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 2014‑15 (Unaudited)
Annex to the Statement of Management Responsibility Including Internal Control over Financial Reporting
This document provides summary information on the measures taken by the Canadian Institutes of Health Research (CIHR) to maintain an effective system of internal control over financial reporting, including information on internal control management, assessment results and related action plans. In particular, it provides summary information on the internal control assessments conducted by CIHR as of March 31, 2015, including progress, results and related action plans along with some financial highlights pertinent to understanding the control environment of CIHR.
Detailed information on the CIHR authority, mandate and program activities can be found in the Departmental Performance Report and the Report on Plans and Priorities.
2. CIHR system of internal control over financial reporting
2.1 Internal control management
CIHR 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 payment of salaries and benefits, the procurement of some goods and services as well as the provision of accommodation on behalf of CIHR;
- Treasury Board Secretariat provides CIHR with information used to calculate various accruals and allowances, such as the employer’s contributions to the health and dental insurance plans, which are funded centrally;
- Shared Services Canada provides information technology (IT) infrastructure services to CIHR in the areas of data centre and network services. The scope and responsibilities are addressed in the interdepartmental arrangement between Shared Services Canada and CIHR; and
- Canada School of Public Service provides access to a large selection of learning publications and training, covering a wide variety of subjects such as management techniques, policy development, planning, leadership and governance.
- The Tri-Council Secretariat administers the Networks of Centres of Excellence, Business Lead Networks of Centres of Excellence, Community Colleges Innovation Program, Canada Excellence Research Chairs, Canada Graduate Scholarships, and the Canada Research Chairs on behalf of CIHR’ Research, Knowledge Translation and Ethics Portfolio. The Secretariat has the authority and responsibility to ensure that funding decisions are fair, due process is 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 2014-15
The key findings and significant adjustments required from the current year’s assessment activities are summarized below.
New or significantly amended key controls: In the current year, there were no significantly amended key controls in existing processes which required a reassessment and there were no new processes to test for design and operating effectiveness.
Ongoing monitoring plan: As a result of updates to the Management Accountability Framework (MAF) and the Committee of Sponsoring Organizations of the Treadway Commission Methodology (COSO), the ongoing rotational monitoring plan was updated to incorporate entity-level control testing into this year’s assessment to best reflect professional practice.
In 2014-15, CIHR completed its reassessment of IT general computer controls, entity-level controls, and financial controls, including grants and awards, financial statement closing (including payables at year end and accruals), hospitality, travel and travel cards, Institute Support Grants, procurement, salary and payroll, and grants and awards payments. For the most part, the key controls that were tested performed as intended, with remediation required as follows:
- Improve timeliness of Section 32 pre-approval for hospitality, conferences and events costing less than $1,500.
- Refine process to ensure all event expenditures are committed in the financial system in a timely manner;
- Ensure that all peer review committee recommendation sheets are properly validated and documented;
- Improve the timeliness of Section 32 commitments for grants and awards and ensure an appropriate verifiable audit trail is maintained on file; and
- Enhance the proactive disclosure reporting of grants and awards to ensure amounts disclosed are timely, complete and accurate.
- Complete the implementation of defined and documented data retention periods for remaining key information systems.
4. CIHR’s action plan
4.1 Progress during fiscal year 2014-15
CIHR continued to conduct its ongoing monitoring as shown in the following table.
|Previous year’s rotational ongoing monitoring plan for current year||Status|
|Financial statement close (including payables at year end and accruals), travel and travel cards, procurement, salary and payroll, and Institute Support Grants – operating effectiveness testing and remediation of deficiencies||Completed as planned; no remedial action required.|
|Grants and awards, grants and awards payments process, hospitality, IT general controls, and operating effectiveness testing and remediation of deficiencies||Completed as planned; remedial actions in progress.|
|Entity-level controls||Completed in the current year, no remedial action plan required.|
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. 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. CIHR’s rotational ongoing monitoring plan over the next three years, based on an annual validation of the high-risk processes and controls and related adjustments to the ongoing monitoring plan as required, is shown in the following table.
|Key control areas||Fiscal year 2015–16||Fiscal year 2016–17||Fiscal year 2017–18|
|Financial statements close process (including payables at year end and accruals)||Yes||Yes||Yes|
|Grants and awards||Yes||Yes||Yes|
|Grants and awards payment process||Yes||Yes||Yes|
|IT general controls||Yes||Yes||Yes|
|Travel and travel cards||Yes||Yes||Yes|
|Institute Support Grants||No||No||Yes|
|Salary and payroll||No||No||Yes|
|Canada Research Chairs||Yes||No||No|
|Financial management and budgeting||Yes||No||No|
|Deferred revenue and revenue||No||Yes||No|
|Networks of Centres of Excellence||No||Yes||No|
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