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The Audit of the Monetary Appraisal of Acquisitions was part of the 2011-14 Risk-Based Audit Plan which was recommended for approval by the Departmental Audit Committee and was subsequently approved by the Deputy Head in June 2011.
In order to achieve its mandate, Library and Archives Canada (LAC) acquires archival items from three primary sources: Government of Canada, publishers, and private collections (through purchases and donations). For donations, LAC issues to donors a receipt for the fair market value of their donations which may be used for tax credit purposes.
For the period extending from fiscal 2005-06 to 2010-2011, LAC has completed a total of 500 appraisals for the issuance of tax receipts. The total value of these appraisals and the total value of tax receipts issued was $20.8 million over this time period.
The objective of this audit was to determine if LAC had policies, systems, and controls in place that were communicated and followed in practice to enable transparent and effective monetary appraisals of acquisitions and subsequent issuance of tax receipts for donations, as per the requirements identified in the Income Tax Act.
Procedures Aligned with Legislation
LAC's documented procedures were aligned to be in compliance with legislative requirements and designed to document key controls.
Key Controls and Supporting Documentation
Acquisition procedures were well understood by LAC personnel; however improvements are required in the application of key appraisal controls. Some key controls were consistently applied and documented, while others required attention. Management should address the weaknesses regarding unsigned Acquisition Proposal forms and the lack of evidence supporting the Major Acquisitions Committee's (MAC) decision to ensure that these key controls are consistently applied and documented. These controls ensure that acquisitions are aligned with LAC's mandate.
The retention of key supporting documentation was not consistent, as evidenced in the acquisition files. The current acquisition file structure made it very difficult to find documentation supporting key controls. Documents were filed in no specific order or logic and different donations relating to a specific collection were mixed within the same file. To maintain a qualified donee status under the Income Tax Act, public bodies must keep adequate books and records. On the basis of these observations, the Canada Revenue Agency (CRA) could determine that LAC does not comply with the Income Tax Act requirements in relation to its qualified donee status.
A formal and regular reporting mechanism to monitor the status of donation receipts issued or in process was not in place. Management should ensure that monitoring reports are regularly prepared and reviewed. These reports should provide sufficient information to ensure donations are aligned with LAC's mandate.
Overall, LAC's controls for the appraisal of collections for the issuance of tax receipts are properly designed to ensure that appraisals are performed in compliance with relevant legislation; however, areas for improvements were identified regarding:
This audit engagement was planned and conducted to be in accordance with the internal auditing standards for the Government of Canada.
In my professional judgment as Chief Audit Executive, sufficient and appropriate procedures have been conducted and evidence gathered to support the accuracy of the conclusions reached and contained in this report. The conclusions were based on a comparison of the situations as they existed at the time of the audit and against the audit criteria.
We wish to express our appreciation for the cooperation and assistance afforded to the internal audit team by management and staff during the course of this assurance engagement.