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 2018–19 (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.
Detailed information on CIHR’s authority, mandate and program activities can be found in the 2017–18 Departmental Results Report (DRR) and the 2019–20 Departmental Plan.
2. CIHR’s 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. The agency internal control management framework, approved by the President, includes:
- 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
- at least annual monitoring of and regular updates on internal control management, as well as the provision of related assessment results and action plans to the President and departmental senior management and, where applicable, the Audit Committee.
The Audit Committee 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 that are recorded in its financial statements as follows.
- Public Services and Procurement Canada centrally administers the payments of salaries and the procurement of goods and services in accordance with CIHR’s Delegation of Authority, and provides accommodation services;
- The Treasury Board of Canada Secretariat provides CIHR with information used to calculate various accruals and allowances.
- The Department of Justice Canada provides legal services to CIHR; and
- Shared Services Canada provides information technology (IT) infrastructure services to CIHR. The scope and responsibilities are addressed in the interdepartmental arrangement between Shared Services Canada and CIHR.
- The Tri-Council Secretariat administers the Networks of Centres of Excellence, Business-Led Networks of Centres of Excellence, College and Community Innovation Program, Canada Excellence Research Chairs, Canada Graduate Scholarships, Canada First Research Excellence Fund, the Canada Research Chairs, and the Canada 150 Research Chairs on behalf of CIHR’s Research Programs 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.
3. CIHR Assessment Results during Fiscal Year 2018–19
The key findings and significant adjustments required from the current year’s assessment activities are summarized below.
New or significantly amended key controls: In recent years, additional controls have been added to the payroll and benefits business process. Most key controls that were tested operated as designed. However, some improvements were required. The identified improvements were accepted by management and an appropriate management response was developed.
Ongoing monitoring program: As part of its rotational ongoing monitoring plan, CIHR completed its reassessment of the following business processes including:
- Entity-level controls;
- IT general controls, and
- Financial controls;
- Grants and awards;
- Payroll and benefits;
- Financial statement closing including payables at year end and accruals;
- Hospitality; and
- Financial management and budgeting processes.
Most key controls that were tested operated as designed. However, some improvements were required. The identified improvements were accepted by management and an appropriate management response was developed.
4. Departmental Action Plan
4.1 Progress During Fiscal Year 2018-19
CIHR continued to conduct its on-going monitoring according to the previous year’s rotational plans as follows:
|Previous year's rotational ongoing monitoring plan for current year||Status|
|Entity-level controls||Controls are operating as designed. No remedial actions are required at this time.|
|Information technology general controls|
|Financial statements preparation (including Payables at year end and accruals)|
|Financial management and budgeting|
|Grants and awards, including payment||Controls processes require minor improvements to their design or operational effectiveness. Management has accepted recommendations and has begun remedial actions.|
|Payroll and benefits|
4.2 Action Plan for the Next Fiscal Year and Subsequent Years
CIHR has implemented an ongoing rotational monitoring plan over the next three years based on a risk-based annual validation of high risk processes and controls. The plan takes into consideration any substantial changes to key controls in each process. CIHR’s rotational ongoing monitoring plan over the next three years is shown in the following table.
|Key Control Areas||2019–20||2020-21||2021–22|
|IT general controls||√||√||√|
|Key Business Processes|
|Grants and awards including payment||√||√||√|
|Payroll and benefits||√||√||√|
|Revenue, deferred revenue and receivables||√|
|Institute support grants||√|
|Procurement and acquisition cards||√|
|Financial management (budgeting and forecasting)||√||√|
|Tri-Agency programsFootnote 1||√|
In addition to the on-going monitoring rotational plan, CIHR has completed or has planned the following assessment work to complement the system of internal control including:
- internal audits and advisory activities;
- the annual assessment of Core Management Controls;
- on-going control monitoring activities using data analytics; and
- the continued utilization of the information gathered from the November 2016 Fraud Risk Assessment.
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