Summary of the Assessment of Effectiveness of the Systems of Internal Control over Financial Reporting and the Action Plan of the Canadian Institutes of Health Research for the Fiscal Year 2012–13 (Unaudited)
Annex to the Statement of Management Responsibility Including Internal Control over Financial Reporting
This document is an annex to the Canadian Institutes of Health Research’s (CIHR) Statement of Management Responsibility Including Internal Control Over Financial Reporting for the 2012–13 fiscal year. As required by the Treasury Board Policy on Internal Control, this document provides summary information on the measures taken by CIHR to maintain an effective system of internal control over financial reporting (ICFR). In particular, it provides summary information on the internal control assessments conducted by CIHR as at March 31, 2013, including progress, results and related action plans along with some financial highlights pertinent to understanding the control environment of the agency. This is the second annex produced by CIHR.
Detailed information on CIHR’s authority, mandate and program activities can be found in its Departmental Performance Report and Report on Plans and Priorities.
2. CIHR system of internal control over financial reporting
2.1 Internal control management
The agency has a well-established governance and accountability structure to support agency assessment efforts and oversight of its system of internal control. An agency internal control management framework, approved by the President, is in place, including:
- organizational accountability structures as they relate to internal control management to support sound financial management including roles and responsibilities for senior managers in their areas of responsibility for control management;
- values and ethics;
- ongoing communication and training on statutory requirements, policies, and procedures for sound financial management and control; and
- monitoring and regular updates, at least semi-annually, on internal control management plus assessment results and action plan to the President and CIHR senior management, and (as applicable) the Departmental Audit Committee (DAC).
The DAC provides advice to the President on the adequacy and functioning of CIHR’s risk management, control and governance frameworks and processes.
2.2 Service arrangements relevant to financial statements
CIHR relies on other organizations for the processing of certain transactions or the provision of information which impact its financial statements as follows:
- Public Works and Government Services Canada centrally administers the payments of salaries and benefits, the procurement of some goods and services as well as the provision of accommodations on behalf of CIHR; and
- Treasury Board Secretariat provides CIHR with information used to calculate various accruals and allowances, such as the employer’s contribution to the health and dental insurance plans which are funded centrally.
- The Tri-Council Secretariat administers the Networks of Centres of Excellence and the Canada Research Chairs on behalf of CIHR’s Program Branch. The Secretariat has the authority and responsibility to ensure that funding decisions are fair, due process was followed, and payments are made in accordance with the terms and conditions set out by CIHR’s programs. As a result, reliance is placed on the control procedures of the Secretariat which CIHR reviews at arm’s length by obtaining key control documentation.
Other government departments rely on CIHR for the processing of certain transactions or the provision of information that affects their financial statements. Operating effectiveness testing has been implemented for the key controls and no issues were identified.
3. CIHR assessment results during fiscal year 2012–13
During 2012–13, CIHR completed all design and operating effectiveness testing of key controls within its significant processes. Ongoing rotational monitoring continues to include testing of all processes until such time as an individual process contains little to no operating control deficiencies.
3.1 New or significantly amended key controls
In the current year, CIHR completed the design and operating effectiveness testing of the last remaining key significant business management process – budgeting, planning and forecasting. Significant adjustments were not required for the new key controls identified and tested. There were no significantly amended key controls to existing processes.
3.2 Ongoing rotational monitoring program
The agency completed its reassessment of entity level controls, IT general computer controls, and of the financial controls within the grants and awards processes (including all significant terms and conditions grants, i.e. Networks of Centres of Excellence, institute support grants, and Canada Research Chairs); financial operations processes such as financial statement close, travel, hospitality, deferred revenue and revenue, collaborative agreements, salary and benefits, grants and awards payments, procurement, and recoveries. As a result of ongoing rotational monitoring, CIHR identified the following required remediation:
- Update the delegation of signing authorities instrument for changes to positions in the organizational chart, roles and/or functions; and
- Establish defined deadlines for pre-approval and submission to central finance of hospitality and travel commitments.
- Clarify and refine the filing processes as required for expenditure documentation; and
- Improve documentation used to make decisions on eligibility of award recipients.
- Prepare guidance on the use and coding of funding mechanisms for collaborative agreements; and
- Improve the timeliness of Section 32 commitments for travel, hospitality, and collaborative agreements.
- Develop and implement defined retention periods for electronic files.
- Improve maintenance and review of issued travel cards and card holder information.
4. CIHR’s action plan
4.1 Progress during fiscal year 2012–13
During 2012–13, the agency continued to make significant progress in the advancement of remediation action plans from the previous fiscal years; however, some deficiencies have remained unchanged.
Below is a summary update from the previous year’s remediation action plans and the results from ongoing rotational monitoring activities:
|Previous year’s action items and results from ongoing rotational monitoring plan for current year||Status|
|Entity level controls – operating effectiveness testing and remediation of deficiencies.||Reassessment completed for entity level controls. No significant issues were identified.|
|IT general controls under agency management – design effectiveness assessment.||Design effectiveness testing done with no significant remediation plans outstanding.|
|Grants and awards (including all significant terms and conditions) – design and operating effectiveness testing and remediation of deficiencies.||Design and operating effectiveness testing complete with no significant remediation plans outstanding.|
|Financial statement close, travel, hospitality, deferred revenue and revenue, collaborative agreements, salary and benefits, grants and awards payments, procurement, and recoveries – design and operating effectiveness testing and remediation of deficiencies.||Design and operating effectiveness testing complete with deficiencies identified in operations relating to section 32 commitment authority, missing documentation and interest earned on partner funds. Remediation is ongoing over the next fiscal year.|
4.2 Action plan for the next fiscal year and subsequent years
Building on the progress to date, CIHR has developed a risk-based annual validation of high risk processes and controls in order to facilitate ongoing rotational monitoring in the next fiscal year. The plan takes into consideration any substantial changes to key controls in significant processes as well as addresses training to enhance the awareness and knowledge of internal controls over financial reporting and associated responsibilities across CIHR. Adjustments to the ongoing rotational monitoring plan will be implemented after the annual risk based assessment is conducted.
Key control areas
|Design effectiveness testing and remediation||Operational effectiveness testing and remediation||Ongoing rotational monitoring1|
|Budgeting and planning||complete||complete||3 year rotation
|Canada Research Chairs||complete||complete||3 year rotation
|Entity-level controls||complete||complete||3 year rotation
|Financial statement close process||complete||complete||annually|
|Grants and awards – program delivery process||complete||complete||annually|
|Grants and awards – payments process||complete||complete||annually|
|Institute support grants||complete||complete||3 year rotation
|IT general controls||complete||complete||annually|
|Networks of Centres of Excellence||complete||complete||3 year rotation
|Procurement||complete||complete||3 year rotation
|Recoveries||complete||complete||3 year rotation
|Revenue and deferred revenue||complete||complete||annually|
|Salary and benefits||complete||complete||3 year rotation
- Footnote 1
The frequency of the ongoing rotational monitoring of key control areas is risk-based and may occur over a multi-year cycle.
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