Audit Report - Audit of Right of Permanent Residence Fee Refund

Audit Report
Internal Audit and Accountability Branch
Citizenship and Immigration Canada
May 2008

Table of Contents

• 1.0 Introduction
  • 1.1 Background
  • 1.2 Environmental Context
  • 1.3 Audit Objectives
  • 1.4 Audit Scope
  • 1.5 Audit Criteria
  • 1.6 Audit Methodology
• 2.0 Audit Conclusions
• 3.0 Observations and Recommendations
  • 3.1 Eligibility for Refunds
  • 3.2 Compliance of Refund Processing
• Appendix A: Management Action Plan

Acronyms used in this report

1.0 Introduction

The Internal Audit and Accountability Branch 2007–2008 Risk-Based Audit Plan identified the need for an audit to assess the adequacy of the internal control framework in place to process the right of permanent residence fee (RPRF) refund initiative.

1.1 Background

The RPRF, first introduced in 1995 as the right of landing fee, is based on the principle that individuals receiving a specific benefit over and above the services enjoyed by the general taxpayer should share the financial burden related to the granting of this privilege. Originally, the fee was $975 and it was required to be paid prior to the issuance of a visa or prior to obtaining permanent resident status. Since the fee is associated with the tangible and intangible benefits accruing to new permanent residents, the RPRF is reimbursed in full if the client is refused or if the client chooses not to proceed with the immigration process.

On May 2, 2006, during the budget speech, the federal government announced its plan to immediately reduce the RPRF by about 50% (from $975 to $490) for all categories of immigrants who were still subject to the fee. The 50% reduction became effective at 12:00 a.m. Eastern Daylight Time on May 3, 2006. As a result of the reduction, anyone who had already paid the $975 fee up front but who had not yet obtained permanent resident status by the effective date became eligible for a refund of $485.

Clients were notified of the fee reduction on the Citizenship and Immigration Canada (CIC) Internet web page and through newspaper advertisements. If they had not received the refund abroad, they were notified of their possible eligibility once they arrived at a port of entry. Clients can obtain their refunds from the following CIC offices in the following situations.

• Missions abroad: DFAIT will issue a refund if the client paid the fee abroad and either has not been issued a permanent resident visa or has returned the visa.
• CIC Accounting Operations at national headquarters (NHQ): If the client has arrived at a port of entry and was not issued a refund abroad.
• Case Processing Centre, Vegreville (CPC-Vegreville): If the client paid the original RPRF to CPC-Vegreville.
• Case Processing Centre, Mississauga (CPC-Mississauga): If the client’s sponsor paid the original RPRF to CPC-Mississauga.
• Local offices: If the client paid the original RPRF locally.

According to calculations received from the CIC Finance Branch, the total number of potential refunds was expected to be approximately 185,000. As of March 31, 2007, the number of refunds that were issued was 90,039.

1.2 Environmental Context

This section of the report highlights some of the operating environment issues which CIC had to take into consideration when creating procedures for issuing the RPRF refunds due to the legislative rate reduction. They are presented here for information purposes only and do not reflect any particular order.

• This initiative was undertaken with a very short turnaround period because of budget secrecy.
• CIC did not receive any funding to support the changes in procedures and systems applications.
• The expected number of refunds to be processed was 185,000, for a total value of approximately $89,725,000 (the value of each refund is $485).
• Refunds were to be issued either from a mission abroad or from CIC Accounting Operations at NHQ, CPC-Vegreville, CPC-Mississauga or a CIC local office.

1.3 Audit Objectives

The objective of the audit was to assess the adequacy of the internal control framework in place to process the RPRF refunds due to the legislative reduction of the fee.

1.4 Audit Scope

The audit scope was limited to the examination and assessment of the control framework in place for processing RPRF refunds issued by the Department due to the legislative reduction in the fee. To that end, the audit examined a limited sample of RPRF refunds issued between May 3, 2006, and March 31, 2007. The audit also examined the electronic documentation of the RPRF refunds processed.

1.5 Audit Criteria

The internal control framework was assessed against the following criteria:

• The client was eligible for the refund.
• The refund was processed in accordance with the applicable operational instructions.

1.6 Audit Methodology

The audit involved interviews with regional and NHQ staff to gain an understanding of the control framework in place for processing RPRF refunds and to obtain documents to validate the information gathered during interviews.

To validate the controls for processing the RPRF refunds, we chose a limited sample of 100 refunds drawn randomly: 50 refunds to clients abroad and 50 refunds to clients in Canada processed between May 3, 2006, and March 31, 2007.

2.0 Audit Conclusions

Overall, the audit found that there was a proper internal control framework in place to process the RPRF refunds and that the clients who received refunds were eligible. However, it found some weaknesses in the internal control framework with regard to compliance with operational instructions.

Our detailed observations and recommendations in these areas are discussed in the next section of the report. We made one recommendation as part of our report. Management’s response and action plan, along with the proposed implementation dates for our recommendation, can be found in appendix A.

3.0 Observations and Recommendations

3.1 Eligibility for Refunds

The audit examined 50 refunds processed in missions abroad and 50 refunds processed in Canada. It expected to find that each client was eligible for the refund. Operational instructions stipulated that clients were eligible for the refund if they had paid the original RPRF but had not obtained permanent resident status as of May 3, 2006.

The audit found that clients were eligible for all 50 refunds processed abroad. It compared each refund processed abroad to the refunds processed in Canada in Accounting Operations at NHQ to ensure that they were not reissued once the client landed in Canada. No duplicate payments were issued in the 50 cases.

Forty-nine of the 50 sampled refunds processed in Canada were issued to clients who were eligible for them. In the remaining case, the ineligible client had obtained permanent resident status in December 2003, but the client’s file had been created and processed overseas while the file originally created in Canada was not updated. Then, when the file created in Canada was reviewed for the processing of the RPRF refund, a refund cheque was issued. As part of its monitoring process, management had discovered that the refund cheque should not have been issued and it was cancelled before the client cashed it.

3.2 Compliance of Refund Processing

3.2.1 Abroad

The audit expected to find that each of the 50 sampled refunds processed in missions abroad was processed in accordance with the applicable operational instructions. Specifically, it expected to find that detailed Computer-Assisted Immigration Processing System (CAIPS) notes indicated the original fee was collected and the refund was processed, that the CAIPS RPRF codes were updated, that the refund was correctly coded in the Integrated Finance and Material System (IFMS), that the correct amount was issued and that the refund was processed after May 11, 2006.

The audit found that detailed CAIPS notes were made for each of the sampled refunds, which decreased the risk of duplicate payments. However, there were weaknesses with regard to compliance with the operational instructions when the refunds were processed. In 15 of the 50 refunds, the CAIPS RPRF codes were not updated as required once the RPRF refund had been issued. The CAIPS codes allow offices to track which payments have been made and which are still outstanding, for information purposes only. In seven of the 50 refunds, the refunds had been coded to the inappropriate IFMS general ledger account. The Department must report to Treasury Board the revenue period to which each refund is linked. When a refund is inaccurately coded in IFMS, it is linked to the inappropriate revenue period but accumulative reporting to Treasury Board over multiple years will be accurate.

3.2.2 In Canada

The audit expected to find that each of the 50 sampled refunds processed in Canada was processed in accordance with the applicable operational instructions. Specifically, it expected to find that the refund was issued in Canadian dollars, that it was correctly coded in the IFMS, FOSS and CPC systems, that the correct amount was issued, that the refund was processed after May 11, 2006, and that it was only processed in Canada.

The audit found that in four of the 50 refunds, the FOSS RPRF codes were not updated as required once the RPRF refund had been issued. The FOSS codes are used to prevent duplicate refund payments. In seven of the 50 refunds, the refund had been coded to the inappropriate IFMS general ledger account, three of which as a result of a discrepancy in the operational instructions. The Department must report to Treasury Board the revenue period to which each refund is linked. When a refund is inaccurately coded in IFMS, it is linked to the inappropriate revenue period but accumulative reporting to Treasury Board over multiple years will be accurate.

Recommendation

Finance must ensure that employees working in CIC offices abroad and in Canada are aware of their responsibilities when processing RPRF refunds as defined by operational instructions in order to support accurate reporting.

Management Response

CIC Finance would like to point out that this initiative was undertaken with a very short turnaround period because of budget secrecy. Furthermore, CIC did not receive any funding to support the changes in procedures and systems applications.

CIC Finance has already modified its financial coding structure by blocking the current year revenue general ledger account to ensure reporting integrity. It will work with its partners (DFAIT, the regions and CPCs) to ensure that the detailed operational instructions are updated and that employees are reminded of their responsibilities. This will be done by e-mail and will be posted on the intranet.

Appendix A: Management Action Plan