4tr.,Services de soutien au personnel et aux families des Forces canadiennes

Canadian Forces Personnel and Family Support Services
7331-1 (DGPFSS)
November 2011 Distribution List 

7331-1 (DGSSPF)
Le	novembre 2011
Liste de distribution

NON-PUBLIC PROPERTY (NPP) FRAUD PREVENTION HANDBOOK AND QUESTIONNAIRE

Refs: A. The NPP Fraud Prevention Handbook (enclosed)
B. The NPP Fraud Prevention Questionnaire (enclosed)
1.	The NPP Fraud Prevention Handbook and Questionnaire (enclosed) are issued on the authority of DGPFSS as Managing Director of NPP.
2.	It is intended as an initial step in communicating the existence of the NPP Fraud Prevention Strategy and is a reference for Base/Wing/Ship/Small Unit Commanders, managers, supervisors, and employees to assist in understanding, preventing, detecting fraud, waste and abuse of NPP.
All individuals who manage NPP activities are encouraged to read these documents to identify high risk areas for losses of resources through fraud, waste, abuse, mismanagement and to access the adequacy of preventative measures and controls. Collectively we must protect NPP from fraud, waste and abuse,
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GUIDE DE PREVENTION DE LA
FRAUDE AU SEIN DES BIENS
NON PUBLICS ET QUESTIONNAIRE
Ref.: A. Guide de prevention de la fraude au sein des Biens non publics (ci-joint)
B. Questionnaire de prevention de la fraude au sein des Biens non publics (ci-joint)
1.	Le Guide de prevention de la fraude au sein des Biens non publics et le questionnaire (ci-joints) sont publies avec l'autorisation du DGSSPF a titre de directeur general des BNP.
II constitue une mesure initiale pour communiquer ('existence de la strategie de prevention de la fraude au sein des BNP et servira de reference pour les commandants des bases, des escadres, des navires et des petites unites de meme que les gestionnaires, les surveillants et les employes pour aider a comprendre,
prevenir et a detecter la fraude, le gaspillage et l'abus des ressources des BNP.
1.	Toute personne qui gere des activites des BNP devrait lire ces documents afin d'identifier les risques &eves de pertes de ressources attribuables a la fraude, au gaspillage, a l'abus et a une mauvaise gestion et de verifier si les mesures de prevention et de controle sont adequates. La protection des BNP contre la fraude, le gaspillage et l'abus doit etre un effort collectif.

4210, rue Labelle Street, Ottawa, Ontario, K1 A 0K2	Canada
www.cfpsa.com • www.aspfc.com

4.	Should you have any further questions or require clarification you may contact the Special Advisor to CFO, Sarah Myrer, (myrer.sarahcfrisa.com) (613) 995-7186.
Le directeur general des Biens non publics,

Brigadier-general F.G. Bigelow
Brigadier-General
Managing Director Non-Public Property
Enclosures: 2
Distribution List
Action
All Base/Wing/Unit Commanders
Assoc DGPFSS
Pres SISIP FS
Pres CANEX
CPSP
VP HR
CFO
CIO
COS
B/W PSP Mgrs/Pers Svcs O
D Acct
D Fin
SA CFO
SMCA
Info
CDS
CRS
COS VCDS 

4.	Si vous avez des questions, n'hesitez
pas a communiquer avec Sarah Myrer, conseillere speciale de la CSF, au 613-995-7186, ou a l'adresse nivrer.sarah@aspfc.com.
Pieces jointes : 2
Liste de distribution
Action
Tous les commandants des
bases/escadres/unites
DGSSPF associe
Pres SF RARM
Pres CANEX
CPSP
VP RH
CSF
CSI
CEM
Gest PSP/O Svc Pers B/Ere
D Compt
D Fin
CS CSF
GSAC
Info
CEMD
CS Ex
CEM VCEMD

2/3

D Mar Pers
DLPM/G1
DG Air Pers
CEFCOM Comptroller
DG Fin Ops	D Pers Mar
G1 D Gest PAT
DG Pers Air
Contraleur COMFEC
DG Ops Fin	

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THE NON-PUBLIC PROPERTY (NPP) FRAUD PREVENTION HANDBOOK -
To protect Non-Public Property (NPP) from fraud, waste, and abuse, Director General Moral and Welfare Services (DGMWS) has established a prevention and detection strategy (based on the current DND/CF Fraud Prevention Handbook) to:
a.	develop an awareness of the nature and scope of potential fraud, waste and abuse situations within NPP;
provide guidance to “Staff of the Non-Public Funds, Canadian Forces”, Military members and Public Servants within DND concerning actions to be taken when such situations are encountered;
b.	communicate risk identification methodologies and tools to allow leaders to target their efforts in high risk/high consequence areas;
a.	systematically identify potential fraud, waste and abuse situations of NPP; and
d.	Investigate those situations that are determined to warrant detailed examination and analysis.
The support of the “Staff of the Non-Public Funds”, Canadian Forces, Military members and Public Servants within DND is required to develop a consistent NPP strategy and to send a clear message that fraud, waste and abuse situations of NPP will not be tolerated.
This NPP Fraud Prevention Handbook is issued on the authority of DGMWS as Managing Director of NPP. It is intended as an initial step in communicating the existence of the NPP Fraud Prevention Strategy and is a reference for Base/Wing/Ship/Small Unit Commanders, managers, supervisors, and employees to assist in understanding, preventing, detecting fraud, waste and abuse of NPP.

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TABLE OF CONTENTS

SECTION	SUBJECT MATTER
SECTION 1 – GENERAL
SECTION 2 – FRAUD PREVENTION
SECTION 3 – TYPES OF FRAUDS AND CONTROLS
PROCUREMENT OF GOODS AND CONTRACTING FOR SERVICES
NON-PUBLIC PROPERTY (NPP)
PROTECTION OF RESALE GOODS AND ASSETS
SAFEGUARDING AND DISPOSAL OF MATERIAL

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SECTION 1 - GENERAL 
INTRODUCTION 
Fraud can occur in any organization at any time when the wrong combination of opportunity, pressure and rationalization exists.
Opportunities may be presented when controls are weak, during major organizational changes or when responsibilities have not been appropriately segregated. Honest people can be tempted to cross the line when there appears to be little risk of getting caught.
Pressures or needs can exist when individuals experience financial difficulties. A desperate need can drive a normally honest person to take a risk of committing fraud.
Rationalization involves individuals resolving internal ethical dilemmas by convincing themselves that the actions being taken are not criminal or dishonest. People can rationalize that increasing workloads, unpaid overtime or pay freezes are sufficient grounds to begin paying themselves. People can also rationalize through statements such as: "Everybody's doing it"; I'll pay it back"; or, "It's peanuts in comparison to the waste I've seen in other areas".
AIM 
The aim of this handbook is to communicate the existence of a NPP Fraud Risk Management Strategy and to inform “Staff of the Non-Public Funds, Canadian Forces”, and Military members and Public Servants within CFMWS of their specific responsibilities for preventing fraud, waste and abuse.
The Handbook is also designed to assist “Staff of the Non-Public Funds, Canadian Forces”, Military members, and Public Servants within NPP in developing local strategies and controls to prevent and detect fraud, waste and abuse.
SCOPE
This handbook will provide a synopsis of types of fraud waste and abuse, warning signs (the "Red Flags"), relevant internal controls and security measures, and pertinent links and references for the following topics:
a.	Fraud prevention;
Procurement of goods and contracting for services
Non-Public Property (NPP);
Protection of Resale Goods and Assets; and
e	Safeguarding and disposal of assets.
DEFINITIONS 
Fraud. Fraud is defined as follows:
a.	Intentional deception resulting in injury to another. Elements of fraud are a false and material misrepresentation made by one who either knows it is false or is ignorant of its truth; the maker's intent that the representation be relied on by the person and in a manner reasonably contemplated upon; the person's ignorance of the falsity of the representation; the person's rightful or justified reliance; and proximate injury to the person. (Canadian Law Dictionary, pg 89, 1983.)
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b.	To defraud is to deprive by deceit: it is by deceit to induce a man/woman to act to his/her injury. More tersely it may be put, that to deceive is by falsehood to induce a state of mind; to defraud is by deceit to induce a course of action (Buckley J. in Re London & Globe Fin. Corp. Ltd., [1903] 1 Ch. 728 at 732-33).
EXAMPLES OF FRAUD, WASTE AND ABUSE
NPP, like any other large organization, may experience fraud and abuse. Examples include but are not limited to:
a.	Forgery or alteration of all types of documents including travel claims and all types of financial records;
Forgery or alteration of cheques, bank drafts, or other negotiable financial documents;
Impropriety in the handling or reporting of money or financial transactions;
Disclosing confidential and proprietary financial information to persons not authorized to receive it;
Use of NPP, supplies, or other assets for other than their intended purpose;
Accepting or seeking anything of value from contractors, vendors, or persons providing goods or services to NPP;
Destruction, removal, or inappropriate use of vehicles, equipment, buildings, and facilities;
Destruction, removal, or inappropriate use of NPP records and documents; and
Breach of trust, conflict of interest, bribery, and other improprieties in the contracting or procurement process.
IMPACT OF FRAUD AND MISAPPROPRIATION 
DGMWS is responsible for administering Non-Public Property (NPP) on behalf of the Chief of Defence Staff (CDS) and for delivering selected public morale and welfare programs, services, and activities to eligible members on behalf of the Chief of Military Personnel (CMP). Any fraud will impact our service delivery at Bases/Unit/Wings and could result in a loss of public trust. Widespread fraud and misappropriation also will destroy the reputation of and trust in the managing staff of NPP.

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SECTION 2 – FRAUD PREVENTION 
ASSESSING THE RISK OF FRAUD 
The following conditions indicate a high risk of fraud in an organization:
a.	Internal controls and/or security measures are absent, weak, or loosely enforced;
Employees are hired without proper Reliability Checks to confirm honesty and integrity;
An employee has an insoluble personal problem, usually financial in nature, brought about by family medical needs, alcoholism, drug abuse, excessive gambling, or expensive tastes. (It must not be presumed; however that an employee is a high risk because of their family medical needs or needs resulting from a disability or because of the needs or conduct of a family member).;
Compliance Assurance resources are inadequate; and
b.	Security resources are inadequate.
Some basic indicators of potential fraud/misappropriation include:
a.	Adjusting journal entries without proper authorization and supporting details;
b.	Expenditures that lack supporting documents;
False and improper entries in accounting books and records;
Unauthorized payments and/or unauthorized use of NPP assets;
Destruction, counterfeiting, and forgery of documents that support payments; and
a.	Overstated or understated account balances.
Each fraud includes the following:
a.	One or more fraud perpetrator;
b.	A motive for committing the fraud – personal or organizational benefit;
a.	A means for committing the fraud – use of deception to convert money or material from their intended purpose to an unauthorized one;
An opportunity to commit the fraud;
An opportunity to profit from the fraud – either for the individual or the organization; and
A belief by the fraud perpetrator(s) that they will not be caught.

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INTERNAL CONTROL – Self Assessment of Risk
Internal Control. Effective internal control is crucial to the prevention and detection of fraud and misappropriation. Internal control comprises those elements of an organization (including its resources, systems, processes, culture, structure, and tasks) that, taken together, support people in the achievement of the organization‟s objectives. Managers at all levels are responsible for the establishment, maintenance, and restoration of effective internal control within their organization or sphere of responsibility. Attached you will find a self-administered risk assessment questionnaire to be used by managers in their area of responsibility. For current managers, this questionnaire should be completed annually. For new managers, this questionnaire should be completed shortly after commencement of position.
REFERENCES 
A-FN-105-001/AG-001 Chapter 5 – Principles of Internal Controls
Staff of the NPF, Canadian Forces Ethical Principles Policy
Canadian Institute of Chartered Accountants Publication Control and Governance - Number 1: Guidance on Control November 1995

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SECTION 3 – TYPES OF FRAUDS AND CONTROLS 

PROCUREMENT OF GOODS AND	SERVICES 
TYPES OF FRAUD 
Types of fraud applicable to goods procurement and contracting for services are listed in Table 31 below.
Table 3-1 Procurement and Contracting Frauds and Red Flags
Type of Fraud	Example	Red Flags	
Fictitious Invoices - Any invoice not reflective of a legitimate sale and purchase.	- Non-existent supplier
- Payment for goods not received - Duplicate payment for goods purchased	- Invoices from strange/unknown vendors - Invoices with Post Office Box addresses only (i.e. no verifiable street address, no telephone numbers, etc.)
- Invoices for types of goods not received or used by the unit
- Multiple cases of duplicate invoices	
Excess Purchase of Goods - Any purchase of goods exceeding legitimate requirements and/or exceeding financial spending authority limits	- Purchase of excess supplies/ inventory. Excess is diverted to military member, DND employee or NPF employee and converted to personal gain.
- Purchase of non-existent goods. Payment is split between Member/ Employee and vendor.
- Invoice splitting. A large purchase exceeding authorized financial spending authority limits is split into several smaller purchases. Each smaller purchase is within authorized spending limits and is invoiced and paid for separately, Bypassing the spending limits.	- Discrepancies between quantity of inventory/supplies on hand and quantities shown on invoices
- Shortages or overages of supplies/inventory
- Discrepancies between quantities of inventory/supplies ordered and quantities shown on invoices
- Multiple purchases of the same commodity or similar items within a short time period, the total cost of which exceeds authorized financial spending limits
- Acquisition card purchases not authorized by the card holder	
Overbilling - Any payment exceeding the value of goods purchased.	- Vendor and/or Member/Employee submits artificially inflated invoices for payment. Overpayment is diverted or paid to Member/ Employee or an accomplice.
- Member/Employee alters legitimate invoices requesting additional (fictitious) amounts payable to another person. Payment is diverted or paid to Member/Employee or an accomplice.	- Invoices with non-competitive prices (i.e. prices for commodities higher than normal prices in the marketplace) - Recent/short notice/no notice significant increases in prices above a vendor's traditional prices
- Ink amendments or other signs of alteration to printed invoices	
Cheques Payable to Members/ Employees - Any payment for goods made to Members/Employees or vendor companies controlled by them.	- Members/Employees intercept and alter legitimate invoices, or submit fictitious invoices, so that payments are made to the Members/Employees or companies controlled by them.	- Vendor invoices bearing the address or telephone number of Members/Employees or their relatives - Vendor invoices with company names that are identical to names of Members/Employees
- Vendor invoices with P.O. Box
addresses only
- Cancelled cheques endorsed with the signature/initials of Members/Employees - Cheques are prepared and authorized by a single Member/Employee	

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Table 3–1 (cont’d) Procurement and Contracting Frauds and Red Flags
Type of Fraud	Examples	Red Flags	
Bid-Rigging, Kickbacks, and Secret Commissions - Manipulation of the contract bidding process for personal gain. Receipt of bribes, gifts, and secret commissions in return for awarding a procurement contract.	- Member/Employee rigs bids or uses insider knowledge/influence to ensure award of a procurement contract to a vendor controlled by themselves or an accomplice.
- Member/Employee receives bribes, kickbacks, gratuities, gifts, other considerations, etc. in return for awarding or influencing the award of a contract to a specific vendor.	- Lack of competitive bids
- Timing and patterns of bids
- Patterns of selecting new vendors
- Undue amount of contracts awarded to
and procurement from one or more
specific vendors
- Sole source contracts
- Non-competitive pricing
- Significant price changes or changed
orders (especially after a contract is
awarded)
- Unhappy/disgruntled purchasing agents
- Purchasing agents living beyond their
financial means
- Complaints from other vendors
- Vendors with P.O. Box addresses only	
Conflicts of Interest - A Member/Employee has an undisclosed economic interest in a procurement transaction	- A Member/Employee secretly owns a business that supplies goods to NPP.	- Member/Employee owns a business that supplies NPP.
- Other vendor complaints	
Product Substitution - A vendor supplies substandard goods and submits an invoice for goods of higher quality/type.	- Vendor deliberately supplies poor quality, defective, or spoiled goods, or goods that do not meet procurement specifications, and bills for goods of the proper quality/type.	- Discrepancies between types of items ordered and items received
- Excessive damage or poor condition of items received	
Short Shipping - A vendor supplies
less goods than were ordered while
billing for the original order quantity.	- Vendor deliberately supplies less goods while billing for the full quantity.	- Discrepancies between quantities on purchase orders, bill of lading, invoices, receipts, and quantities of items received	

The following may also indicate fraudulent activity by personnel in charge of contracting/procurement:
a.	Sole Source or Few Suppliers. The outlet deals with only one or a few suppliers who rarely change. Most orders go to one or two suppliers.
Concentrated Purchasing Authority. Final purchasing decisions are made by one person, with no independent verification.
Living Beyond One's Means. The lifestyle of the person with purchasing authority is clearly more affluent than their salary would allow.
Purchasing Records. Purchasing files are not easily accessible or understandable.
Complex Purchase Orders. Large orders are not covered by a single purchase order, but are broken up into confusing elements, including changes and add-ons.
Lack of Receiving Reports. There are no verified receiving reports.
Vendor Complaints. Vendors complain that they cannot get any of the outlet‟s business -- it is normal that 20% to 25% of local vendors should change annually.
Refusal of Promotion/Transfer. Employee who refuses a promotion or transfer that would move them to another job.
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b.	Purchaser Work Habits. Employees who arrive at work early and leave late, and never take leave or vacations.
a.	Purchasing Costs. Cost of goods have risen faster than the current inflation rate.
INTERNAL CONTROLS 
Key controls (it may be impossible to implement all internal controls) for preventing fraud in goods procurement and services contracting include:
a.	Fraud awareness;
Effective tendering and budgeting;
Good knowledge of vendors and contractors who supply goods and services to the unit;
Proper documentation - serial numbered purchase orders, receipts, and cheques;
Proper approval procedures for procurement and contracting transactions, including detailed background information on vendors and contractors;
Segregation of duties - procurement/contracting, requisition/purchase order, financial commitment, payment authorization, accounts payable invoice processing, cheque preparation, and receiving of goods must be performed by different personnel;
Compliance with policy on conflicts of interest and acceptance of gifts from prospective/actual vendors;
Reconciliation of purchase orders/requisitions, invoices, cheques/payments, bills of lading, and receipts;
Purchasing agents and contracting personnel must not be responsible for
disposal of obsolete or surplus inventory, scrap, or fixed assets;
Prompt reporting of discrepancies, irregularities, and suspected violations to the proper authorities for investigation; and
Timely investigation of discrepancies, irregularities, and suspected violations by appropriate authorities.
FINANCIAL AUTHORITY
For specific information on the financial authority limits for goods and services procurement, including emergency financial limits, see the „CDS Delegation of Authorities for Financial Administration of NPP‟ Matrix

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POLICIES AND PROCEDURES – RELEVANT LINKS
Policies and procedures applicable to procurement and contracting for services can be found at the following link:
A-FN-105-001/AG-001, Policy and Procedures for Non Public Property (NPP) accounting, Chapter 18, Cash and Other Receipts 
NPP Contracting Policy available on the cfmws.ca website - Finance Division

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NON-PUBLIC PROPERTY (NPP) 
GENERAL 
The sector of NPP is extensive and includes such varied entities as:
a.	Unit messes, kit shops, unit funds, and other institutes;
Unit clubs and recreational organizations;
CANEX retail operations; and
SISIP Retail Financial Services.
All NPP entities, regardless of type, provide goods and/or services to authorized patrons. NPP entities are vulnerable, in general, to the same types of frauds experienced by private sector wholesale and retail businesses.
TYPES OF FRAUD 
Types of fraud applicable to NPP, messes, and institutes are listed at Table 3-2 below.
Table 3-2 NPP, Messes, and Institutes Frauds and Red Flags
Type of Fraud	Examples	Red Flags	
Goods Procurement and Contracting for Services Frauds (Acquisition and Payment Cycle) - Any type of fraudulent activity related to purchasing goods or services. See Table 3-1 for details	- Fictitious Invoices
- Excess Purchase of Goods
and/or Services
- Overbilling
- Cheques Payable to Employees
- Bid-Rigging, Kickbacks, and
Secret Commissions
- Conflicts of Interest
- Product Substitution
- Short Shipping	See Table 3-1.	
Compensation and Benefits Frauds (Payroll and Personnel Cycle) - Any type of fraudulent activity related to compensation and/or benefits paid to NPF employees.	Payroll Fraud	- Poor central control - failure to have procedures in place to monitor/identify and investigate anomalies - Paycheques for more than one employee are deposited to the same bank account
- Paycheques for more than one employee are mailed to a single address
- Paycheques for one employee endorsed with another employee's signature/initials
- A single Social Insurance Number is shared by more than one employee (Accero will not allow this to occur) - Employees without income tax or other payroll deductions
- Delinquent payroll tax notices from Revenue Canada - Discrepancies between member/employee rank/classification and pay rate
- Single employee working overtime in a unit/section
- Overtime during Statutory Holidays and other periods in which work normally is not authorized
- Excessive overtime
- Missing, altered, incomplete, or inaccurate overtime records	
	- Ghost Employees
- Overpayment of Wages
- Withholding Tax Schemes - Benefits Schemes		
Other Personal
Expenses Frauds	Personal Expense Fraud	- Ink amendments and whiteout on documents
- Duplicate or multiple claims for the same expense
- Unreasonable mileage distances claimed
- Unreasonable amounts for reimbursement claimed
- Unreasonable or questionable items claimed
- Reluctance, refusal, or inability to justify/explain items
and amounts claimed
- Unallowable items claimed	
	- Fictitious Expenses
- Altered Expenses
- Unallowable Expenses		

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- Receipts and Government Travel Card (AMEX) slips for questionable, unallowable, or unexplained items
Table 3-2 (cont’d) NPP, Messes, and Institutes Frauds and Red Flags
Type of Fraud	Examples	Red Flags	
Sales and Collection Cycle Frauds - Any type of fraudulent activity related to the sale of goods and services.	Theft of Cash (Front-End Fraud)	- Customer Complaints
- Vendor Complaints
- Missing Invoices, Receipts, Cash Register Tapes, or
Other Documents
- Non-Payment by Customers
- Shipments to Customers with the Same Address as
Employees
- Missing Inventory
- Unexplained Shortages of Cash on Hand
Statistical Analysis	
	- Unrecorded Sales/Sales
Taxes
- Under Ringing Sales on Cash
Register
- Lapping
- Theft of Funds from Voided
Sales and Returns
Theft of Inventory and Other		
	Assets		
	- Ordering/Shipping Goods to
Employee's Residence
- Ordering Goods for Personal
Use
Kickbacks to Customers	- Prices Charged by Product by Customer
- Credit Granting Approval vs. Actual Sales to
Customers
- Customer Balances vs. Sales
- Customer Balances vs. Length of Time Doing
Business With the Customer
- Receivable Write-Offs
- Credit Memos by Customers
- Time Between Order and Delivery
- Discounts By Customer in Descending Volume of
Purchase	
	- Underbilling for Merchandise and Splitting the Difference with the Customer
- Writing Off Receivables Owed to NPP Entity for a Fee
Improper Barter - Non-monetary		
	exchange of goods or services with another NPP entity or a commercial entity without proper authorization/documentation, and/or at a financial loss		
Inventory and Warehousing Cycle Frauds - Any type of fraudulent activity related to the purchase and warehousing of goods/merchandise for manufacture and resale.	- Ordering Unneeded Inventory - Appropriating Inventory for Personal Use
- Theft of Inventory and Scrap Proceeds
- Charging Embezzlements to Inventory	- Excessive Inventory Shrinkage
- Discrepancies in Purchase Orders, Receiving
Records, Inventory Records, Raw Material
Requisitions, Shipping Documents, and Other
Records
- Disposals Followed by Reorders
- Shipments to Employees' Residence Addresses
- Excessive Purchases by Item or Vendor
- Unduly Low Inventory for Specific Item Types
- Excessive Costs Per Inventory Item Over Time
- Excessive Direct Labour/Materials Per Inventory Item
- Excessive Overhead Per Inventory Item
- Patterns of Shortage by Inventory Item	
Capital Acquisition and Repayment Cycle Frauds - Any type of fraudulent activity related to borrowing money in the name of the NPP entity and accounting for the NPP entity's debts.	- Borrowing for Personal Use - Theft of Interest Payments - Theft of Loan Proceeds	- Creditor Complaints - Late/Missing Loan Payments - Missing Blank Cheques or Negotiables
- Loan Payments Mailed to Employees' Addresses or Post Office Boxes
- Missing/Altered Receipts, Bank Statements, Cancelled Cheques, or Other Records	
Cash Misappropriation - Any type of fraudulent activity related to the NPP entity's cash account:
a.	petty cash; and
demand deposits:
(1)	NPP chequing accounts,
NPP savings or interest- bearing accounts, and
NPF certificates of deposit or all other liquid investments that easily	Theft of Petty Cash	- Late and/or infrequent bank deposits
- Shortages or Missing Cash on Hand
- Missing/Altered Cash Register Tapes, Receipts, Bank
Statements, Cancelled Cheques, or Other Records	
	- Forging or Preparing Fictitious Vouchers for Reimbursement from Petty Cash
- "Borrowing" from Cash Floats or Cash on Hand
Theft of Bank Deposits		
	- Theft of Receipts (Funds) Prepared for Bank Deposit - Theft of Blank or Signed Cheques		

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can be converted to cash.
NPP related frauds also may be classified by the type of concealment on-book frauds and off-book frauds. An on-book fraud is one that principally occurs within the NPP entity and where an audit trail (possibly obscure) exists to aid in detection. Examples include fictitious vendors and ghost employees. On-book frauds normally are detected at the point of payment. An off-book fraud is one which occurs outside the accounting environment, and where no audit trail is likely to exist. Examples include bribery and kickbacks. Off-book frauds are detected in an indirect manner (e.g. complaints by other vendors, lifestyle of employee receiving bribes, etc.).
INTERNAL CONTROLS
Internal controls applicable to the detection and prevention of NPP fraud are as follows:
a.	Elements of Internal Control. Every NPP activity functions under conditions peculiar to its field of endeavour and with particular requirements. There is no ready-made pre-packaged internal control system which meets the needs of all concerns. Management must select the internal controls necessary by comparing the costs to the organization relative to the benefits expected from implementing control. The basic elements essential to satisfactory control are:
(1)	Organization Plan - a logical organizational plan which clearly identifies lines of authority and delegation of responsibility, and which segregates incompatible functions;
Accounting Structure - an adequate accounting structure (including budgetary techniques, a chart of accounts, procedural manuals and instructions, which reflect the flow of transactions);
Transaction Records - transactions should be recorded promptly and accurately;
Competent Personnel - competent personnel with integrity should be hired and properly trained;
Authorized Transactions - actions are taken only by individuals acting within their authority;
Control of Access to Assets - access to assets should be limited to authorized individuals;
Independent Verification of Accounting Records - accounting records should be compared to assets on a regular basis. This comparison should be done by individuals other than those having custody of records and assets; and
Management Review - management should review the organization‟s financial operations, financial position, and internal control at regular and frequent intervals.
b.	Adequate Segregation of Duties. Management should segregate the following duties to prevent intentional and unintentional errors:
(1)	General. Custody, authorization, and record keeping functions must be separated:
(a)	Separation of the custody of assets from accounting,

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(b)	Separation of the authorization of transactions from the custody of related assets,
Separation of duties within the accounting function, and
Separation of operational responsibility from record-keeping responsibility.
(2)	Acquisition and Payment Cycle. See the NPP Contracting Policy.
Payroll and Personnel Cycle. Separate accounting for work from cheque processing. Separate cheque processing from cheque distribution. Separate employee hiring/firing from timekeeping. Separate claims processing from claims approval. Separate claims processing and claims approval from claims payment.
Sales and Collection Cycle. Separate sales, record keeping, and cash handling. Separate purchasing from disposal of obsolete inventory, scrap, or fixed assets.
Inventory and Warehousing Cycle. Separate inventory purchasing/ disbursement approval from the purchasing and warehousing functions. Separate receipt of inventory from custody of inventory. Separate independent verification of inventory from the purchasing and warehousing functions.
Capital Acquisition and Repayment Cycle. Separate authorization to borrow from the cash handling and accounting functions.
Cash. Separate payment authorization from the record keeping and cash handling functions.
c.	Prevention of Errors in Journals and Records. To prevent errors in journals and records, the organization must ensure the following:
(1)	Recorded transactions are valid,
Transactions are properly authorized,
(1)	All existing transactions are recorded (no omissions),
(5)	Transactions are properly valued (i.e. the correct financial value is recorded for the transaction),
Transactions are properly classified (i.e. recorded in the correct accounts),
Transactions are recorded at the proper time, and
Transactions are properly included in subsidiary records and correctly summarized.
d.	Point of Sale (POS)/Cash Registers. POS/Cash registers are not, in themselves, controls. It is only by exercising supervisory prerogatives and using the various features of these machines, that management exercises control. To evaluate internal control over cash register transactions, the following questions should be answered:
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(1)	Is there a POS/cash register in use?
Is each sale recorded at the time of the transaction?
Is a sales receipt given to the customer?
Is there a master tape that records all transactions?
Is the master tape retained and examined periodically by supervisory or management personnel?
Does the cash register provide "X" and "Z" readings?
Do the "Z" reading tapes indicate consecutive reading numbers?
Are "Z" readings taken by supervisory staff not employed on cash register duties?
Are the reading keys secured and accessible only to designated supervisory staff?
Do representatives of management periodically carry out independent readings?
Are the "Z" reading consecutive reading numbers verified by the NPP accounting staff?
Each "No" answer to the above questions indicates a weakening of internal control. Management should take appropriate corrective action to minimize such weaknesses.
e.	Serially Numbered Forms. The use of serially numbered documents is a common method of internal control, by providing an accountable record for transactions. Cheques, tickets, invoice, purchase orders, and many other documents can be controlled in this manner. Certain documents, such as cheques and purchase orders, require strict accountability for every number in the series with a regular inspection of the documents used. Other types of documents, such as admission tickets, can be controlled by verifying unused holdings and computing the total value of those issued/sold between verifications. Detailed procedures for control of serially numbered documents are given at A-FN-105-001/AG-001 (Policy and Procedures for Non-Public Funds Accounting), Chapter 6. Accountable documents include:
(1)	Form CF 601, Purchase Order and Receipt,
Form CF 602, NPF Receipt,
Form CF 603, Merchandise Requisition,
Form CF 614, Merchandise Stocktaking Report,
Form CF 1023, Inventory Record,
Form DND 1221, NPF Invoice,
Form CF 1333, Request for Credit,
Form CF 1343, Retail Price Change,
Form DND 1353, CANEX Purchase Order,
Blank cheques,
Gift Certificates; and
Tickets.
f.	Proper Approvals. Approval from the appropriate authorized individual should be obtained and recorded for critical functions listed below:
14 November 2011	15

(1)	Sales and Collection Cycle. Authorization for credit granting, write-offs, and shipment of goods.
Acquisition and Payment Cycle. Authorization for purchasing of goods and services, and disposing of obsolete inventory, scrap, or fixed assets.
Payroll and Personnel Cycle. Authorization for hours worked and wage rates, hiring and terminations, overtime, medical benefits, and travel/ relocation expenses/benefits.
Inventory and Warehousing Cycle. Authorization for inventory purchase, inventory disbursement, disposal of obsolete inventory, scrap, or fixed assets.
Capital Acquisition and Repayment. Authorization to borrow.
Cash. Authorization to withdraw funds from bank accounts.
Barter. Appropriate authorization for non-monetary exchange of goods and services. For more details on Sponsorship and Donations, refer to A-FN-105-001/AG-001 Chapter 29.
g.	Documentation. Accurate, timely, and complete records must be kept for all transactions. This includes the initiation, authorization, and completion of each transaction. Records are kept within the NPP entity, by the local Non-Public Property Accounting Manager, and with outside entities (e.g. banks and other financial institutions, customers, vendors/suppliers, Provincial/Municipal licensing authorities, etc.). Time Sheets and Payroll Verification Reports (PVR) are financial records that must be maintained at the local NPP entity outlet. Records must be maintained for the previous six years plus the current year.
Independent Verification. Bank reconciliations, comparisons of inventory to accounting records, audits, and other verification activities should be performed frequently by personnel independent of the function/activity under review and by management.
SECURITY MEASURES
Internal control requires that access to assets be limited only to authorized personnel. This is achieved through the use of appropriate physical, procedural, and other types of security measures. Key security requirements can be found in Chapter 6 and Chapter 7 of the A-FN-105-001/AG-001, Policy and Procedures for Non Public Property (NPP) accounting, and Chapter 8 of the National Defence Security Policy (A-SJ-100-001/AS-000)
POLICIES AND PROCEDURES – RELEVANT LINKS
A-FN-105-001/AG-001, Policy and Procedures for Non Public Property (NPP) accounting

14 November 2011	16

TYPES OF FRAUD
The types of fraud that could be found within NPP are typical of those found in the inventory and warehousing function of any large organization. Supply related frauds involve the diversion of material from its intended purpose. Some examples include:
a.	Ordering unneeded inventory or exceeding authorized entitlement quantities;
Appropriating inventory for personal use or to sell for profit;
Theft of inventory and scrap proceeds; and
Appropriation of surplus inventory and scrap to sell for profit.
RED FLAGS 
Some Red Flags that indicate supply-related fraud include:
a.	Excessive inventory shrinkage;
Discrepancies between demands/orders, receiving records, inventory records, shipping records, issue records, and actual inventory on hand;
Discrepancies between current and previous reports and items on hand during supply verifications, stocktaking counts, and reconciliations of serialized items;
Disposals of specific items (scrap or surplus) followed by orders/demands for the same items;
Shipments to employees‟ residence addresses;
Excessive orders/demands by item;
Excessive issues of items to units/individuals;
Issues of items to units/individuals without proper entitlement;
Unduly low inventory holdings for specific item types; and
Excessive write-off of inventory or write-off by persons lacking proper authority.
INTERNAL CONTROLS 
Key internal controls applicable to supply and material are summarized below:
a.	Stocktaking and Verification. Detailed procedures for stocktaking and verification are given in Chapter 26 of A-FN-105-001/AG-001.
Investigation of Stocktaking/Verification Discrepancies.
Write-Off Control. Detailed procedures for reporting and approving write-off of material are provided within the A-FN-105-001/AG-001 Chapter 28 and contact your local NPP accounting office for procedures.
b.	Inventory and Special Material Control.
14 November 2011	17

e.	Segregation of Duties. Custody, entitlement/issue authorization, and record keeping functions must be separated. Separate inventory purchasing/ordering approval from the purchasing/ordering and warehouse functions. Separate receipt of inventory from custody of inventory. Separate independent
verification of inventory from the purchasing/ordering and warehousing functions. Separate purchasing/ordering from write-off approval and from disposal of surplus/scrap inventory.
f.	Prevention of Errors in Records. To prevent errors in records, the organization must ensure the following:
(1)	Recorded transactions are valid,
Transactions are properly authorized,
All existing transactions are recorded (no omissions),
Transactions are properly valued (i.e. the correct quantity of item is recorded for the transaction),
Transactions are properly classified (i.e. recorded in the correct accounts),
Transactions are recorded at the proper time, and
Transactions are properly included in subsidiary records and correctly summarized.
g.	Proper Approvals. Approval from the appropriate authorized individual should be obtained and recorded for material authorization (new/amended entitlements), inventory purchasing/ordering, inventory disbursement, disposal of obsolete inventory, scrap, or fixed assets.
(1)	Documentation. Accurate, timely, and complete records must be kept for all transactions. This includes the initiation, authorization, and completion of each transaction
SECURITY MEASURES
Internal control requires that access to assets be limited only to authorized personnel.
This prevents theft, pilferage, and other forms of illegal diversion of inventory. This is achieved through the use of appropriate physical, procedural, and other types of security measures. Key security requirements for supply and material can be found at A-FN-105-001/AG-001, Policy and Procedures for Non Public Property (NPP) accounting
MATERIAL WRITE-OFF
Authorization for material write-off can be found in the „CDS Delegation of Authorities for Financial Administration of NPP‟ Matrix on cfmws.ca.
Contact your local NPP accounting office for more details on write-off.

14 November 2011	18

SAFEGUARDING AND DISPOSAL OF MATERIAL 
TYPES OF FRAUD 
Table 3-3 Material Disposal Frauds and Red Flags
Types of Fraud	Red Flags	
Unrecorded/unauthorized transactions	-Discrepancies between fixed asset records and material on hand.
- Shortages/losses of specific items
- Frequent demands/re-orders of specific items
- Material held which is not recorded as on charge to the holder
- Holdings of NPP material
- History of frequent loss/shortage of specific items	
Unauthorized sale of material (for the profit of individuals or the organization)	- Discrepancies between holding records and material on hand
- Shortages of specific items
- Frequent demands/re-orders of specific items
- Unit personnel with unexplained wealth or who live beyond their means	
Unauthorized disposal of material (e.g. improper conversion to scrap)	- Frequent shortages of specific items followed by re-orders
- Large quantities of CF/DND/NPP material being sold in the local community
without proper authorization.
- Shipments of material to employees‟ residence addresses	
Theft of disposal proceeds:
(1)	Theft of scrap or other material awaiting disposal;
Theft of sales proceeds for disposed material.	- Shortages in funds received from purchasers of disposed material
- Missing payments from purchasers of disposed material
- Discrepancies between the realized gain/loss on the sale of fixed assets
and the amount reported on the entity financial statements.	

INTERNAL CONTROLS
Internal controls for detecting and preventing material disposal frauds are the same as those generally applicable to supply and material. Segregation of duties is critical. Different personnel should handle the following duties:
a.	ordering inventory;
issuing/disbursing inventory;
converting inventory to scrap/surplus; and
receiving proceeds from disposal of scrap/surplus.
If any one person has the ability to order and issue inventory, then that person has the ability to order excess inventory, which then can be converted for personal use. If any one person has the authority to convert inventory to scrap/surplus, dispose of the scrap/surplus, and collect the proceeds of scrap/surplus disposal, that person can divert (i.e. steal) the proceeds, or steal “scrap/surplus” inventory for personal use or to sell for profit.
SECURITY MEASURES
All inventory (including surplus and scrap) should be kept in secure storage. Access should be limited to authorized personnel only. Appropriate personnel and procedural measures should be implemented.
14 November 2011	19

NON-PUBLIC PROPERTY (NPP)
FRAUD PREVENTION QUESTIONNAIRE
Guidance Documentation for the
Non-Public Property Fraud Control Plan
RISK CHECK

A Self-Assessment Questionnaire to assist Non-Public Property Accounting Managers, Business Managers/Directors and Supervisors to identify high risk areas for losses of resources through fraud, waste, abuse, mismanagement and to assess the adequacy of prevention measures and controls.
FRAUD RISK SELF ASSESSMENT QUESTIONNAIRE
In the context of Fraud Risk Management, the term resources is not confined merely to funds or money in the delegated
14 November 2011
1

sense, but is used in the broadest sense including all Non-Public Property (NPP). It includes personnel, time, information, assets and intellectual property.
This Fraud Prevention questionnaire has been designed as a self help assessment tool to guide Non-Public Property Accounting Mangers (NPPAM) and operational managers in recognizing potential risk of loss to resources delegated to
them and to assess the adequacy of existing controls. An alert symbol  appears against responses indicating a possibly inadequate level of control. Sometimes you will be asked to elaborate on a particular answer and a box has been provided for that purpose.
As per A-PS-110-001/AG-002, The National Defence Act (NDA) provides that NPP shall be used for the benefit of CF members, former members, their dependants, or for any other purpose approved by CDS. Section 39 (3) of the Act also provides that, except as authorized by the CDS, “no gift, sale or other alienation or attempted alienation of non-public property” is effectual to pass the property therein.
Note that all authorities for commitment and contract authority, payment approval authority, and requisitioning authority must be performed as per The Chief of the Defence Staff Delegation of Authorities for Financial Administration of Non-Public Property (NPP).
Most operational managers and NPPAM will be responsible for only a small proportion of the resource categories covered by this questionnaire. Answer only those questions in sub-sections related to categories which you manage or control, and this way you won't be daunted by the questionnaire.

Section A – Expenditure Transactions
Al - Salaries
A2 - O&M, travel, etc
A3 - Non-Public Property (NPP) Monies including Petty Cash
A4 - Non-Public Property (NPP) Corporate Credit Card
A5 - Purchase Orders/Manual Commitment
Section B - Assets
B1 - Control of Assets
B2 - Disposal of Assets
B3 -	Information (including storage on computer facilities)
C1 - Purchasing of Fixed Assets and other Goods and/or Services
D1 -	Payment Card Industry (PCI) Compliance

2

14 November 2011

SECTION A - EXPENDITURE TRANSACTIONS
A1 Salaries
0Alert symbol should draw your intention to the requirement for more internal controls to mitigate risk.
Note that all authorities for commitment and contract authority, payment approval authority, and requisitioning authority must be performed as per The Chief of the Defence Staff Delegation of Authorities for Financial Administration of Non-Public Property (NPP).
A.1 Are you involved in the payment or authorization of salaries (including the input of data upon which salaries are based)?
Yes 0	Please go to next	question
No 0 Go to A.2
A.1.1 What was the total value of gross salaries paid for the last pay period?
Up to $50,000	0
$50,001-$100,000	0
$100,001-$200,000	0
Over $200,000	0
Data unavailable	0
A.1.2 How many people were paid in the last pay period?
Up to 50	0
51 - 100	0
101 - 200	0
Over 200	0
Data unavailable	0
A.1.3 Are there predictable periods of abnormally high workload in the processing or approval functions?
Yes 0
No 0
A.1.4 Are additional resources allocated for processing and checking during these periods?
Yes 0
No	0	Go to A.1.6
A.1.5 What sort of additional resources are allocated for these periods?
Overtime	0
Additional Staff 0
Other	0
14 November 2011
3

A 1.6 What was the level of staff turnover in this entity in the last financial year?
0% - 30%	
31% - 60%	
61% - 100+% ©
A.1.7 What was the general level of related experience of new/replacement staff in the last fiscal year?
Low	©
Medium	
High	
A.1.8 Are the approval, processing and checking functions geographically co-located (i.e., in the same building, on the same Base/Wing etc.)?
Yes 
No 
A.1.9 Are the processing and approval functions separated?
Yes 
No ©
A.1.10 What is the minimum number of people required to approve a salary payment or adjustment?
1©
2
3
A.1.11 In addition to normal controls what degree of additional local management controls / Standing Operating Procedures have been put in place?
None ©
NATURE
Minor	Major

NUMBER Few Moderate Many

q	

4

q	

A.1.12 What level of review is the NPP entity subject to?
Tick EACH applicable box
Nil Review	©
Supervisory Checks
Compliance and Assurance Review/Command Inspection
Chief of Review Services (CRS) Audit and External Auditors	Random	Scheduled
q	

A.1.13 How would you describe the processing of salary payments and authorizations?
Primarily computerised	©
50/50 computerised/manual	
Primarily manual	
A.1.14 ls access to salaries records (e.g., excluding original documents) controlled?
Yes 
No ©
A.1.15 How is access to salaries records controlled?

Insecure area
Partially secure area
Secure area
Initial password gives full access (computer)
Initial password gives read only access (computer) Manual records file register
Supervised access to manual records Accountable forms kept in locked container-
- single custodian
- double custodian

q	©
q	

q	

q	

q	

q	

q	

A.1.16 Are all instances of access to salaries records recorded?
Yes 
No ©
A.1.17 How often are records of access inspected?
Random	Scheduled
Frequently 	
Infrequently 	

5

A.1.18 Have staff members performing this activity been provided with relevant training?
No DO
Yes	D What? When?
A.1.19 Do staff involved in this activity have easy access to relevant manuals and instructions?
Yes D

6

No DO

A2 (O&M, Travel, etc)
©Alert symbol should draw your intention to the requirement for more internal controls to mitigate risk.
Note that all authorities for commitment and contract authority, payment approval authority, and requisitioning authority must be performed as per The Chief of the Defence Staff Delegation of Authorities for Financial Administration of Non-Public Property (NPP).
A.2	Do any of your activities involve the payment or authorization of O&M, Travel, etc.
Yes	Please go to the next question
No	Go to A.3
A.2.1 What was the total value of O&M, travel, etc paid in the last period?
Up to $5,000	
$5,001 - $10,000	
$10,001 - $20,000	
Over $20,000	
Data Unavailable	
A.2.2 How many transactions were completed in the last monthly reconciliation?
Up to 50	
51 - 100	
101 - 200	
Over 200	
Data unavailable	
A.2.3 What type of expenditures does your NPP entity process?
Travel	
Moving	
O&M	
Combination of Above 
Other	
A.2.4 If allowances are processed in your NPP entity, do you require documentation before approving/processing them?
Yes	
Sometimes	

7

No	©

A.2.5 Are there predictable periods of abnormally high workload in the processing or approval functions?
Yes 
No 
A.2.6 Are additional resources allocated for processing and checking during these periods? Yes 
No	 Go to A.2.8
A.2.7 What sort of additional resources are allocated for these periods?
Overtime	
Additional Staff 
Other	
A.2.8 What was the level of staff turnover in this activity in the last fiscal year?
0%- 30%	
31% - 60%	
61%- 100+% ©
A.2.9 What was the general level of work related experience of new/replacement staff in the last fiscal year?
Low ©
Medium 
High 
A.2.10 Are the approval, processing and checking functions geographically co-located (i.e., in the same building, on the same Base/Wing etc)?
Yes 
No 
A.2.11 Are the processing and approval functions separated?
Yes 
No ©
A.2.12 What is the minimum number of people required to approve a payment or adjustment?
0-1 ©
2 

8

3+ 

A2.13 In addition to normal controls what degree of additional local management controls / Standing Operating Procedures have been put in place?
None 
NUMBER Few
Moderate
Many	NATURE
Minor	Major
q	

A.2.14 What level of review is the NPP entity subject to?
Tick EACH applicable box
Nil Review ©
Random	Scheduled
Supervisory Checks		
Compliance and Assurance Review/Command Inspection		
Chief of Review Services (CRS) Audit and External Auditors		
A.2.15 How would you describe the processing of O&M and travel payments and authorizations?
Primarily computerised	©
50/50 computerised/manual	
Primarily manual	
A.2.16 If O&M and travel processing is computerised, is there an inbuilt review trail in the system's software?
Yes 
No ©
A.2.17 Is access to O&M and travel records (e.g., excluding original documents) controlled?
Yes 

q	©

9

No

q	©

A.2.18 How is access to O&M and travel records controlled?
Insecure area
Partially secure area
Secure area
Initial password gives full access (computer)
Initial password gives read only access (computer) Manual records file register
Supervised access to manual records
Accountable forms kept in locked container-
- single custodian
- double custodian

A.2.19 Are all instances of access to O&M and travel records recorded?
Yes 
No ©
A.2.20 How often are records of access inspected?
Random	Scheduled
Frequently 	
Infrequently 	©
A.2.21 Have staff members performing this activity been provided with relevant training?
Yes	 What? When?
No ©
A.2.22 Do staff involved in this activity have easy access to relevant manuals and instructions?
Yes 

10

No ©

A.3 Non-Public (NP) monies including Petty Cash
oAlert symbol should draw your intention to the requirement for more internal controls to mitigate risk.
Note that all authorities for commitment and contract authority, payment approval authority, and requisitioning authority must be performed as per The Chief of the Defence Staff Delegation of Authorities for Financial Administration of Non-Public Property (NPP).
A.3	Do any of your activities involve the use of Non-Public monies including Petty Cash, Standing Advances, etc? Note: Non-Public Monies are all cash values including postage stamps and bus tickets.
Yes		Go to next question
No	 Go to A.4
A.3.1 Does your NPP entity deal with Standing advances?
Yes 
No	 Go to A.3.6
A.3.2 What was the value last month of these standing advances?
0 -$500	
$501 -$ 2000 
$2000+	
A.3.3 How many standing advance transactions were completed last month?
0 - 50	
51 - 100	
101 - 200	
201+	
A.3.4 What level of review are standing advances subject to?
Tick EACH applicable box
Tick EACH applicable box
Nil Review o
Random	Scheduled
Supervisory Checks		
Compliance and Assurance Review/Command Inspection		
Chief of Review Services (CRS) Audit and External Auditors		
A.3.5 Is the reviewing/checking supervisor/manager different to the custodian?
Yes 

q	o

11

No

A.3.6 Does your area deal with Non-Public Property revenue receipt?
Yes 
No		Go to 3.10
A.3.7 What was the value last month of revenue receipts of Non-Public funds?
0 - $500	
$501 - $2000 
$2000+	
A.3.8 How many revenue receipts of Non-Public funds transactions were completed last month?
0 - 50	
51 - 100	
101 - 200	
201+	
A.3.9 What level of review are revenue receipts of Non-Public funds subject to?
Tick EACH applicable box
Nil Review 
Random	Scheduled
Supervisory Checks		
Compliance and Assurance Review/Command Inspection		
Chief of Review Services (CRS) Audit and External Auditors		
A.3.10 Does your area deal with postage stamps, bus tickets, stamp machines, NPP event tickets, etc? Yes 
No	 Go to A.3.15
A.3.11 What was the value last month of the postage stamps, bus tickets, stamp machines, NPP event tickets, etc?
0 - $500	
$501 - $2000 
$2000+	
A.3.12 How many postage stamps, bus tickets, stamp machines, NPP event tickets, etc transactions were completed last month?
0-50	
51 - 100	
101 - 200	

12

201+	

A.3.13 What level of review is postage stamps, bus tickets, stamp machines, NPP event tickets, etc subject to?
Tick EACH applicable box
Nil Review ©
Supervisory Checks
Compliance and Assurance Review/Command Inspection	Random	Scheduled
q	
	
Chief of Review Services (CRS) Audit and External Auditors		
A.3.14 Is the reviewing/checking individual different to the custodian?
Yes 
No ©
A.3.15 Does your area deal with petty cash?
Yes 
No		Go to A.3.25
A.3.16 What was the value last month of petty cash expenditure?
Up to $500	
$500 - $1,000 
$1,001+	
A.3.17 How many petty cash transactions were completed last month?
Up to 50	
51 - 100	
101 - 200	
200+	
A.3.18 How many people in the NPP entity can approve petty cash expenditure?
1-5 
5-20 
20+ 
A.3.19 Is the approving/issuing individual always different from the processing individual?
Yes 
No ©
A.3.20 Is the individual raising the petty cash reimbursement always different from and subordinate to the individual approving the petty cash reimbursement?
Yes 
No ©
13

A.3.21 Is there a procedure in place for reconciling expenditure with receipt of goods?

Yes (goods & receipts verified by other than purchasing individual) Yes (receipts only verified by other than purchasing individual) Yes (goods only verified by other than purchasing individual) No
A.3.22 What level of review is petty cash subject to?
Tick EACH applicable box
Nil Review ©	q	

©	

Random	Scheduled
Supervisory Checks		
Compliance and Assurance Review/Command Inspection		
Chief of Review Services (CRS) Audit and External Auditors		
A.3.23 At any one time, what is the average value of all Non-Public monies held by your area?
0 - $200	
$201 - $500 
$501 - $1000 
$1001 - $5000 
$5001+	
A.3.24 How are Non-Public monies stored?
Locked container
Single custodian
Double custodian
Double lock, fire proof safe
Single custodian
Double custodian	q	

	

Other	
A.3.25 Are you involved in opening and operating official bank accounts?
Yes 

14

No	 Go to A4

A.3.26 Are you involved in the transit of Non-Public monies?
Yes	 What special arrangements are made?

No 
A.3.27 Is a register of accountable forms maintained?
Yes 
No ©
A.3.28 How is access to original documents and records controlled after they have been processed?

Insecure area
Partially secure area
Secure area
Initial password gives full access (computer)
Initial password gives read only access (computer)
Manual records file register
Supervised access to manual records Accountable forms kept in locked container-
- single custodian
- double custodian

q	©

A.3.29 Are all instances of access to original documents and records recorded once they are paid?
Yes 
No ©
A.3.30 How often are records of access inspected?
Random	Scheduled
Frequently		
Infrequently		©
15

A.3.31 Have staff members performing this activity been provided with relevant training?
Yes	D What? When?
No	D O
A.3.32 Do staff involved in this NPP entity have easy access to relevant manuals and instructions?
Yes D
No DO
A.3.33 Are procedures in place to ensure sales/revenue are appropriately controlled (ie. Safekeeping of X and Z keys and cash/over shortage, for SMS systems are passwords secured).
Yes D

16

No DO

A4 Non-Public Property (NPP) Corporate Credit Card
©Alert symbol should draw your intention to the requirement for more internal controls to mitigate risk.
Note that all authorities for commitment and contract authority, payment approval authority, and requisitioning authority must be performed as per The Chief of the Defence Staff Delegation of Authorities for Financial Administration of Non-Public Property (NPP).
A.4	Do any of your activities involve the use of a NPP Corporate Credit Card?
Yes		Go to next question
No	 Go to A.5
A.4.1 How many cards are on issue to individuals within your NPP entity?
1	
2-5 
5-9 
10+ 
A.4.2 What is the average monthly total value (over the past three statements) of transactions on each card? (e.g., total value of all transactions for the past three statements divided by three).
No. of Cards
Up to $1,000		
$1,001 - $5,000		
$5,001 - $20,000		
$20,000 - $100,000		
$100,000+		
A.4.3 What is the monthly average number (over the past three statements) of transactions for each card?
No. of Cards
Up to 50		
51 - 100		

17

101+		

A.4.4 What was the highest value of any single transaction for each card on the past three statements?
No. of Cards
Up to $500		
$501 - $1,000		
$1,001 - $10,000		
$10,001 - $100,000		
$100,000+		
A.4.5 What are the limits of the cards?
Up to $100	
$101 - $500	
$501 - $1,000	
$1,001 - $10,000	
$10,001 - $100,000	
$100,000+	
A.4.6 Is there a procedure in place for reconciling expenditure on cards with their statements?
Yes		Please briefly describe reconciliation procedure
No	 Go to A.4.8©
A.4.7 Is the person conducting the reconciliation always different from the card holder?
Yes 
No ©
A.4.8 Are card holders required to obtain approval for expenditure prior to making a transaction?
Yes	
No	©
Sometimes (Depending on value of expenditure)	 (At what value do you require approval?)

18

A.4.9 What level of review has taken place on credit card usage in your NPP entity in the past year? Tick EACH applicable box

Nil Review ©
Supervisory Checks
Compliance and Assurance Review/Command Inspection
Chief of Review Services (CRS) Audit and External Auditors	Random	Scheduled
q	

A.4.10 How is access to original documents and records controlled after they have been processed?

Insecure area
Partially secure area
Secure area
Initial password gives full access (computer)
Initial password gives read only access (computer)
Manual records file register
Supervised access to manual records Accountable forms kept in locked container-
- single custodian
- double custodian

q	©
q	

A.4.11 Are all instances of access to original documents and records recorded once they are paid?
Yes 
No ©
A.4.12 How often are records of access inspected?
Random	Scheduled
Frequently		
Infrequently		©
A.4.13 Have staff members performing this activity been provided with relevant training?
Yes	 What? When?
No ©

19

A.4.14 Do staff involved in this activity have easy access to relevant manuals and instructions?
Yes 

20

No 

A5 Purchase Orders/Manual Commitment
©Alert symbol should draw your intention to the requirement for more internal controls to mitigate risk.
Note that all authorities for commitment and contract authority, payment approval authority, and requisitioning authority must be performed as per The Chief of the Defence Staff Delegation of Authorities for Financial Administration of Non-Public Property (NPP).
A.5	Do any of your NPP entities involve the use of Purchase Orders (including claims processing against contracts)?
Yes		Please go to next question
No		Please go to Section B - Assets.
A.5.1 What was the value last month of this type of expenditure?
Up to $500	
$501 - $1,000	
$1,001 - $5,000	
$5,001 - $30,000	
$30,000+	
A.5.2 How many transactions were completed last month?
Up to 50	
51-100	
101-200	
Over 200	
A.5.3 How many people in the NPP entity can approve this form of expenditure?
1 - 5 
5 -20 
20 + 
A.5.4 Is the approving/issuing individual always different from the processing individual?
Yes 
No ©
A.5.5 Is the person raising the Purchase Order/making the commitment always different from the person approving the invoice?
Yes 

q	©

21

No

A.5.6 Is there a procedure in place for reconciling expenditure with receipt of goods?
Yes 
No ©
A5.7 What level of review is the activity subject to?
Tick EACH applicable box
Nil Review ©
Random	Scheduled
Supervisory Checks		
Compliance and Assurance Review/Command Inspection		
Chief of Review Services (CRS) Audit and External Auditors		
A.5.8 Is access to original controlled documents after they have been processed?
Yes 
No ©
A.5.9 How is access to original documents and records controlled after they have been processed?

Insecure area
Partially secure area
Secure area
Initial password gives full access (computer)
Initial password gives read only access (computer)
Manual records file register
Supervised access to manual records Accountable forms kept in locked container-
- single custodian
- double custodian

q	©
q	

A.5.10 Are all instances of access to original documents and records recorded once they are paid?
Yes 
No ©
A.5.11 How often are records of access inspected?
Random Scheduled
Frequently  
Infrequently  

22

A.5.12 Have staff members performing this activity been provided with relevant training?
Yes	D What?
No Do
A.5.13 Do staff involved in this activity have easy access to relevant manuals and instructions?
Yes D

23

No Do

SECTION B - ASSETS
For the purposes of this questionnaire, "asset" includes all capital equipment items (major and minor), facilities, vehicles, furnishings, inventories of stores and spare parts and administrative support equipment (such as computer hardware and peripherals, computer equipment and software (including manuals, tapes and diskettes), facsimile machines, telephones, electronic recorders, audio-visual equipment, typewriters, photocopiers, printing/reproduction equipment and training aid equipment). It includes consumable items related to the use of the above (e.g., power, fuel, maintenance / cleaning stores & stationery, printer & photocopy toner and supplies). NPP Managers should ensure that this part of the questionnaire is done for both merchandise for resale and fixed assets.
B1 Control of Assets
OAlert symbol should draw your intention to the requirement for more internal controls to mitigate risk.
Note that all authorities for commitment and contract authority, payment approval authority, and requisitioning authority must be performed as per The Chief of the Defence Staff Delegation of Authorities for Financial Administration of Non-Public Property (NPP).
B.1.1 Is this NPP entity responsible for the control of assets?
Yes	0	Please go to the next question.
No	0 Go to B2.
B.1.2 What is the assessed overall value of total assets for which the NPP activity entity is responsible?
< $50,000	0
$50,000 - $200,000	0
$200,000 - $500,000 0
$500,000 - $1,000,000 0
>$1,000,000	0
B.1.3 What percentage of assets, located within your NPP activity entity, can be considered as either valuable, portable desirable or exchangeable (i.e., for alternative or personal use outside of the CFMWS work environment)?
Up to 25%	0
26% - 50%	0
More than 50%	0O
B.1.4 Has your activity area revealed asset stocktaking deficiencies or asset control procedural deficiencies through either external review or stocktaking activities during the previous two years?
Yes 0O
No 0
24

B.1.5 How frequently is the merchandise for resale and fixed assets within your NPP activity entity subject to stocktaking?
Monthly
Quarterly
Bi-annually
Annually
Biennially	m	

	

Less Frequently	0©	How long since last stocktaking?
B.1.6 How is the inventory verifications performed?
Personnel external to the activity	0 Go to B.1.8
Activity staff	O
Combination of the above	O
B.1.7 Are internal stocktaking activities performed by the same persons who have custodian responsibilities?
Always	O©
Sometimes	O
Never	O
B.1.8 What percentage of assets held by the activity area required authorization from an external (or higher) authority prior to acquisition?
Up to 20% O©
21 - 50%	0
More than 50% 0
B.1.9 What is the physical security classification of the work activity area containing the assets?
Secure	O
Partially Secure	O
Not In a secure location 0©
B.1.10 Does your area maintain an assets register?
Yes	0
No	O©

25

Held by Other Area	0

B.1.11 Are individuals removing or relocating assets from the workplace required to sign for such action?
Yes	0
No	0O
B.1.12 Is authorization required to remove assets from the normal workplace location?
Yes
Supervisor/Manager or Higher 0
DA or inventory holder	0
Other	0 Who?
No	0O
B.1.13 Is authorization required to allow use of assets outside of normal working hours and outside of the normal workspace?
Yes
Supervisor/Manager or Higher 0
DA or inventory holder	0
Other	0 Who?
No	0O
B.1.14 How is physical access to the asset location controlled?
Supervised and Recorded Access	0
Recorded Computer Keycard	0
Unsupervised Secure Area Access	0
Unrestricted Area	0O
26

B.1.15 What is the degree of consumable items (e.g. office supplies, etc)?
TURNOVER RATE (per annum)
<100% 100%-200% >200%
AVERAGE
ITEM VALUE
Over $100 		
$51 - $100 		
Up to $50			
B.1.16 How often are your stocktaking records audited?
More Frequently than Quarterly 
Quarterly	
Biannually	
Annually	
Less Frequently than Above	©	How often?
B.1.17 Have staff members performing this activity been provided with relevant training? Yes  What?
No ©
B.1.18 Do staff involved in this activity have easy access to relevant manuals and instructions?
Yes 

27

No ©

B2 Disposal of Assets
oAlert symbol should draw your intention to the requirement for more internal controls to mitigate risk.
Note that all authorities for commitment and contract authority, payment approval authority, and requisitioning authority must be performed as per The Chief of the Defence Staff Delegation of Authorities for Financial Administration of Non-Public Property (NPP).
B.2.1 Has this entity disposed of assets during the last two fiscal years?
Yes		Please go to the next question
No	 Go to B3
B.2.2 What was the highest value of any one asset disposed of during the last two fiscal years?
Up to $5,000	
$5,001 - $50,000	
$50,000 - $100,000	
$100,001 - $500,000 
More than $500,000 
B.2.3 What percentage of past disposal action within the activity area was initiated and processed within the NPP entity?
Up to 25%	
25 - 75%	
More than 75%	
B.2.4 Has any past disposal action for your area been initiated and processed outside the NPP entity?
Yes	
No	
B.2.5 Are there any local disposal directives within your NPP entity?
Yes	
No		Go to B.2.7
B.2.6 Is disposal action only conducted in accordance with the disposal policy within A-FN-105-001/AG-001 chapter 27 (inventory shrinkage/breakage and short/over) or chapter 28 (fixed assets)?
Yes 
No o
B.2.7 Is the individual appointed for disposal different from the person responsible for the physical custody of the assets?
Yes 
No o
28

B.2.8 Is disposal recorded in accordance with A-FN-105-001/AG-001 chapter 27/28?
Yes	
No	©

B.2.9 Are these disposal records verified by an independent source? Yes 
No		Go to B.2.12
B.2.10 Who conducts the review?
Entity Staff	©

Entity Staff & Personnel External to the Entity 

Personnel External to the Entity	

B.2.11 How often are the records audited?
Tick EACH applicable box
Nil Review ©
Supervisory Checks
Compliance and Assurance Review/Command Inspection
Chief of Review Services (CRS) Audit and External Auditors
B.2.12 What level of authorization is required for asset disposal?

Asset Manager/Inventory holder	
Manager external to Entity	
Base/Wing/Unit Commander	

Random	Scheduled

q	

B.2.13 Have staff members performing this activity been provided with relevant training?
No ©
Yes  What?

B.2.14 Do staff involved in this activity have easy access to relevant manuals and instructions?
Yes 
No ©

29

B3 Information (including storage on computer facilities)
OAlert symbol should draw your intention to the requirement for more internal controls to mitigate risk.
Note that all authorities for commitment and contract authority, payment approval authority, and requisitioning authority must be performed as per The Chief of the Defence Staff Delegation of Authorities for Financial Administration of Non-Public Property (NPP).
B.3.1 Does this area involve the keeping of commercially sensitive/intellectual property/proprietary information/classified/valuable records?
Yes	0	Please go to the next question
No	0 Go to C1
B.3.2 Who controls the physical security of information records?
Processing Staff	0
Supervisory Staff	0
Management	0
Not controlled	0

B.3.3 Is access to records restricted to a need to know basis?
Yes 0
No 0O
B.3.4 How is access to records controlled?

0O 0 0 0 0 0 0
0

Insecure area
Partially secure area
Secure area
Initial password gives full access (computer)
Initial password gives read only access (computer)
Manual records file register
Supervised access to manual records

30

Accountable forms kept in locked container

B.3.5 What recording system is used?
Manual Filing System	O
Computer System	O
Combination of the Above	O
B.3.6 In the last 12 months has your area been required to produce an Initial Loss or Compromise Report for classified information?
Yes 0©
No O
B.3.7 Is the area involved in the transmission of classified/sensitive data/documents/materials?
Yes 0
No O
B.3.8 Are procedures in place governing the use and security of computer telecommunications links, modems & electronic mail?
Yes 0
No O©
B.3.9 Is classified/sensitive information stored on computers in the area?
Yes 0
No O
B.3.10 Is there a designated Systems Security Officer in the area?
Yes 0
No O©
B.3.11 How is access to the computers in the area controlled?
Initial password gives full access?	O
Initial password gives read only access?	O
2+ passwords	0
Other	0
B.3.12 Does the area handle classified/sensitive information on any removable media (e.g., disks, printer ribbons)?
Yes 0

m	

31

No

B.3.13 How is classified removable media stored?
Secure area	0
Secure container	0
Other	0O
B.3.14 Is the NPP entity using standard commercial software?
Yes 0 What?
No 0
B.3.15 Is the computer system in the area accessible to non CFMWS personnel (e.g., industry, contractors)? Yes 0O
No 0
B.3.16 Is the area involved in the release of information?
Industry	0
Departmental Officers	0
Other Government Agencies 0
Other	0
No	0
B.3.17 Does the NPP entity handle the disposal of information?
Yes	0	How is this handled?
No 0
B.3.18 Are individuals regularly reminded of the duty of nondisclosure (e.g., Privacy, FOI, and Access to Information Acts, National Security)?
Yes 0
No 0O
32

B.3.19 Have staff members performing this activity been provided with relevant training? Yes D What?
No Do
B.3.20 Do staff involved in this activity have easy access to relevant manuals and instructions?
Yes D

33

No Do

SECTION C - ACQUISITION/PURCHASING PROCESS
C1 Purchasing of Fixed Assets and Other Goods and/or Services
©Alert symbol should draw your intention to the requirement for more internal controls to mitigate risk.
Note that all authorities for commitment and contract authority, payment approval authority, and requisitioning authority must be performed as per The Chief of the Defence Staff Delegation of Authorities for Financial Administration of Non-Public Property (NPP).
C.1	Does this NPP entity involve the purchase of fixed assets and other goods and/or services?
Yes		Please go to the next question
No	 Go to D1
C.1.1 Does this NPP entity adhere to the Chief of the Defence Staff Delegation of Authorities for Financial Administration of Non-Public Property (NPP)?
Yes 
No ©
C.1.2 What was the value of all purchases in your NPP entity last fiscal year?
Up to $50,000	
$50,000-$200,000	
More than $200,000 
C.1.3 How many transactions were made in your entity last fiscal year?
Up to 10	
10 - 100	
100 +	
C.1.4 What is the minimum number of people involved in the purchasing process?
1 ©
2 
3+ 
C.1.5 Does the person/s drafting the purchase order have contact with relevant industry representatives?
Tick all applicable boxes
Yes	Formal*	Informal
Frequent  ©
Infrequent		
*Formal means higher approval for the contact has been obtained and/or a record of the contact placed on file.
No 
34

C.1.6 Are individuals in the entity regularly reminded of the duty of disclosure relating to conflict of interest?
Yes 
No ©
C.1.7 Are the acquisition and purchasing process aligned with the NPP Contracting Policy?
Yes 
No ©
C.1.8 Is the person/s who writes the purchase order always different from the person/s who issues the request for quotations (etc) and evaluates the quotations/tenders?
Yes 
No ©
C.1.9 Is there always more than one manager authorising expenditure at the various steps?
Yes 
No ©
C.1.10 Are standing offers/common use contracts/period contracts investigated as a standard part of the purchase process?
Yes 
No ©
C.1.11 Is the purchasing process subject to review?
Tick EACH applicable box
Nil Review ©
Random	Scheduled
Supervisory Checks		
Compliance and Assurance Review/Command Inspection		
Chief of Review Services (CRS) Audit and External Auditors		
C.1.12 Do staff involved in this activity have easy access to relevant manuals and instructions?
Yes 
No ©
C.1.13 Have staff members performing this activity been provided with relevant training?
No ©
Yes  What?
35

C.1.14 Are mechanisms in place to ensure that former employees who are engaged as consultants are in compliance with post separation employment procedures?
Yes 0

0
36

No

SECTION D – PAYMENT CARD INDUSTRY (PCI) COMPLIANCE
D1 PCI Compliance
OAlert symbol should draw your intention to the requirement for more internal controls to mitigate risk.
Note that all authorities for commitment and contract authority, payment approval authority, and requisitioning authority must be performed as per The Chief of the Defence Staff Delegation of Authorities for Financial Administration of Non-Public Property (NPP).
D.1	Is this NPP entity involved in the capturing of debit and credit card information?
Yes	0	Please go to the next question
No	0	You have completed the questionnaire
D.2	Is access to debit/credit information restricted?
Yes 0
No 0O
D.3	How many individuals have access to debit and credit card information?
1	0
2 0
3+ 0O
D.4	Is access to debit/credit information secured at all times?
Yes 0
No 0O

37

End of questionnaire