abdul rahman saleh al rajhi & partners co. ltd. (ararco) - final ia report... · 2018. 7. 10. ·...

Performance Audit Services

March 2016

Tamkeen Performance Audit Final Report: Human Resources process

March 20, 2016

Dear Mr. Jarrar,

In accordance with our provision of performance auditoutsourcing services for Tamkeen dated June 30th 2015, wehave completed our activities related to the performanceaudit task assigned by Tamkeen and we are pleased topresent our final performance audit report for the humanresources process.

The primary objective of this performance audit exercise was to evaluate the existing controls related to the human resources process at Tamkeen. The resulting issues and recommendations were discussed with the management during the course of the audit and prior to the finalisation of this report.

Our performance audit review was performed in accordancewith the Standards for the Professional Practice of InternalAuditing as prescribed by the Institute of Internal Auditors(IIA). The procedures we performed did not constitute anexamination or a review in accordance with generallyaccepted auditing standards or attestation standards,accordingly we do not provide an opinion, attestation orother form of assurance with respect to our review, except asmay be specified in this report.

Further, we did not plan and perform our work with the objective of preventing or discovering fraud. Our procedures under this engagement are also not designed to and are not likely to reveal misrepresentation by the management of the company. Consequently, we give no assurance on whether the period covered by our audit was free of fraud (whether by management or by external parties), other irregularities or misrepresentation by the management of the company or

any other persons. Full details regarding our audit andreport limitations are stated in our Letter of Engagementwith Tamkeen dated June 30th 2015.

We would like to take this opportunity to thank themanagement and staff of who assisted us in the course of ourwork.

Yours faithfully

PricewaterhouseCoopers

PricewaterhouseCoopers M.E Limited, CR # 47378, 13th Floor, Jeera I Tower, PO Box 21144 – Seef District, Kingdom of Bahrain. Telephone: +973 17 11 8800 | Fax: +973 17 540556, www.pwc.com/middle-east

Mr. Hassan Amin JarrarChairman of the Audit CommitteeTamkeenP.O. Box 18131, Manama, Kingdom of Bahrain

1 Executive Summary 1

2 Summary of Audit Observations 6

3 Detailed Observations and Recommendations 9

1 Meetings Conducted 28

2 Documents Reviewed 30

Contents

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Executive SummarySection 1

Tamkeen • Performance Audit Final Report: Human Resources process1

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The criteria adopted for classifying the importance of each observation as High, Moderate or Low are as follows:

Section 1 – Executive Summary


Priority 1High

Serious and substantial impact on the Tamkeen’s ability to achieve objectives

Conditions which would have a significant impact on the Tamkeen’s overall performance, the achievement of itsobjectives, arising through significantly deficient or degraded control processes or inefficient/ineffective workingpractices. These could include incidents involving failure to report or react to situations where activities are placed at risk;acts of employee infidelity; failures on of managerial staff to adequately direct activities or supervisory staff to adequatelycontrol their areas of responsibility; significant violations involving segregation of duties; gross breaches of standinginstructions or policies; failure to correct more material conditions previously reported; conditions which have continuedfor extended periods in management’s knowledge.

Priority 2 Moderate

Moderate impact on the Tamkeen’s ability to achieve objectives

Situations might include “one off errors” arising through misunderstandings rather than neglect; less material omissions,but those of a recurring nature; variations in systems, where controls need refinement to ensure adequacy, or levels ofeffectiveness while not wholly unsatisfactory, require enhancement, incidents where reporting requirements have notbeen fulfilled on a timely basis; breaches of procedural requirements where corrective action is required to avoid loss.

Priority 3Low

Minimal impact on the Tamkeen’s ability to achieve objectives

Deficiencies which are unlikely to cause other than a low level disruption to the achievement of objectives, butnevertheless represent areas where working practices could be improved, or where controls require minimalimprovement to fully achieve their objective, attention should be paid to them at some stage, but early resolution is notcritical.

This report has been prepared on an exception basis and consequently only matters that come to our attention during our review, that require to be addressed tomanagement, have been reported.

Our report has been prepared solely for your information and the management of Tamkeen and is not to be used for any other purposes. It should not beincluded or referred to in any document or publication made available to persons outside Tamkeen without our written consent. We do not accept responsibilityto any other party to whom it may be shown or who on their own volition may decide to rely on it. Our engagement has been performed on out-sourcing basis.

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Background

Tamkeen’s senior management and audit committee have decided toembark on a performance audit project; in this regard, PwC was appointedto perform an inherent-based risk assessment, develop a 3-year internalaudit plan, and execute audit reviews over specific processes that weremutually agreed with Tamkeen’s audit committee.

Engagement objectives

The objectives of this engagement are to:

• Provide an independent and objective report on Tamkeen’s selectedoperational and support functions by bringing a systematic anddisciplined approach to evaluating the risks and controls’ over thesefunctions and recommending opportunities for improvements.

• Conduct a follow up review over the previous performance auditfindings

Audit period and time line

The audit review covers the period from January 1st, 2011 to December 31st,2014. We have assessed the specific risks identified within each scope area,evaluated the associated mitigating controls, and commented on theresults of our audit procedures which were performed on sampling basis.Management should be aware of the inherent limitations of the results ofusing a sample; if the tests were expanded to 100% of the population,observation details could have differed.

Objective and scope of this report

The objective of this report is to provide Tamkeen’s senior management andaudit committee with our performance audit observations andrecommendations over the human resources process, which were establishedbased on our (PwC) standard performance audit activities and procedures.

Our approach included the following steps:

• Conducting meetings with Tamkeen’s management and Audit Committeemembers to confirm the objective of the audit exercise and identify areasof concerns;

• Conducting meetings with the relevant process owners in order to obtain aholistic understanding of current departmental practices;

• Submitting an initial List of Requirements (LOR) and requesting samplesfrom the relevant process owners;

• Obtaining, reviewing and testing the selecting samples;

• Preparing and submitting the draft performance audit report to Tamkeen’smanagement for feedback and further discussions.

• Preparing and submitting the final draft performance audit report toTamkeen’s management and audit committee inclusive offeedback/management responses.

Executive SummarySection 1 – Executive Summary


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Summary of audit results

The purpose of the chart below is to provide Tamkeen’s senior managementand audit committee with a high level summary of the overall risk levelscorresponding to our audit observations.

Total number of observations: 11

• Total % of observations with a High Risk rating: 73%

• Total % of observations with a Moderate Risk rating: 18%

• Total % of observations with a Low Risk rating: 9%

Audit scope and objective

The audit included gaining an understanding of the various activitieswithin the process, evaluating the overall control environment and testingvarious documents/files to provide reasonable assurance that theidentified internal controls are operating as designed. Based on ourdeveloped performance audit program, the performance audit comprisedthe following areas:

• Recruitment

• Training and Development

• Employee Separation

• Leaves and Attendance

• HRMIS System

The main objective of our performance audit was to assess theeffectiveness of the existing controls related to the human resourcesprocess. We performed our audit through inquiry, observation ofapplicable policies and procedures, and inspection of relevantdocumentation. The “observations/risks” section on the following pages isintended to propose improvements to the existing controls over theserisks, which, when implemented, could improve the efficiency andeffectiveness of current operations.

Executive Summary (Continued)Section 1 – Executive Summary


9%

18%

73%

AUDIT RESULTS BY SEVERITY LEVEL

Low Moderate High

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Summary of observations and potential risks

Below is a summary of the key observations with a high priority rating. Details are set out in section 2 of this report.

Departmental effectiveness:

During the course of our review, we noted that the HR departmentcurrently does not possess an approved Manpower nor a Succession Plan,which may impact Tamkeen’s ability to ensure that competent staff areavailable to fill key positions. Additionally, we noted that the departmentlacks monitoring and control of documented objectives and keyperformance indicators to ensure proper alignment with the overallcorporate strategy, as well as adequate monitoring of departmentalactivities to enhance decision making.

Moreover, we have noted significant inconsistencies in the performanceappraisal process; for instance, over 56% of the tested files were missingperformance evaluations documentation. Also, over 50 % of the tested fileswere missing the appraiser’s signature. On the same note, in June 2014,there was no appraisal process conducted for any employee.

Employee separation:

We have noted that the process of handling separated employees, (i.e.resignations, terminations, retirements), is significantly inconsistent anddoes not comply with Articles 99 and 100 of the Bahrain Labor Law.Additionally, there are no documented policies and procedures forseparated employees; currently, the HR department does not conduct exitinterviews with departing employees.

Hiring and on-boarding process

During our audit review, we noted that none of the employees had anemployment contract in their files. Also, for new joiners, we noted that “pre-employment & on-boarding” documents were missing from the files. Thiscould lead to non-compliance with Article 19 of the Bahrain Labor Law.

Leaves and attendance:

During our review of the “Leave, Time and Attendance” process, we noted thatleave forms were not maintained in employee files. Moreover, the HumanResources department does not use an automated system to maintainemployee leave activities and related balances; instead, these records are beingmaintained using excel sheets, which have resulted in substantial variancesbetween the balances calculated and the actual annual leave days taken by theemployees.

HRMIS System:

During the course of our audit review over the MIS system, we have noted thatthe HR department lacks a comprehensive Human Resources ManagementInformation System (HRMIS) System. Thus, the recruitment process, on-boarding, attendance, leaves, and payroll processes are being performed usingexcel sheets without updating are the HRMIS system.

Executive Summary (Continued)Section 1 – Executive Summary


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Summary of Audit ObservationsSection 2


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The purpose of this section is to present Tamkeen’s executive management with a high level summary of the number of observations that were identified duringthe course of the engagement. A priority level has been assigned to each observation; the detailed internal audit observations are shown in Section 3.

Human Resources processSection 2 – Summary of Audit Observations


Ref Observation Rating Page

1 Absence of succession planning process High 10

2 Lack of monitoring and control of departmental objectives and key performance indicators (KPIs) High 11

3 Inconsistency in dealing with separated employees High 12

4 Inconsistencies in performance appraisals High 14

5 Inadequate hiring process High 16

6 Inadequate on-boarding process for new joiners High 18

7 Low employee satisfaction High 20

8 Absence of HRMIS System High 22

9 Absence of detailed manpower plan Moderate 24

10 Ineffective training and development plan Moderate 25

11 Incomplete employee files Low 27

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Observations layout & disclaimerSection 2 – Summary of Audit Observations


Observations The observations were derived from discussions with concerned managers and process owners, in addition toevaluating the process flows and the representative sample selected during our course of work. Management shouldbe aware of the inherent limitations of the results of using a sample; if the tests were expanded to 100% of thepopulation, observation details could have differed. The recommendations listed are proposed to enhance theprocess and its execution. Management should assess the relevant cost to benefit formula of implementing suchrecommendations before deciding on doing so.

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Detailed Observations and Recommendations Section 3


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Observation

During the course of our audit, we requested the Succession Planning related documents as part of the List of Requirements submitted to Tamkeen. We noted that currently, there is no succession plan in place.

It is also noteworthy to mention that similar observations were raised previously in 2013 by the previous auditors under the title of:

• “Inadequate Succession Planning” (Protiviti Performance Report - March 2013/4.1/pg36)

• “Absence of Succession Planning ” (Tamkeen’s Internal Audit - 2013 - HR and Payroll Audit - 7.)

Potential Risk and Impact

• Inability to replace competent staff, or devise other mitigating actions, within a favourable timeframe

• Hindered business continuity for key positions

• Absence of qualified employees

• Increased administration & HR related costs (recruitment and development of new employees)

• Adverse impact on the employee retention rate

Recommendation

Succession planning is the process of identifying and developing internal staff with potential to fill key business leadership positions within the organization.This process increases the availability of experienced and capable employees that are prepared to assume these roles as they become available. Hence, tomitigate the above raised observation, it is recommended that a “Succession Plan” be put in place and all department heads should prepare succession plans fortheir department stating suitable successors for all key job positions. Polices and procedures for succession planning should also be developed and implementedat Tamkeen.

1 – Absence of succession planning process – High

Section 3 – Detailed Observations and Recommendations


Management Response and Remediation Plan Responsible and Due date

Agree with the observation, policies and procedures in reference to succession planning practice are being created and included in the newly revamped HR Manual, the reason the said system was not in place earlier is that many fundamentals that are essential for having an objective, fair and effective succession planning system in place were yet to be designed and implemented ( i.e. proper performance management system, clear Job descriptions …etc. ) now that those systems are up and running and backed up by the appropriate, relevant policies and procedures.

Responsible: HR and Administration Director

Due Date: Q4 2016

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Observation

During the course of our audit, we requested for the HR&A department objectives and key performance indicators (KPI’s) as part of the list of requirements.Initially, we were not provided with the departmental objectives and KPIs during the internal audit fieldwork; however, we were provided with HR related KPI’safter the observations discussion session. As informed, the provided KPI’s are not monitored within the monthly reports and yet to be added.


• Lack of effective decision making

• Lack of efficiency and effectiveness

Recommendation

It is recommended that the Human Resources department at Tamkeen monitors and controls HR&A departmental Key Performance Indicators (KPIs) andobjectives pertaining to the various activities under its jurisdiction, and reports them to upper management. Furthermore, departmental goals and objectivesshould be aligned with the company goals and objectives.

Relevant action plans for underperforming KPIs shall be continuously implemented and executed in order to maintain a high performance level.

2 – Lack of monitoring and control of departmental objectives and key performance indicators (KPIs)– High




Agree with the observation regarding previous years, KPI & HR departmental objectives are now available for this year and will finalized by Q2 2016.HR Monthly reports with relevant statistics are already actioned starting February 2016

Responsible: HR Manager

Due Date: Q2 2016

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Observation

During the course of our audit, we have selected 5 personnel files out of the 7 separated employees who left Tamkeen during our audit period. We noted that thecurrent HR policies and procedures do not have any documented sections with regards to employee separation (handling resigned, terminated, retiredemployees).

Based on our review of the employee files, we observed the following:

• Resignations letters were not found in 60% (3 out of 5) of the tested personnel files

• 80% (4 out of 5) of the selected sample have no End of Service Benefits (EOSB) calculation sheet within their personnel files

• Clearance forms are not available in 60% (3 out of 5) of the tested personnel files, while the 40% (2 out of 5) tested personnel files had clearance forms thatwere incomplete

• 100% of the selected sample had no exit interview forms in the personnel files

The Bahrain Labour Law – Article 100 states that “… the party wishing to terminate the labour contract shall send the notice to the other party or his representative and obtain his signature as an acknowledgment of receipt or send this notice by virtue of registered letter with acknowledgment of receipt to the last address provided by the other party.”

The notice specified in Article 99 of Labour Law shall be sent in writing and the party wishing to terminate the labour contract shall send the notice to the other party or his representative and obtain his signature as an acknowledgment of receipt or send this notice by virtue of registered letter with acknowledgment of receipt to the last address provided by the other party.


• Inability to identify reasons for separated employees

• Hindered knowledge transfer to successors/replacements

• Loss of critical company information or assets due to incomplete clearance forms

• Incompliance with governmental entities and laws ( e.g. Incompliance with Labour Law )

3 – Inconsistency in dealing with separated employees– High



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3 – Inconsistency in dealing with separated employees– High (Continued)



Recommendation

It is advisable that the Human Resources department conducts “exit interviews” with departing employees. The primary objective of exit interviews is to learnthe reasons for the persons departure, taking into consideration that negative feedback is a driver for organizational improvement. Exit interviews are also a wayfor transferring knowledge from the departing employee to successors/replacements.

Furthermore, it is recommended that the Human Resources Department updates its policies and procedures to add sections related to employee separation.This should enforce the completion of the clearance form and the calculation of the end of service benefits, before the employee leaves Tamkeen. The employeeseparation policies and procedures shall cover the following at a minimum:

• Types and conditions of termination

• Notice period

• Payment of Lieu of notice period

• End of Service Award

• Disciplinary Procedures

• Exit Interview

• Clearances


Agree with the observation, Inconsistency was due to amendments in the HR Manual that include all policies and procedures . Remediation plan : - Review all separated employees files and ensuring alignment with the new detailed procedure- Implementing the new off boarding Policy and procedure with associated checklists


Due Date: Q2 2016

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Observation

During our audit fieldwork, we reviewed the performance appraisals for 16 sample personnel files at Tamkeen who are eligible for performance appraisals. Weobserved the following:

• Absence of June 2014 appraisal forms in all of the tested personnel files, after following up with HR department on this matter, it was noted that June 2014appraisals were not conducted for any of the employees.

• In 13% (2 out of the 16) tested employees, the employee had the same appraisal results for 3 consecutive periods (June 2012, December 2012, June 2013)

• One employee had filed an appeal on her appraisal stating that she does not agree with the results of her appraisal, however there was no follow updocumented on the appeal

• 13% (2 out of the 16) tested employees for promotion did not have a promotion assessment form in their file, as indicated in Tamkeen’s policies andprocedures

• 56% (9 out of the 16) tested employees had missing Performance Evaluations in their file

• 88% (14 out of the 16) tested employee appraisals were not signed by the CE

• 50% (8 out of the 16) tested employee appraisals were not signed by the Appraiser

• 6% (1 out of the 16) tested employee appraisals were not signed by the Appraised

• One of the tested employees appeared to have high appraisal results (96%) from June 2011-December 2012, however, in December 2013 he received anappraisal result of 79% and were promoted

It is also noteworthy to mention that similar observations have been raised in 2013 by the previous performance auditors under the title of :

• “Improvements needed to Performance Appraisal process documentation” (Protiviti Performance Report - March 2013/4.2/pg35)

• “Performance Evaluation Limitations ” (Tamkeen’s Internal Audit - 2013 - HR and Payroll Audit - 2.)

• “Inadequate performance appraisal of key senior individuals in receipt of salary increments and bonuses ” (Protiviti Performance Report – March2013/5.14/pg46)

• “Performance Evaluations not in Employee Files” (Tamkeen’s Internal Audit - 2013- HR and Payroll Audit - 3)

4 – Inconsistencies in performance appraisals – High



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• Inability to effectively review, appraise and manage employee performance

• Lack of compliance with documented HR Policy

• Inability to identify employee’s competence

Recommendation

In order to mitigate the above observations, it is highly recommended to implement the following:

• Ensure that all employees are properly evaluated using the standard appraisal form

• Ensure that all appraisal fields are complete and that appraisals are signed by all concerned personnel

• Ensure that at least appraisals of the last three years are kept within the personnel files

It is also important to systemize the performance appraisal process, to ensure consistency and accuracy in the appraisals of all employees.

4 – Inconsistencies in performance appraisals – High (Continued)




- There was no mid-year appraisal in 2014 due to the change in Performance system content and design- December 2014 Appraisals were out for comparison purposes; we will place them back in the personnel files oncereview round is completed-Promotion assessment form was not in our policy, but now it is-Remediation Plan :-To put in place an Appraisal review process and include the same in the currently being finalized policies andprocedures , that includes Promotion Process being controlled by HR


Due Date: Q2 2016

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Observation

During the course of our audit review, we tested a sample of 30 new joiners’ employee files at Tamkeen, and reviewed the hiring process for each employeewithin the sample. We noted that none of the employees have an employment contract within their files, as Tamkeen only issues a Job Offer and ExecutiveResolution upon employment. However, under the Bahraini Labour Law, Article 19, organizations are required to have a labour contract for their employees.Furthermore, we observed the following:

• 53% (16 out of 30) tested files, did not have the employee’s good conduct form

• 37% (11 out of 30) tested files had no documentation of conducted interviews or assessments during the recruitment process

• 30% (9 out of 30) tested files, medical insurance copies were not available

• 20% (6 out of 30) tested files, proof of pre-employment medical tests were not available

• 10% (3 out of 30) tested files, did not have the employee’s CV

• 6% (2 out of 30) tested were missing job offers

• Lack of detailed employee file checklist

It is also noteworthy to mention that similar observations have been raised previously, in 2013, by the previous auditors under the title of: “Recruitment Process– Non-compliance to Recruitment Requirements” (Tamkeen’s Internal Audit - 2013 - HR and Payroll Audit – 5.)



• Ineffective hiring and selection process

• Failure to hire and select the right candidate

• Increased rate of low performing employees

• High employee turnover

5 – Inadequate hiring process – High



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Recommendation

To mitigate the above raised observation, it is recommended that the Human Resource department considers the following:

• Ensure that all approved policies and procedures related to the recruitment process are strictly adhered to

• Ensure that all Job Applications are accurately completed, acknowledged and filed

• Ascertain that background checks are being effectively carried out for all potential candidates (i.e. good conduct form, pre-employment medical test)

• Document recruitment interviews and assessments conducted during the selection process and file them in the employee file

• Ensure all new joiners are enrolled for medical insurance

5 – Inadequate hiring process – High (Continued)




Agree with the observationRemediation Plan :- Update employee personal files where possible- Implement Employee file checklist- New detailed hiring process is being included in the new policies and procedures


Due Date: Q2 2016

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Observation

During our audit review, we tested 30 new joiners files and noted that Tamkeen follows an inadequate on-boarding process for new joiners, due to the following:

• 83% (25 out of 30) tested files did not have signed confidentiality or disclosure form

• 30% (9 out of 30) tested files had no Job Descriptions within the file

• 30% (9 out of 30) tested files did not have probationary evaluations

• 27% (8 out of 30) tested files had expired CPR copies

• 6% (2 out of 30) tested files had expired passport copies

• 3% (1 out of 30) tested files, the Job Description was not signed by the HR or CE

It is also noteworthy to mention that similar observations have been raised in 2013 by the previous performance auditors under the title of : “Employingunqualified staff whose experiences do not match job descriptions” (2012 – HR - National Audit Court)



• Increased rate of low performing employees

• High employee turnover

Recommendation

It is recommended that the HR department ensures that all Tamkeen’s employees approve their Job Descriptions and confidentiality agreements by signing them upon joining, and ensure that all signed and approved Job Descriptions and Confidentiality agreements are attached within employee files. It is also important to document successful completion of employees’ probationary period and attach it within the employee files. Employee’s personal information in the file should be valid and regularly updated (i.e. employee CPR, passport).

6 – Inadequate on-boarding process for new joiners – High



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6 – Inadequate on-boarding process for new joiners – High (Continued)




Agree with the observation.

Remediation Plan :

-Update employee personal files system, that includes a detailed and clear workflow for the exercise,-Employee file checklist- On-boarding checklist + program review- Governing policies and procedures are being finalized for sign off in April 2016


Due Date: Q2 2016

Recommendation (continued)

The Human Resources department should ensure that all required and approved forms are adequately completed and approved by necessary departments.

Moreover, the Human Resources departmental forms shall maintain standardized forms and include fields for signatures of responsible positions as per theHuman Resources policies and procedures and process maps of the department sub-processes.

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Observation

During the course of our audit, we reviewed two Employee Satisfactions Surveys conducted in 2013 by Aon Hewitt and Talent Enterprise. We observed thefollowing:

• Based on Aon Hewitt research, organizations need an employee engagement level of 65% or better to drive superior business results. Tamkeen’s employeeengagement level is only 45%, according to Aon Hewitt.

• Moreover, the level of trusted leadership at Tamkeen was 29%, while organizations need a trusted leadership level of 61% or better to drive superior businessresults

• The level of high performance culture at Tamkeen was 35%, while organizations need a high performance culture level of 57% or better to drive superiorbusiness results

• The level of compelling employer brand level at Tamkeen was 55% while organizations need a compelling employer brand of 71% or better to drive superiorbusiness results

• Employee satisfaction surveys are not done annually. Moreover, results of these satisfaction surveys were not shared with management and no action planswere taken to improve the results.

In addition to the above, we also noted that Tamkeen lacks the motivational and cultural programs that engages employees. There is no documentation of anysuch programs conducted between 2011-2014, that will help increase employee satisfaction.

It is also noteworthy to mention that similar observations have been raised previously, in 2013, by the previous auditors under the title of :

• “Disengagement evident in Employee Survey ” (Tamkeen’s Internal Audit 2013 – HR and Payroll Audit -14)

• “Labour Day Awards” (Tamkeen’s Internal Audit - 2013 – HR and Payroll Audit - 10)


• Low employee morale

• Low productivity

• Lack of innovation

7 – Low employee satisfaction – High



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7 – Low employee satisfaction – High (Continued)




-Policies and procedures are being updated to reflect that an employee satisfaction survey is to take place on annualbases.- For now, some efforts have already taken place to tackle reasons behind low employee satisfaction and rectify

accordingly , that includes but not limited to contracting with MSB consultancy in October 2015 , the project inreference resulted in a number of recommendations that are being implemented already, that includes :

1- A Day in the Life of Tamkeen , an structured one day experience whereby all staff gather in one place and getpresented with the different functions roles and responsibilities by a representative of the relevant department in aninnovative, engaging manner

2- Leadership coaching program is to start soon as leadership style was highlighted in the MSB consultancy report asone of the reasons behind the low employee satisfaction rate

Responsible: Human Resources and Administration Director

Due Date: implemented already

Recommendation

In order to mitigate the above observations, it is highly recommended to conduct an employee satisfaction survey on a yearly basis to have a clear understandingof the Fund’s standing from the employees perspective. Satisfaction survey results should be shared with management and accordingly and action plan shouldbe developed and implemented immediately. It is also recommended to implement a reward system and motivational programs that would encourage employeesto better perform and grow within the Fund.

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Observation

During our audit review, we noted that Tamkeen’s MIS system does not fully support the Human Resources department. As we requested various documents totest during our HR audit, we have received the same document in more than one format and version, since the department manages these documents manually.

We selected a sample of 25 employees and tested their leaves and leave balances. As a result, we found that 96% (24 out of 25) sample employees had variancebetween the number of days carried over to the next year and the number of leave days they took during the year.

We also observed that documentation of employee information, attendance, leaves, payroll, trainings, etc. are all maintained on separate excel sheets, and thereis no correlation between them. Employee files are not backed up on an MIS system, in case of loss of employee files. In addition to that, the performanceappraisals are done by writing on paper and are not uploaded to the system.


• Loss of Employee Data

• Inaccuracy of Employee Data

• Inaccuracy and inefficiency in processing employee payrolls

• Inability to produce dynamic and real time information on Tamkeen

• Inefficient recruitment process

• Inefficient utilization of manpower

• Increased risk of Human Error

8 – Absence of HRMIS system – High



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Recommendation

It is highly recommended for the Human Resources department at Tamkeen, to implement a strong MIS system that will automate the processes of:

• Recruitment including posting vacancies, screening, shortlisting, assessment and hiring process of candidates

• Employee personal information including the department, division and position the employee works in

• Payroll

• Attendance and Leaves covering overtime, planned leaves, actual leaves

• Trainings which will include the competency assessments, trainings attended by employees, cost, exam results of professional certification,

• Performance Appraisals

The MIS system should also enable the department to maintain an electronic backup of the employee files. Furthermore, it is important to maintain all theinformation related to each employee under one umbrella, and link the information together.

8 – Absence of HRMIS system – High (Continued)




Agree with the observation, work to rectify have started in midyear 2015, an RFP was launched and we have received a number of proposals, however selection is not finalized yet.

Responsible: Human Resources and Administration Director

Due Date: Q4 2016

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Observation

During the course of our audit, we reviewed the Manpower planning process at Tamkeen. We received a manpower plan, which was not approved or dated that identifies the number of required employees per department, available employees per department, and planned number of employees to be hired per department; however, the Human Resources department does not possess / maintain a detailed Manpower Plan which takes into account the manpower budget plan. In addition to that, the current manpower plan is not updated periodically to show the number of required employees per department. We also noted that the hiring process is not being done with reference to the approved manpower plan. Moreover, the manpower plan does not take into account the positions that have been filled by the outsourced employees.


• Inefficient hiring and selection process• Manpower shortage• Excessive Hiring• Increased cost due to dependence outsourced manpower• Interrupted operations due to shortage of planned resources

Recommendation

To mitigate the above raised observation, we recommend that the Human Resources department works closely with department heads to establish a ManpowerPlan in order to include job titles, job qualifications and experience, brief job profiles and expected yield and return from the new employees. In addition, it isessential that the manpower budget/plan is prepared keeping in mind the approved organization structure. Any additional new positions, as laid out in themanpower budget plan, should be included within the organization structure, including outsourced employees.

Moreover, the Manpower Plan should show the status of every required employee and whether the employee shall be transferred from another department orhired from outside the Company. Finally, “Workload Analysis” can be an effective tool to be used when considering effective manpower planning.

Workload Analysis: A tool used to predict and plan future work and skills requirements based upon historical data. Once a workload baseline has beenestablished using past performance adjustments are made for expected changes in demand or other factors which impact the work scope.

9 – Absence of detailed manpower plan– Moderate




- Agree and will implement recommendations , that includes maintaining a periodically reviewed manpower planwith associated costs and budget, however to clarify, HR was not included in the outsourcing activities took placebetween 2011 and 2014 General manpower plan is available for the new structure launched in July 2015

- New policies and procedures are to include manpower planning as part of the recruitment policy

Responsible: Human Resources and Administration 2016

Due Date: Q2 2016

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Observation

During the course of our audit, we reviewed the documents received related to the Training and Development process. We noted that the Human Resources department at Tamkeen has a Training Plan in place that details the name of the trainings employees who are planning to attend during that year and the cost of that training. However, the plan does not have a training budget for each department. The total cost spent on training was as follows:

The table above illustrates that the average cost of training per head decreases in 2012 and 2013 and then increases in 2014 indicating lack of control on cost of training.

Furthermore, following our review of the conducted trainings, we noted that there were no competency assessments or training needs analysis conducted before planning the trainings.

Moreover, we observed that 3 out of 25 tested employees have attended the same training twice within the audit period (2011-2014). Following the training, there was no documented certification of attendance in the employees’ files, training report, or any monitoring of the employees performance. Although Tamkeen’s HR policies and procedures states that “6.5 …. A record of all courses attended by employees and the results will be kept in their personal files maintained by HR”.

Moreover, similar observations have been raised previously, in 2013, by the previous auditors under the title of:

• “Lack of competency assessment” (Protiviti Performance Report - March 2013/4.1/pg34)

• “Failure to monitor an employees performance subsequent to their completion of specialized training” (Protiviti Performance Report – March 2013/4.4/pg36)

• “Absence of competency assessment reporting” (Tamkeen’s Internal Audit - 2013 - HR and Payroll Audit - 17.) and “Training Budgets ” (2013 - HR andPayroll Audit – 20)

10 – Ineffective training and development plan– Moderate



2011 2012 2013 2014

Training Cost (BD) 97,035 69,343 118,343 122,639

Number of Trainees 44 33 60 49

Cost per Head (BD) 2,205 2,101 1,972 2,502

PwCMarch 2016

10 – Ineffective training and development plan– Moderate (Continued)




• Unaligned employee performance with overall organizational direction / objectives

• Failure to develop effective employee growth

• Lack of motivation and decreased employee satisfaction

Recommendation

To mitigate the above raised observation, it is recommended that the Human Resources department works closely with concerned department heads in order todevelop the required training & development plan for staff. Based on an approved cost/benefit analysis the Human Resources department shall decide if thetraining is to be conducted internally or externally. Records of any trainings that are undertaken by members of staff should be included in their respectiveemployee files.

Moreover, the training plan should be approved, updated, and communicated to respective employees. Employees should be informed, at a minimum, of thetime and location of the training in order to adequately plan for leaves. The training plan should also include a training budget for all the departments withinTamkeen, in order to plan trainings accordingly.

Furthermore, the training and development policy should be further improved to include the process of requesting a training, which should include a templateof the “Training Request Form” and the process for approving the requested trainings. A training needs analysis (TNA) should be conducted periodically, to havea clear understanding of the trainings that would benefit Tamkeen the most.


-Training plan for 2016 are now being created based on gaps in performance taken from 2015 appraisal as well asbusiness needs identified after meeting with the different department heads- Also, HR policies and procedures are being updated to include

* Actual training details (cost & attendance)* Training calendar creation and training requests workflow* Training Evaluation* Training Impact


Due Date: Q2 2016

PwCMarch 2016

Observation

During the course of our audit, we reviewed a sample of the employee files and observed the following:

• 1 out of the 51 employee files only contained pension papers, and all other documents were missing

• 1 out of the 51 employee files requested had no actual file in place, instead a group of papers clipped together. It was mentioned that this employee joined thefund for 8 months only and hence, did not have an employee file

• Based on a selected sample of 27 employee files, 44% (12 out of 27) employee salaries stated on the GOSI documents in the employee files did not match theactual salary of the employee.


• Potential financial loss due to inefficient clearance process

• Disputes with employee due to incomplete undertaking forms

• Unauthorized approvals

Recommendation

In order to mitigate the above raised observations, the Human Resources department should ensure that all document relevant to the employee should be filedin the employee file. Once a new employee joins Tamkeen, the Human Resources department should create an employee file to file all required documents. Inaddition to that, the employee file should be updated on a timely basis to contain the latest employee information.

11 – Incomplete employee files – Low




Agree with the observation

Remediation Plan :

- To file where possible- To maintain a PF check list and perform annual update to relevant documents- To reflect the new detailed personnel file maintenance procedure in the new policy


Due Date: Ongoing

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Appendix 1Meetings Conducted


PwCMarch 2016

Meetings ConductedAppendix 1 – Meetings Conducted


# Name Position

1 Ms. Abeer Al Matooq Human Resources Director

2 Sheikh Hassan Al Khalifa Human Resources Analyst

3 Ms. Alla Bardestani Human Resources Officer

During our information gathering process and fieldwork, our engagement team held several meetings with personnel from the Human Resources department.

Listed here are some of the key attendees.

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Appendix 2Document Reviewed


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Documents Reviewed Appendix 2 – Document Reviewed


# Document

1 List of employees (detailing names, grades, job titles, employee ID#, date of joining license no. and nationality)

2 List of all new joiners during 2011-2014

3 List of al resigned employees during 2011-2014

4 List of all employees with increments/merit increase during 2011-2014

5 List of all employees promoted during 2011-2014 along with respective letters of promotion

6 Updated and approved organizational structure for the HR department and other departments

7 Last updated and approved HR Policies and Procedures

8 Approved job descriptions for HR personnel and for other departments

9 Code of Conduct/ Ethics

10 Copy of all contracts with manpower supply agencies

11 Training budget, plan and list of all conducted courses during 2011-2014

12 Monthly over-time summary sheets/reports during 2011-2014

During our information gathering process and fieldwork, our engagement team reviewed the following main documents, received from Tamkeen’s HR department.

Limitations and ResponsibilitiesLimitations inherent to the internal auditor’s workWe have undertaken the review associated with evaluating the existing controls within Tamkeen’s HR process, subject to the limitations outlinedbelow:

Internal controlInternal control systems, no matter how well designed and operated, are affected by inherent limitations. These include the possibility of poorjudgment in decision-making, human error, control processes being deliberately circumvented by employees and others, management overridingcontrols and the occurrence of unforeseeable circumstances. The observations raised within this report are resulting from conducting our auditwithin the limited time of each audit. The observations were raised based on a risk-based audit approach where the focus was to highlightobservations to Tamkeen Audit Committee based on the risk exposure of the department or function. Action plans and deadlines were committed byTamkeen management process owners based on agreement on the raised observations.

The work we performed did not constitute a review in accordance with generally accepted auditing standards or attestation standards. Accordingly,we do not provide an opinion, attestation or other form of assurance with respect to our work.

Future periodsOur assessment of controls relating to this Internal Audit review is for the period from 01 January 2011 to 31 December 2014. Historic evaluation ofeffectiveness is not relevant to future periods due to the risk that:

• the design of controls may become inadequate because of changes in operating environment, law, regulation or other; or• the degree of compliance with policies and procedures may deteriorate.

Responsibilities of management and internal auditorsDespite the fact that we did not plan and perform our work with the objective of preventing or discovering fraud or misrepresentation by Tamkeen, itis management’s responsibility to develop and maintain sound systems of risk management, internal control and governance and for the preventionand detection of irregularities and fraud. Internal audit work should not be seen as a substitute for management’s responsibilities for the design andoperation of these systems.

We endeavour to plan our work so that we have a reasonable expectation of detecting significant control weaknesses and, if detected, we shall carryout additional work directed towards identification of consequent fraud or other irregularities. However, performance audit procedures alone, evenwhen carried out with due professional care, do not guarantee that fraud will be detected.

Accordingly, our examinations as performance auditors should not be relied upon solely to disclose fraud, defalcations or other irregularities whichmay exist.

Disclaimer

This report has been prepared in accordance with our Agreement and Agreements Terms and Conditions with Tamkeen dated 30 June 2018,

and has been prepared for Tamkeen only and not for any other purpose. To the extent permitted by law, PricewaterhouseCoopers, M.E.Limited does not accept or assume any liability, responsibility or duty of care for any use of or reliance on this document by anyone, other than(i) the intended recipient to the extent agreed in the Agreement for the matter to which this document relates (if any), or (ii) as expressly

agreed by PricewaterhouseCoopers, M.E. Limited at its sole discretion in writing in advance. Accordingly, regardless of the form of action,

whether in contract or otherwise, and to the extent permitted by applicable law, PricewaterhouseCoopers, M.E. Limited accepts no liability ofany kind and disclaims all responsibility for the consequences of any person acting or refraining to act in reliance on the contents of this reportor for any decisions made or not made which are based upon the contents of this report.

“PricewaterhouseCoopers” refers to PricewaterhouseCoopers (a partnership) or, as the context requires, other member firms ofPricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.

© 2016 PricewaterhouseCoopers. All rights reserved.

© 2016 PricewaterhouseCoopers. All rights reserved.

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Slide Number 1Slide Number 2Slide Number 3Section 1The criteria adopted for classifying the importance of each observation as High, Moderate or Low are as follows:Executive SummaryExecutive Summary (Continued)Executive Summary (Continued)Section 2Human Resources processObservations layout & disclaimerSection 31 – Absence of succession planning process – High2 – Lack of monitoring and control of departmental objectives and key performance indicators (KPIs)– High3 – Inconsistency in dealing with separated employees– High3 – Inconsistency in dealing with separated employees– High (Continued)4 – Inconsistencies in performance appraisals – High4 – Inconsistencies in performance appraisals – High (Continued)5 – Inadequate hiring process – High5 – Inadequate hiring process – High (Continued)6 – Inadequate on-boarding process for new joiners – High6 – Inadequate on-boarding process for new joiners – High (Continued)7 – Low employee satisfaction – High7 – Low employee satisfaction – High (Continued)8 – Absence of HRMIS system – High8 – Absence of HRMIS system – High (Continued)9 – Absence of detailed manpower plan– Moderate10 – Ineffective training and development plan– Moderate10 – Ineffective training and development plan– Moderate (Continued)11 – Incomplete employee files – LowAppendix 1Meetings ConductedAppendix 2Documents Reviewed Limitations and ResponsibilitiesDisclaimerpwc.com/middle-east