strategic Plan. The goal of Internal Audit work is to protect the City’s interests and assets through – ensuring compliance with policy, procedures and legislation – ensuring adequate controls are in place to protect our assets – ensuring our operations are as efficient and effective as possible This helps support the financial goal of long term financial stability and fiscal accountability to our taxpayers. The work also supports the public sector leadership goal of positioning the municipality as a leader in public sector policy, processes, and systems. FINANCIAL IMPLICATIONS: N/A COMMUNITY ENGAGEMENT: N/A ACKNOWLEDGED BY: Dan Chapman, Deputy CAO, Finance and Corporate Services î óïë î óïê î óïé î óïè î óïç î óîð î óîï î óîî î óîí î óîì î óîë î óîê î óîé î óîè î óîç î óíð î óíï î óíî î óíí î óíì î óíë î óíê î óíé î óíè î óíç î óìð î óìï î óìî î óìí î óìì î óìë î óìê î óìé î óìè î óìç î óëð î óëï î óëî î óëí î óëì î óëë î óëê î óëé î óëè î óëç î óêð