Senate expense controls have 'significant deficiency,' audit finds

The Senate's expense controls have a "significant deficiency" that needs immediate fixing, and the administration should audit a sample of senators' offices every year, a newly released audit by KPMG says.

The Sept. 17, 2013, letter to Senate administration says the Senate's expense claim policies related to housing allowances and travel expenses aren't "sufficiently detailed with respect to eligibility and documentation requirements to ensure amounts claimed were appropriate."

"The potential effect of this deficiency is that ineligible expenses may be approved and paid," KPMG said in the letter, which was posted Monday on the Senate's website.

"By their very nature, there is a risk in all expense claim systems that ineligible expenses are paid.... Due to the self-reporting nature of expense claims, it is difficult and expensive to design and implement a centralized expense claim approval process that mitigates all of the risks of ineligible expenses being paid," the letter says.

KPMG recommends the Senate:

• Create guidelines to explain how the policies should be interpreted and applied to specific situations.
• Revise its staff training and make it mandatory for senators and for any staff of senators who prepare expense claims.
• Audit at random some senators' offices every year, looking at the processes used for preparing and approving expense claims, and at the performance of audit procedures on a sample of expense claims.
• Have all senators sign a declaration every year that they're complying with expense policies.

KPMG said the recommendations should be implemented in the fiscal year ending March 31, 2014.

'Amply clear'

In a response dated Feb. 26 — five months after KPMG's letter — Senate clerk Gary O'Brien said the upper chamber had determined its residence declaration form "was amply clear." The form has senators declare their primary and secondary residences. Senators can claim living expenses, including daily per diems, if they live outside of Ottawa but have to be in the National Capital Region (NCR) for work.

"To claim living expenses, any residence owned or rented by a Senator must be a secondary residence, not the place where he or she ordinarily lives, for use by the senator while in the NCR for Senate business. The Senate has concluded that this language is unambiguous and, plainly, if a senator resides primarily in the NCR, he or she should not be claiming living expenses for the NCR," O'Brien wrote in the response provided to Senate Speaker Noël Kinsella.

Despite that, O'Brien says in the letter that the Senate:

• Agrees to develop guidelines on how to interpret and apply the expense policies to specific situations. ​
• Design improved training sessions on financial matters for new senators and their staff, and ask the internal economy committee to make the training mandatory. 
• Already decided in 2012 to audit senators' expense claims, but is waiting until the auditor general's review is done.
• Will ask the internal economy committee to consider requiring annual signed compliance declarations about the expense policies. 

Suspended Senator Patrick Brazeau and retired senator Mac Harb have been charged with fraud and breach of trust over their living expense claims. The RCMP allege in court documents that Brazeau and Harb lived within the 100-kilometre limit around Ottawa and Gatineau, Que., but claimed residences outside of the region as their primary ones so that they could file expense claims for their time in the capital.

Lawyers for both Brazeau and Harb pointed to audits by Deloitte last summer that found the rules surrounding expenses to be unclear.

Court documents show the RCMP are also investigating suspended Senator Mike Duffy. Senator Pamela Wallin has also been suspended by the Senate over her travel expense claims.

All senators are being scrutinized by Auditor General Michael Ferguson.