Financial Statements 2011-2012
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Statement of Management Responsibility (unaudited)
Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2012, and all information contained in these statements rests with the management of the Public Safety and Emergency Preparedness Canada (PSEPC). These financial statements have been prepared by management using the Government's accounting policies, which are based on Canadian public sector accounting standards.
Management is responsible for the integrity and objectivity of the information in these financial statements. Some of the information in the financial statements is based on management's best estimates and judgment, and gives due consideration to materiality. To fulfill its accounting and reporting responsibilities, management maintains a set of accounts that provides a centralized record of the department's financial transactions. Financial information submitted in the preparation of the Public Accounts of Canada and included in PSEPC's Departmental Performance Report, is consistent with these financial statements.
Management is also responsible for maintaining an effective system of internal controls over financial reporting (ICFR) designed to provide reasonable assurance that financial information is reliable, that assets are safeguarded and that transactions are properly authorized and recorded in accordance with the Financial Administration Act and other applicable legislation, regulations, authorities and policies.
Management seeks to ensure the objectivity and integrity of data in its financial statements through careful selection, training and development of qualified staff; through organizational arrangements that provide appropriate divisions of responsibility; and through communication programs aimed at ensuring that regulations, policies, standards and managerial authorities are understood throughout the Department and through conducting an annual risk-based assessment of the effectiveness of the system of ICFR.
The system of ICFR is designed to mitigate risks to a reasonable level based on an ongoing process to identify key risks, to assess effectiveness of associated key controls, and to make any necessary adjustments.
A risk-based assessment of the system of ICFR for the year ended March 31, 2012 was completed in accordance with the Treasury Board Policy on Internal Control and the results and action plans are summarized in the annex.
The effectiveness and adequacy of the Department's system of internal control is reviewed by the work of internal audit staff, who conduct periodic audits of different areas of the Department's operations, and by the Departmental Audit Committee, which oversees management's responsibilities for maintaining adequate control systems and the quality of financial reporting, and which recommends the financial statements to the Deputy Minister of Public Safety and Emergency Preparedness Canada.
The financial statements of PSEPC have not been audited.
Graham Flack
A/Deputy Minister
Ottawa, Canada
Gary Robertson
Assistant Deputy Minister
Corporate Management Branch
Chief Financial Officer
Ottawa, Canada
Liabilities | 2012 | 2011 |
---|---|---|
Accounts payable and accrued liabilities (note 4) | $ 210,843 | $ 348,344 |
Vacation pay and compensatory leave | $ 3,732 | $ 3,506 |
Employee future benefits (note 5) | $ 9,457 | $ 18,806 |
Disaster Financial Assistance Arrangements (DFAA) (note 6) | $ 1,299,851 | $ 545,918 |
Total liabilities | $ 1,523,874 | $ 916,574 |
Financial assets | ||
Due from Consolidated Revenue Fund | $ 172,158 | $ 278,394 |
Accounts receivable and advances (Note 7) | $ 278,394 | $ 3,025 |
Total net financial assets | $ 173,229 | $ 281,419 |
Departmental Net Debt | $ 1,350,645 | $ 635,155 |
Non-financial assets | ||
Tangible capital assets (Note 8) | $ 15,160 | $ 15,706 |
Total non-financial assets | $ 15,160 | $ 15,706 |
Departmental net financial position | ($ 1,335,485) | ($ 619,449) |
Contractual liabilities (note 9)
Contingent obligations (note 10)
The accompanying notes form an integral part of these financial statements
Graham Flack
A/Deputy Minister
Ottawa, Canada
Gary Robertson
Assistant Deputy Minister
Corporate Management Branch
Chief Financial Officer
Ottawa, Canada
2012 Planned Results |
2012 | 2010 Restated (Note 15) |
|
---|---|---|---|
Expenses | |||
Emergency Management | $ 161,237 | $ 890,320 | $ 268,738 |
Countering Crime | 192,043 | 172,226 | 310,572 |
Internal Services | 55,609 | 70,767 | 67,019 |
National Security | 16,143 | 19,561 | 19,832 |
Border Strategies | 2,574 | 3,424 | 2,321 |
Total expenses | $ 427,696 | $ 1,156,298 | $ 668,482 |
Revenues | |||
Respendable revenue | $ - | $ 1,596 | $ - |
Miscellaneous revenues | 85 | 89 | 110 |
Revenues earned on behalf of government | (85) | (89) | (110) |
Total revenues | $ 0 | $ 1,596 | $ 0 |
Net Cost from continuing operations | $ 427,696 | $ 1,154,702 | $ 668,482 |
Transferred operations (note 13) | |||
Expenses | 3,235 | 3,235 | 6,905 |
Net cost of transferred operations | 3,235 | 3,235 | 6,905 |
Net Cost of Operations before government funding and transfers | $ 430,931 | $ 1,157,937 | $ 675,387 |
Government Funding and Transfers | |||
Net cash provided by Government | $ 528,825 | $ 451,792 | |
Change in due from the Consolidated Revenue Fund | (106,236) | 42,798 | |
Services provided without charge by other government departments (note 11) | 20,238 | 17,781 | |
Transfer of assets and liabilities to Shared Services Canada (note 13) | (917) | - | |
Transfer of assets to other government department (note 8) | (9) | - | |
Net Cost of Operations after government funding and transfers | $ 716,036 | $ 163,016 | |
Departmental Net Financial Position - Beginning of Year | ($ 619,449) | ($ 456,433) | |
Departmental Net Financial Position - End of Year | ($ 1,335,485) | ($ 619,449) |
Segmented information (Note 14)
The accompanying notes form an integral part of these financial statements.
2012 | 2011 | |
---|---|---|
Net Cost of Operations after government funding and transfers | $ 716,036 | $ 163,016 |
Change Due to Tangible Capital Assets | ||
Acquisition of tangible capital assets | 3,293 | 2,514 |
Amortization of tangible capital assets | (1,764) | (1,696) |
Proceeds from disposal of tangible capital assets | - | (6) |
Transfer to other Government Departments (note 8 & 13) | $ (2,075) | |
Total Change Due to Tangible Capital Assets | $ (546) | $ 812 |
Net Increase in Departmental Net Debt due to operations | $ 715,490 | $ 163,828 |
Departmental Net Debt Beginning of Year | $ 635,155 | $ 471,327 |
Departmental Net Debt End of Year | $ 1,350,645 | $ 635,155 |
The accompanying notes form an integral part of these financial statements
2012 | 2011 Restated (Note 15) |
|
---|---|---|
Operating activities | ||
Net Cost of Operations before government funding and transfers | $ 1,157,937 | $ 675,387 |
Non-cash items: | ||
Amortization of tangible capital assets (Note 8) | (1,764) | (1,696) |
Services provided without charge by other government departments (Note 11) | (20,238) | (17,781) |
Variations in Statement of Financial Position: | ||
Increase (decrease) in accounts receivable | (1,954) | 1,828 |
Decrease (increase) in accounts payable and accrued liablities | 137,510 | (72,644) |
Decrease (increase) in vacation pay and compensatory leave | (226) | 811 |
Decrease (increase) in employee future benefits | 9,349 | (1,803) |
Decrease (increase) in Disaster Financial Assistance Arrangements program | (753,933) | (134,818) |
Transfer of liabilities to other government departments (note 13) | (1,149) | 0 |
Cash used by operating activities | 449,174 | 306,395 |
Capital investing activities | ||
Acquisitions of tangible capital assets (Note 8) | 3,293 | 2,514 |
Proceed from Disposal of tangible capital assets (Note 8) | (6) | |
Cash used in capital investing activities | 3,293 | 2,508 |
Net cash provided by Government of Canada | $ 528,825 | $ 451,792 |
The accompanying notes form an integral part of these financial statements
Notes to the Financial Statements (unaudited)
For the Year Ended March 31, 2012
1. Authority and objectives
The Department of Public Safety and Emergency Preparedness Canada (PSEPC) was created in 2003 to ensure coordination across all federal departments and agencies responsible for national security and the safety of Canadians. The Department operates under the Department of Public Safety and Emergency Preparedness Act (2005, c.10) that received Royal assent on March 23, 2005.
PSEPC contributes to the public safety of Canadians through the promotion and maintenance of a just, peaceful and safe society; it has five main core activities:
- Emergency Management: Addresses all-hazards through the development of an integrated emergency management system, legislation and national strategies, training and standards to protect Canada and Canadians;
- Countering Crime: Collaborates with regions and communities to build crime prevention programs that are specific and appropriate to them. It provides communities with tools, knowledge and support to implement prevention programs;
- Internal Services: Supports the work of all other programs activities and provides key corporate services;
- National Security: Develops and coordinates policy to define and advance Canada's national security objectives; and
- Border Strategies: Provides federal policy leadership and coordination on a variety of border issues to ensure that security objectives are achieved in a manner that facilitates the flow of legitimate trade and travel, and contributes to the effective management of the Canada-US border agenda.
2. Significant accounting policies
These financial statements have been prepared using the Government's accounting policies stated below, which are based on Canadian public sector accounting standards. The presentation and results using the stated accounting policies do not result in any significant differences from Canadian public sector accounting standards.
Significant accounting policies are as follows:
- Parliamentary authorities
PSEPC is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to the Department do not parallel financial reporting according to generally accepted accounting principles since authorities are primarily based on cash flow requirements. Consequently, items recognized in the Statement of Operations and Departmental Net Financial Position and in the Statement of Financial Position are not necessarily the same as those provided through authorities from Parliament. Note 3 provides a reconciliation between the bases of reporting. The planned results amounts in the Statement of Operations and Departmental Net Financial Position are the amounts reported in the future-oriented financial statements included in the 2011-12 Report on Plans and Priorities. The future-oriented financial statements for 2011-2012 have been restated to reflect the revenue net of non-respendable amounts. This restatement resulted in an $85,000 increase in net costs of operations before government funding and transfers. In addition, the future-oriented financial statements have also been reclassified to conform to the current year presentation. - Net cash provided by government
The Department operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by the Department is deposited to the CRF, and all cash disbursements made by the Department are paid from the CRF. The net cash provided by Government is the difference between all cash receipts and all cash disbursements, including transactions between departments of the Government. - Amounts due from/to the CRF
Amounts due from or to the CRF are the result of timing differences at year-end between when a transaction affects authorities and when it is processed through the CRF. Amounts due from the CRF represent the net amount of cash that the Department is entitled to draw from the CRF without further authorities to discharge its liabilities. - Revenues
Revenues are accounted for in the period in which the underlying transaction or event that gave rise to the revenue takes place.
Revenues that are non-respendable are not available to discharge the Department's liabilities. While the Deputy Head is expected to maintain accounting control, he or she has no authority regarding the disposition of non-respendable revenues. As a result, non-respendable revenues are considered to be earned on behalf of the Government of Canada and are therefore presented in reduction of the PSEPC 's gross revenues. - Expenses - Expenses are recorded on the accrual basis:
Transfer payments are recorded as expenses when authorization for the payment exists and the recipient has met the eligibility criteria or the entitlements established for the transfer payment program. In situations where payments do not form part of an existing program, transfer payments are recorded as expenses when the Government announces a decision to make a non-recurring transfer, provided the enabling legislation or authorization for payment receives parliamentary approval prior to the completion of the financial statements. Transfer payments that become repayable as a result of conditions specified in the contribution agreement that have come into being are recorded as a reduction to transfer payment expense and as a receivable.
Vacation pay and compensatory leave are accrued as the benefits are earned by employees under their respective terms of employment.
Services provided without charge by other government departments for accommodation, employer contributions to the health and dental insurance plans, legal services and workers' compensation are recorded as operating expenses at their estimated cost. - Employee future benefits
- Pension benefits: Eligible employees participate in the Public Service Pension Plan, a multi-employer plan administered by the Government. The Department's contributions to the Plan are charged to expenses in the year incurred and represent the total Departmental obligation to the Plan. The Department's responsibility with regard to the Plan is limited to its contributions. Actuarial surpluses or deficiencies are recognized in the financial statements of the Government of Canada, as the Plan's sponsor.
- Severance benefits: Employees entitled to severance benefits under labor contracts or conditions of employment earn these benefits as services necessary to earn them are rendered. The obligation relating to the benefits earned by employees is calculated using information derived from the results of the actuarially determined liability for employee severance benefits for the Government as a whole.
- Receivables: Accounts receivables are stated at the lower of cost and net recoverable value; a valuation allowance is recorded for receivables where recovery is considered uncertain.
- Contingent liabilities: Contingent liabilities are potential liabilities which may become actual liabilities when one or more future events occur or fail to occur. To the extent that the future event is likely to occur or fail to occur, and a reasonable estimate of the loss can be made, an estimated liability is accrued and an expense recorded. If the likelihood is not determinable or an amount cannot be reasonably estimated, the contingency is disclosed in the note 10 to the financial statements.
- Tangible capital assets: All tangible capital assets and leasehold improvements having an initial cost of $10,000 or more are recorded at their acquisition cost. The Department does not capitalize intangibles, works of art and historical treasures that have cultural, aesthetic or historical value, assets located on Indian Reserves and museum collections.
Amortization of tangible capital assets is done on a straight-line basis over the estimated useful life of the asset as follows: Asset Class Amortization Period Computer hardware 4 years Computer software 3-5 years Vehicles 3 years Leasehold improvements Lesser of the remaining term of the lease or useful life of improvement Other Equipment including Furniture 5 years - Measurement uncertainty: The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses reported in the financial statements. At the time of preparation of these statements, management believes the estimates and assumptions to be reasonable. The most significant items where estimates are used are contingent liabilities, the liability for the Disaster Financial Assistance Arrangements Program, the employee future benefits and the useful life of tangible capital assets. Actual results could significantly differ from those estimated. Management's estimates are reviewed periodically and, as adjustments become necessary, they are recorded in the financial statements in the year they become known.
3. Parliamentary authorities
PSEPC receives most of its funding through annual Parliamentary authorities. Items recognized in the Statement of Operations and Departmental Net Financial Position and the Statement of Financial Position in one year may be funded through Parliamentary authorities in prior, current or future years. Accordingly, PSEPC has different net results of operations for the year on a government funding basis than on an accrual accounting basis. The differences are reconciled in the following tables:
2012 | 2011 Restated (Note 15) |
|
---|---|---|
Net cost of operations before government funding and transfers | $ 1,157,937 | $ 675,277 |
Adjustments for items affecting net cost of operations but not affecting authorities: | ||
Add (Less): | ||
Amortization of tangible capital assets (Note 5) | (1,764) | (1,696) |
Services provided without charge by other government departments (Note 11) | (20,238) | (17,781) |
Decrease (increase) in vacation pay and compensatory leave net of SSC transfer (Note 13) | (358) | 811 |
Decrease (increase) in employee future benefits net of SSC transfer (Note 5) | 8,524 | (1,803) |
Bad debt expenses | (1,901) | 0 |
Refund of prior year expenditures | 2,294 | 3,276 |
Decrease (increase) in accruals for Disaster Financial Assistance (Note 6) | (753,933) | (134,818) |
Adjustments to previous years' payables at year-end | 12,358 | 6,712 |
(755,018) | (145,299) | |
Adjustments for items not affecting net cost of operations but affecting authorities: | ||
Add (Less): | ||
Acquisitions of tangible capital assets (Note 8) | 3,293 | 2,514 |
Proceeds from disposal of tangible capital Assets | 0 | (6) |
3,293 | 2,508 | |
Current year authorities used | $ 406,212 | $ 532,596 |
2012 | 2011 | |
---|---|---|
Operating expenditures - Vote 1 | $ 152,159 | $ 150,251 |
Grants & Contributions - Vote 5 | 246,044 | 520,028 |
Salary and motor car allowance | 78 | 78 |
Contributions to employee benefits plan | 15,676 | 15,188 |
413,957 | 685,545 | |
Less: | ||
Lapsed: Operating and transfer payments | (12,392) | (152,949) |
Subtotal | $ 401,565 | $ 532,596 |
Obligation for Termination Benefits | $ 4,647 | $ 0 |
Current year authorities used | $ 406,212 | $ 532,596 |
4. Accounts payable and accrued liabilities
2012 | 2011 | |
---|---|---|
Accounts payable to other government departments and agencies | $ 4,162 | $ 4,970 |
Accounts payable to external parties | 201,173 | 342,770 |
Total accounts payable | 205,335 | 347,740 |
Accrued liabilities | 5,499 | 604 |
Total accounts payable and accrued liabilities | $ 210,834 | $ 348,344 |
In Canada's Economic Action Plan 2012, the Government announced savings measures to be implemented by departments over the next three years starting in 2012-2013. As a result, the Department has recorded at March 31, 2012 an obligation for termination benefits for an amount of $4,647,000 as part of accrued liabilities to reflect the estimated workforce adjustment costs.
5. Employee future benefits
a) Pension benefits
PSEPC's employees participate in the Public Service Pension Plan, which is sponsored and administered by the Government of Canada. Pension benefits accrue up to a maximum period of 35 years at a rate of 2 percent per year of pensionable service, times the average of the best five consecutive years of earnings. The benefits are integrated with Canada/Québec Pension Plans benefits and they are indexed to inflation. Both the employees and the Department contribute to the cost of the Plan. The 2011-12 expense amounts to $11,303,865 ($10,756,494 in 2010-11), which represents approximately 1.8 times the contributions by employees (1.9 in 2010-11).
The Department's responsibility with regard to the Plan is limited to its contributions. Actuarial surpluses or deficiencies are recognized in the financial statements of the Government of Canada, as the Plan's sponsor.
(b) Severance benefits
PSEPC provides severance benefits to its employees based on eligibility, years of service and salary at termination of employment. These severance benefits are not pre-funded. Benefits will be paid from future authorities. Information about the severance benefits, measured as at March 31, are as follows:
As part of collective agreement negotiations with certain employee groups, and changes to conditions of employment for executives and certain non-represented employees, the accumulation of severance benefits under the employee severance pay program ceased for these employees commencing in 2012. Employees subject to these changes have been given the option to be immediately paid the full or partial value of benefits earned to date or collect the full or remaining value of benefits on termination from the public service. These changes have been reflected in the calculation of the outstanding severance benefit obligation.
2012 | 2011 | |
---|---|---|
Accrued benefit obligation - Beginning of year | $ 18,806 | $ 17,003 |
Transferred to other government department, effective November 15, 2011 (note 13) | (825) | 0 |
Subtotal | 17,981 | 17,003 |
Expense for the year | 1,786 | 2,854 |
Benefits paid during the year | (10,310) | (1,051) |
Accrued benefit obligation, end of year | $ 9,457 | $ 18,806 |
6. Disaster Financial Assistance Arrangements (DFAA)
In the event of a natural disaster in Canada, the federal government provides financial assistance to provincial and territorial governments through the Disaster Financial Assistance Arrangements program to help meet the basic costs of response and recovery when such expenditures exceed what an individual province or territory could reasonably be expected to bear on its own. The current outstanding liabilities of $1,299M is the estimated cost to PSEPC of 52 natural disaster events for which the Federal Government has agreed to share the costs and final payments have not yet been made.
2012 | 2011 | |
---|---|---|
Opening balance | $ 545,918 | $ 411,100 |
Disbursements | (99,970) | (88,716) |
Accrued expenses for the year | 853,903 | 223,534 |
Closing balance | $ 1,299,851 | $ 545,918 |
7. Accounts receivable and advances
The following table presents details of accounts receivable and advances:
2012 | 2011 | |
---|---|---|
Receivables – Other government departments and agencies | $ 892 | $ 1,034 |
Receivables – External parties | 2,053 | 1,971 |
Employee advances | 27 | 20 |
Subtotal | $ 2,972 | $ 3,025 |
Allowance for doubtful accounts on receivables from external parties | $ (1,901) | $ 0 |
Net accounts receivable | $ 1,071 | $ 3,025 |
8. Tangible capital assets
Cost | AccumulatedAmortization | Net book value | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
Capital asset class | Opening balance | Acquisitions | Adjustments (1) | Closing balance | Opening balance | Amortizations | Adjustments(1) | Closing balance | 2012 | 2011 |
Computer hardware | 6,684 | 973 | (3,025) | 4,632 | 4,204 | 609 | (1,093) | 3,720 | 912 | 2,480 |
Computer software | 497 | 0 | (283) | 214 | 275 | 49 | (149) | 175 | 39 | 222 |
Other equipment including furniture | 692 | 650 | 0 | 1,342 | 38 | 145 | 0 | 183 | 1,159 | 654 |
Vehicles | 109 | 73 | (11) | 171 | 75 | 22 | (2) | 95 | 76 | 34 |
Leasehold improvements | 18,642 | 1,253 | 11 | 19,906 | 6,337 | 939 | 0 | 7,276 | 12,630 | 12,305 |
Assets under construction | 11 | 344 | (11) | 344 | 0 | 0 | 0 | 0 | 344 | 11 |
Total | $ 26,635 | $ 3,293 | $ (3,319) | $ 26,609 | $ 10,929 | $ 1,764 | $ (1,244) | $ 11,449 | $ 15,160 | $15,706 |
(1) Adjustments include assets under construction of $11,000that were transferred to other categories upon completion of the assets.
Effective November 15, 2011, the Department transferredcomputer hardware and software with a net book value of $2,066,000 to SSC(refer to Note 13 for further detail on the transfers). The Department alsotransferred a vehicle with a net book value of $9,000 to another governmentdepartment. The transfers are included in the Adjustments columns.
9. Contractual Obligations
The nature of the Department's activities can result in some large multi-year contracts and obligations whereby the Department will be obligated to make future payments in order to carry out its transfer payment programs or when the services/goods are received. Significant contractual obligations that can be reasonably estimated are summarized as follows:
Fiscal Year | Total | |||||
---|---|---|---|---|---|---|
2013 | 2014 | 2015 | 2016 | 2017 and thereafter |
||
Transfer payments | $104,195 | 28,912 | 15,268 | 3,413 | 375 | $ 152,163 |
10. Contingent liabilities - claims and litigation
Claims have been made against the Department in the normal course of operations. These claims include items with pleading amounts and others for which no amount is specified. While the total amount claimed in these actions is significant, their outcomes are not determinable. The Department has recorded an allowance for claims and litigations where it is likely that there will be a future payment and a reasonable estimate of the loss can be made. Claims and litigations for which the outcome is not determinable and a reasonable estimate can be made by management amount to approximately $1,822,110 ($250,000 in 2010-2011) at March 31, 2012.
Please note that during 2011, Public Safety Canada has reviewed the methodology to estimate the value of the claims and litigation from potential liability for all named parties to the only portion attributable to the department. Therefore 2010-2011 estimated claims and litigation were restated from $451,344,220 to $250,000.
11. Related party transactions
The Department is related as a result of common ownership to all Government of Canada departments, agencies, and Crown corporations. The Department enters into transactions with these entities in the normal course of business and on normal trade terms. In addition, the Department has agreements with Correctional Services Canada and with Royal Canadian Mounted Police related to the provision of finance and human resources system services. During the year, the Department received common services which were obtained without charge from other Government departments as disclosed below:
(a) Common services provided without charge by other government departments
During the year the Department received services without charge from certain common service organizations related to accommodation, legal services, the employer's contribution to the health and dental insurance plans and workers' compensation coverage. These services provided without charge have been recorded in the Department's Statement of Operations and Departmental Net Financial Position as follows:
2012 | 2011 | |
---|---|---|
Accommodation | $ 10,088 | $ 9,596 |
Employer's contribution to the health and dental insurance plans | 8,385 | 6,719 |
Legal services | 1,758 | 1,459 |
Workers' Compensation | 7 | 7 |
Total | $ 20,238 | $ 17,781 |
The Government has centralized some of its administrative activities for efficiency, cost-effectiveness purposes and economic delivery of programs to the public. As a result, the Government uses central agencies and common services organization so that one department performs services for all other departments and agencies without charge. The costs of these services, such as payroll and cheque issuance services provided by Public Works and Government Services Canada and audit services provided by the Office of the Auditor General are not included in the Department's Statement of Operations and Departmental Net Financial Position.
(b) Other transactions with related parties
2012 | 2011 | |
---|---|---|
Accounts receivable – Other government departments and agencies | $ 892 | $ 1,034 |
Accounts payable – Other government departments and agencies | 4,162 | 4,970 |
Expenses - Other Government departments and agencies | 11,145 | 9,690 |
Revenues - Other Government departments and agencies | 1,596 | 0 |
Expenses and revenues disclosed in (b) exclude common services provided without charge, which are already disclosed in (a).
12. Transfer payments
2012 | 2011 | |
---|---|---|
Payments to Territorial Governments for Operating Expenditures | $ 13,044 | $ 153,779 |
Payments to other levels of government | 859,934 | 231,555 |
Payments to Native peoples | 80,798 | 84,141 |
Payments to Non-Profit Organizations | 31,502 | 33,523 |
Total | $ 985,278 | $ 502,998 |
13. Transfers from/to other government departments
Effective November 15, 2011, the Department transferred its information technology activities to Shared Services Canada (SSC) in accordance with PC 2011-12 97, including the stewardship responsibility for the assets and liabilities related to the program. Accordingly, the Department transferred the following assets and liabilities related to PSEPC to SSC on November 15, 2011:
Assets: | |
---|---|
Tangible capital assets (net book value) (note 8) | $ 2,066 |
Total assets transferred | $ 2,066 |
Liabilities | |
Allowance for Vacation pay and compensatory leave | 132 |
Employee future benefits liabilities (note 5) | 763 |
Accrued Salaries and Wages | 17 |
Payables at year-end | 237 |
Total liabilities transferred | $ 1,149 |
Adjustment to the departmental net financial position | $ 917 |
In addition, the 2011 comparative figures have been reclassified on the Statement of Operations and Departmental Net Financial Position to present the revenues and expenses of the transferred operations. During the transition period, the Department continued to administer the transferred activities on behalf of Shared Services Canada. The administered expenses amounted to $5,358,811 for the year. These expenses are not recorded in these financial statements.
14. Segmented information
Presentation by segment is based onthe Department's program activity architecture. The presentation by segmentis based on the same accounting policies as described in the Summary ofsignificant accounting policies in note 2. The following table presents theexpenses incurred and revenue generated for the main program activities, bymajor object of expenses and by major type of revenues. The segment resultsfor the period are as follows:
2012 | 2011 | ||||||
---|---|---|---|---|---|---|---|
Emergency Management | Countering Crime | Internal Services | National Security | Border Strategies | Total | Total Restated (note 15) | |
Expenses | |||||||
Transfer payments | $ 853,149 | $ 132,031 | $ 0 | $ 98 | $ 0 | $ 985,278 | $ 502,998 |
Operating expenses | |||||||
Salaries and employee benefits | 28,035 | 28,300 | 46,713 | 14,586 | 2,753 | 120,387 | 111,503 |
Professional and special services | 5,030 | 5,619 | 9,402 | 1,636 | 232 | 21,919 | 24,219 |
Accommodation | 2,416 | 2,391 | 6,969 | 1,257 | 228 | 13,261 | 12,870 |
Travel and relocation | 754 | 1,476 | 622 | 704 | 183 | 3,739 | 5,418 |
Equipment | 355 | 46 | 0 | 519 | 11 | 931 | 3,473 |
Communication | 29 | 28 | 0 | 59 | 1 | 117 | 0 |
Equipment rentals | 82 | 88 | 662 | 600 | 10 | 1,442 | 2,515 |
Amortization | 173 | 1 | 1,579 | 11 | 0 | 1,764 | 1,696 |
Information | 119 | 241 | 2,236 | 49 | 0 | 2,645 | 1,553 |
Repairs | 61 | 0 | 1,868 | 10 | 0 | 1,939 | 1,394 |
Utilities, material and supplies | 117 | 111 | 674 | 32 | 6 | 940 | 843 |
Bad debt expense | 0 | 1,894 | 7 | 0 | 0 | 1,901 | 0 |
Miscellaneous | 0 | 0 | 35 | 0 | 0 | 35 | 0 |
Total Operating expenses | 37,171 | 40,195 | 70,767 | 19,463 | 3,424 | 171,020 | 165,484 |
Total Expenses | 890,320 | 172,226 | 70,767 | 19,561 | 3,424 | 1,156,298 | 668,482 |
Revenues | |||||||
Respendable Revenue | 1,596 | 1,596 | |||||
Miscellaneous Revenues | 21 | 21 | 35 | 11 | 1 | 89 | 110 |
Revenue earned on behalf of Government | (21) | (21) | (35) | (11) | (1) | (89) | (110) |
Total Revenues | 0 | 0 | 1,596 | 0 | 0 | 1,596 | 0 |
Net Cost from continuingoperations | $ 890,320 | $ 172,226 | $ 69,171 | $ 19,561 | $ 3,424 | $ 1,154,702 | $ 668,482 |
15. Accounting changes
During 2011, amendments were made to Treasury Board Accounting Standard 1.2––Departmental and Agency Financial Statements to improve financial reporting by government departments and agencies. The amendmentsare effective for financial reporting of fiscal years ending March 31, 2012, and later. The significant changes to theDepartment's financial statements are described below. These changes have been applied retroactively, andcomparative information for 2010-11 has been restated.
Net debt (calculated as liabilities less financial assets) is now presented in the Statement of Financial Position. Accompanying this change, the Department now presents a Statement of Change in Net Debt and no longer presents a Statement of Equity.
Revenues are now presented net of non-respendable amounts in the Statement of Operations and Departmental Net Financial Position and Statement of Financial Position. The effect of this change was to increase the net cost of operations after government funding and transfers by $89,000 for 2012 ($110,000 for 2011).
Government funding and transfers, as well as the credit related to services provided without charge by other government departments are now recognized in the Statement of Operations and Departmental Net Financial Position below “Net cost of operations before government funding and transfers.” In previous years, the Department recognized these transactions directly in the Statement of Equity of Canada. The effect of this change was to decrease the net cost of operations after government funding and transfers by $441,812,000 for 2012 ($512,261,000 for 2011).
As previously stated | Effect of change | Restated | |
---|---|---|---|
Statement of Operations and Departmental Net Financial Position | |||
Revenues | $ 110 | $ (110) | $ 0 |
Government funding and transfers | |||
Net cash provided by Government | 0 | 451,792 | 451,792 |
Change in due from Consolidated Revenue Fund | 0 | 42,798 | 42,798 |
Services provided without charge by other government departments | 0 | 17,781 | 17,781 |
16. Comparative information
Comparative figures have been reclassified to conform to the current year's presentation. Also, Public Safety Canada recently revised its Program Activity Architecture (PAA) for 2011‐12. The revisions do not represent a significant departure from the previous PAA, but better reflect the nature of its business and facilitate departmental reporting requirements.
The Department's streamlined PAA regroups the previous eight program activities into five:
- Emergency Management – includes elements of the former Interoperability program activity;
- Countering Crime – Incorporates the former Law Enforcement, Corrections, and Crime Prevention program activities;
- Internal Services – no change;
- National Security: includes the Critical Infrastructure and Cyber Security programs, both formerly under the Emergency Management program activity;
- Border Strategies: formerly named Border Management.
This crosswalk illustrates the redistribution of the 2010-11 net cost from continuing operations made at the program activity level between the former and new PAAs.
National Security | Border Strategies | Countering Crime | Emergency Management | Internal Services | Total | |
---|---|---|---|---|---|---|
National Security | 9,210 | 9,210 | ||||
Emergency Management | 10,622 | 267,690 | 278,312 | |||
Law Enforcement | 251,317 | 251,317 | ||||
Corrections | 9,127 | 9,127 | ||||
Crime Prevention | 50,128 | 50,128 | ||||
Border Management | 2,321 | 2,321 | ||||
Interoperability | 1,048 | 1,048 | ||||
Internal Services | 67,019 | 67,019 | ||||
Total Expenses | $ 19,832 | $ 2,321 | $ 310,572 | $ 268,738 | $ 67,019 | $ 668,482 |
Annex to the Statement of Management Responsibility
Note to the Reader
With the new Treasury Board Policy on Internal Control, effective April 1st, 2009, departments are now required to demonstrate the measures they are taking to maintain an effective system of internal control over financial reporting (ICFR).
As part of this policy, departments are expected to conduct an annual assessment of their system of ICFR, establish action plan(s) to address any necessary adjustments, and to attach to their Statement of Management Responsibility a summary of their assessment results and action plan.
Effective systems of ICFR aim to achieve reliable financial statements and to provide assurances that:
- Transactions are appropriately authorized;
- Financial records are properly maintained;
- Assets are safeguarded from risks such as waste, abuse, loss, fraud and mismanagement; and
- Applicable laws, regulations and policies are followed.
It is important to note that the system of ICFR is not designed to eliminate all risks; rather to mitigate risk to a reasonable level with controls that are balanced with, and proportionate to, the risks they aim to mitigate.
The system of ICFR is designed to mitigate risks to a reasonable level based on an on-going process to identify key risks, to assess effectiveness of associated key controls and adjust as required, as well as to monitor the system in support of continuous improvement. As a result, the scope, pace and status of those departmental assessments of the effectiveness of their systems of ICFR will vary from one organization to another based on risks and taking into account their unique circumstances.
Contents
- Annex to the Statement of Management Responsibility
- Note to the Reader
- Contents
- 1.0 Introduction
- 1.1 Authority, Mandate and Program Activities
- 1.2 Financial Highlights
- 1.3 Service Arrangements Relevant to Financial Statements
- 1.3.1 Arrangements Where Public Safety Receives Services
- 1.3.2 Arrangements Where Public Safety Provides Services
- 1.4 Material Changes Impacting ICFR in Fiscal-Year 2011-12
- 2.0 Public Safety's Control Environment Relevant to ICRF
- 2.1 Key Positions, Roles and Responsibilities
- 2.2 Key Measures Taken By Public Safety
- 3.0 Assessment of Public Safety's System of ICFR
- 3.1 Assessment Approach
- 3.2 Scope of Public Safety's Assessment as of March 31st, 2012
- 4.0 Departmental Assessment Results as of March 31st, 2012
- 4.1 Design Effectiveness of Key Controls
- 4.2 Operating Effectiveness of Key Controls
- 5.0 Public Safety's Action Plan
- 5.1 Progress Made During the Fiscal Year Ending March 31, 2012
- 5.2 Action Plan – Future Years
1.0 Introduction
This document is an annex to the Public Safety Statement of Management Responsibility Including Internal Control over Financial Reporting for the fiscal year 2011-12. As required by the Treasury Board Policy on Internal Control, effective April 1st, 2009, this document provides summary information on the measures taken by Public Safety to maintain an effective system of internal control over financial reporting (ICFR). In particular, it provides summary information on the assessments conducted by Public Safety as at March 31st, 2012, including progress, results and related action plans, along with some financial highlights pertinent to understanding the control environment unique to Public Safety. This is the first annex produced by Public Safety.
1.1 Authority, Mandate and Program Activities
Public Safety Canada's mandate is both diverse and complex. The Department delivers programs and develops policies on a wide range of public safety issues while exercising a broad leadership role that brings coherence to the activities of the agencies responsible for public safety and security.
The Department plays a key role in helping keep Canadians safe and secure by working to protect Canada's national security; making sure that we are prepared to respond to and recover from any major incident; and developing effective approaches to federal law enforcement, corrections, crime prevention and management of our nation's borders.
Detailed information on Public Safety's authority, mandate and program activities can be found in its 2011-12 Part III – Departmental Performance Reports (DPR) and 2012-13 Part III – Reports on Plans and Priorities (RPP).
1.2 Financial Highlights
Information can also be found in the Public Accounts of Canada.
Overall
- Corporate Management (Finance), within Public Safety, currently follows a substantive testing approach to financial transactions. The Department has decentralized financial operations where financial transactions are initiated and approved outside of accounting operations. However, all transactions are processed, approved and/or recorded in the departmental financial system by a centralized departmental accounting operations group; and
- Other significant information systems, such as the Human Resources Management Information Systems (HRMS) and several custom Grants and Contributions Information Management Systems are critical to the Department's financial reporting.
Accounting Changes
- The Department applied the amended Treasury Board Accounting Standard (TBAS) 1.2 – Departmental and Agency Financial Statements, which improved the financial reporting. These changes have also been applied retroactively and comparative information for 2010-11 has been restated.
Liabilities
- Total Public Safety Liabilities are $1.5B. The 85% (or $1.3B) of these liabilities relate to Disaster Financial Assistance Arrangements (DFFA) obligations.
Financial Assets
- Total Public Safety gross financial assets are $173M. 99% of these assets are Due from Consolidated Revenue Fund (CRF). Accounts Receivables account for the remaining 1% of the total gross financial assets.
Departmental Net Debt
- The Department's Net Debt has increased by $715.5M or 112.6% from $635.2M in 2011 to $1.3B in 2012.
Non-Financial Assets
- The net book value of tangible capital assets is $15M, including primarily leasehold improvements, machinery, equipment and vehicles. Public Safety acquired $3.3M of tangible assets in 2011-12 and transferred $2.1M in net assets to Shared Services Canada.
Expenses
- Total Public Safety expenses for 2011-12 are $1.156B. The majority of the expenses are for Grants and Contributions at 85% (or $985M) and 15% (or $171M) are for Operating expenditures. Salary comprises 70% (or $120M) of the Operating expenditures. The remainder are Operating and Maintenance expenditures
Revenue
- Public Safety secured new Vote Net Revenue Authorities through Supplementary Estimates C to comply with a recent amendment to the Financial Administration Act, which required that Departments record funding received for the provision of internal services to other government departments as revenue; and
- Public Safety collected a total of $1.685M in revenue, of which 95% (or $1.596M) was related to the change in accounting treatment to account for the provision of internal services to other government departments. Five percent (or $0.89M) of the revenue collected was earned on behalf of government; as such, was not available to the Department.
Transferred Operations
- The value of the services transferred to Shared Services Canada is $8.6M. $3.2M of this amount has been recorded as an expense under transferred operations within the financial statements because the expenses were incurred prior to November 15th, 2011. The remaining $5.4M has not been recorded in these financial statements, but will instead be reflected in the financial statements of Shared Services Canada.
Transfer Payments:
- Transfer payments total $985M and are mainly broken down as follows:
Transfer Payments Break Down Program Activities Amount Percentage Emergency Management $853M 87% Countering Crime $132M 13% Total $985M 100% - Recipients of the funding were:
- Other levels of government, who received 88% (or $860M);
- Native peoples, who received 8% (or $81M);
- Non-Profit Organizations, who received 3% (or $31M); and
- Territorial Governments for Operating Expenditures, who received 1% (or 13M).
1.3 Service Arrangements Relevant to Financial Statements
Below are the details of the service arrangements relevant Public Safety's financial statements.
1.3.1 Arrangements Where Public Safety Receives Services
Public Safety relies on other organizations for the processing of certain transactions that are recorded in its financial statements:
Common Arrangements:
- Public Works and Government Services Canada (PWGSC) centrally administers the payments of salaries and benefits and many information technology activities. PWGSC also provides for the procurement of some goods and services; the provision of accommodations; and billing, banking, electronic funds processing and similar payment services are provided by the Receiver General for Canada within the department of Public Works and Government Services Canada on behalf of Public Safety;
- Shared Services Canada (SSC) was created on August 4th, 2011 to consolidate, streamline and improve the government's information technology (IT) infrastructure services, specifically email, data centre and network services for 43 federal government departments and agencies. Effective November 15th, 2011, the responsibility for email, data centres and network services, including associated resources, was transferred from Public Safety to SSC. The administration and delivery of these services was shared during the 2011-12 transition period while SSC was being established.
- The Department of Justice provides legal services to Public Safety;
- The Treasury Board Secretariat provides Public Safety with information used to calculate various accruals and allowances, such as accrued severance liability.
- Human Resources and Social Development Canada provides Worker's Compensation coverage; also
- Public Safety relies on the internal controls of third party suppliers which provide specific services, such as relocation services.
Specific Arrangements:
- Public Safety's systems of record are provided by the RCMP, who hosts the Department's financial management system, and by the Correctional Services of Canada (CSC), who hosts the Department's human resource information management system. Memorandums of Understanding (MOU) exist between Public Safety and these agencies identifying roles and responsibilities; and
- Human Resources and Skills Development Canada will provide the recipient selection and payment operations under the Air India Ex-Gratia Payment program. A MOU has been developed detailing the roles and responsibilities of both departments.
1.3.2 Arrangements Where Public Safety Provides Services
Public Safety provides Corporate Services to three Public Safety Portfolio Agencies including the Office of the Correctional Investigator of Canada (OCI), RCMP External Review Committee (ERC) and the Commission For Public Complaints Against the RCMP (CPC). Memorandums of Understanding (MOU) exist between Public Safety and these agencies identifying roles and responsibilities.
1.4 Material Changes Impacting ICFR in Fiscal-Year 2011-12
During fiscal year 2011-12 there have been changes to the control environment at Public Safety:
- Mr. G. Flack (Associate Deputy Minister) has been the Acting Deputy Minister, since Mr. W. Baker's retirement in late April 2012;
- Mr. G. Robertson was appointed to the position of Chief Financial Officer September 19th, 2011;
- Fiscal Year 2011-12 also saw a reorganization of the Emergency Management and National Security Branch (EMNS) Branch within the Department. This change resulted in the splitting of the Branch into two separate entities, with each respective Branch having its own Assistant Deputy Minister (ADM). The split resulted in the creation of Emergency Management and Regional Operations (EM&RO) Branch and the National Security (NS) Branch. This change did not result in any substantive change to the Department's Program Activity Architecture (PAA);
- Public Safety undertook an initiative to transform regional operations in order to strengthen the overall contribution of the Department's regional offices. This initiative will enhance collaboration within and across regions and headquarters and will more fully integrate the regional offices into departmental operations, while enhancing program and service delivery;
- With the approval of the Shared Services Canada Order-in-Council on November 15, 2011, some employees of Public Safety Canada were transferred to Shared Services Canada. Employees whose positions are transferred have been informed of the change and were provided with the information required to make a smooth transition. Transferred employees will continue to be co-located within Public Safety and will continue to support the delivery of services to the department with the implementation strategy starting in 2011-12. Funding was transferred through Supplementary Estimates and Annual Reference Level Update (ARLU) processes to SSC;
- The Consolidation of Pay Services Project was approved by Treasury Board Ministers in June 2009 as part of the Transformation of Pay Administration Initiative. The Project is consolidating pay services from departments and agencies that use the endorsed Government of Canada Human Resources Management System (PeopleSoft). As a result, the Department's reference levels will be progressively decreased as pay services are consolidated within Public Works and Government Services Canada (PWGSC). One of the key components of the funding strategy (which commenced in 2011-12) is that work is transferred in a gradual and deliberate manner to ensure that the amount of funding is proportionate to the number of accounts being serviced for the Project and the ongoing operations of PWGSC's Center of Expertise (CoE). Funding was and will be transferred through Supplementary Estimates and Annual Reference Level Update (ARLU) processes.
- The following new programs or amendments to existing programs were approved in 2011-12:
- (new) the Air India Ex-Gratia Program was approved;
- (new) the Kanishka Program was approved;
- (amendment) temporarily increased funding of $15M for the First Nations Policing Program
- (amendment) temporarily increased funding of $7M for the Youth Gangs component of the National Crime Prevention Strategy; and
- (amendment) previously approved Strategic Review reductions were applied to the National Crime Prevention Strategy Program.
- With the 2010-11 changes resulting from the Policy on Financial Resource Management, Information and Reporting, the resulting amendment of the Treasury Board Accounting Standards (TBAS) 1.2 & 1.3, the new Directive on the Management of Travel, Hospitality and Conferences and the Parliamentary Budget Officer requests have created new requirements for the reporting of financial information on departments. These policies/directives now require departments to produce auditable financial statements, comprehensive Future-Oriented Financial Statements and Quarterly Financial Reports, Restructured annual financial statements, a comparative annual report on travel, hospitality and conferences and reports on Supplementary Estimates net adjustments delineated by Program Activity to the Parliamentary Budget Officer. These requirements have resulted in greater focus on reporting and monitoring.
- Budget 2012 announce measures specific to Public Safety's role in the Deficit Reduction Action Plan (DRAP). In preparation for this announcement and subsequent implementation of the measures, Public Safety Canada, in conjunction with the Minister's office, developed and tested a monitoring strategy for the Department and portfolio which will track the implementation of the measures against key metrics.
2.0 Public Safety's Control Environment Relevant to ICRF
Public Safety recognizes the importance of setting the tone from the top and to help ensure that staff at all levels understand their roles in maintaining effective systems of ICFR and is well equipped to exercise these responsibilities effectively. Public Safety focus is to ensure risks are managed well through a risk-based control environment that is founded on the principle of continuous improvement and innovation.
2.1 Key Positions, Roles and Responsibilities
Below are Public Safety's key positions and committees with responsibilities for maintaining and reviewing the effectiveness of its system of ICFR.
Deputy Minister (DM) – As Accounting Officer, assumes overall responsibility and leadership for the measures taken to maintain an effective system of internal control. In this role, the DM, and Associate DM oversee the management of the Department in accordance with the expectations defined in the Management Accountability Framework, via two senior level committees: the Executive Committee and the Departmental Management Committee. Additionally, the DM sits on the Departmental Audit Committee and the Departmental Evaluation Committee. Both committees are advisory bodies who as part of their mandates provide the DM with recommendations on how to strengthen the control environment within the Departmental.
Chief Financial Officer (CFO) – Reports directly to the DM and provides leadership for the coordination, coherence and focus on the design and maintenance of an effective and integrated system of ICFR, including its annual assessment. The CFO meets in-camera with the Departmental Audit Committee as part of the formal agenda of all Departmental Audit Committee meetings.
Senior Departmental Managers (SDM) – Are responsible for reviewing and maintaining the effectiveness of their system of ICFR within their area of responsibilities. Their roles and responsibilities are laid out within the departmental Financial Management Framework and Transfer Payment Management Framework and have been confirmed through a sub-certification process that required that SDMs acknowledge their accountabilities under the departmental systems of internal controls, including the system of internal control over financial reporting.
Chief Audit Executive (CAE) – Reports directly to the DM and provides assurance on the integrity of the Department's financial management and financial reporting processes and the effectiveness and adequacy of risk management, internal controls, governance and accountability processes through periodic internal audits, which are instrumental to the maintenance of an effective system of ICFR. The CAE is an ex-officio member at the Departmental Audit Committee quarterly meetings.
Committees Chaired by the Deputy Minister:
Executive Committee (ExCom) - Meets twice weekly to serve as a forum for the Deputy Minister and Associate Deputy Minister to provide strategic direction, provide meeting debriefs, receive updates, review the departmental agenda and discuss substantive key policy issues. Committee membership includes all Assistant Deputy Ministers (ADMs), the Director General Internal Audit, the Director General (DG) of the Communications Directorate, the Executive Director, Senior General Counsel, and the Chief of Staffs to the DM and Associate Deputy Minister. This committee is chaired by the Deputy Minister and in his absence, by the Associate Deputy Minister.
Departmental Management Committee (DMC) - The Departmental Management Committee (including the Financial Management Committee (FMC) and the Human Resources Management Committee (HRMC)) meets twice a month to deliberate on issues relating to departmental programs and operations, in-year budgets and expenditures, systems of internal control, risk management, as well as program, operational and corporate performance. The committee membership is identical to that of the Executive Committee at the ADM level and includes the Senior General Counsel and Director General Internal Audit. Secretariat services for this committee are provided by the Corporate Services Directorate in the Corporate Management Branch.
Departmental Evaluation Committee (DEC) - The Departmental Evaluation Committee membership includes Assistant Deputy Ministers, the Director General of Communications, and Executive Director, Senior General Counsel. The Committee is chaired by the Deputy Minister, co-chaired by the Associate Deputy Minister, and supported by the Director General, Evaluation.
Independent Committees:
Departmental Audit Committee (DAC) – The Departmental Audit Committee is an independent committee that meets at least semi-annually (DAC formally met three times in 2011-12) and provides objective views on the Department's risk management, control and governance frameworks and is comprised of three external members. It reviews Public Safety's Corporate Risk Profile and its system of internal control, including the assessment and action plans relating to the system of ICFR.
Other Committees:
Director-General Grants and Contributions Oversight Committee (DGGCOC) – Provides oversight for G&C Reform work and initiatives within the Department. It reports to the Departmental Management Committee (DMC). The responsibilities of this committee include the recommendations and internal control enhancement related to Transfer Payments.
Contract Review Committee (CRC) – Provides an effective central procurement challenge and oversight function. The CRC plays a key role in assessing corporate risks, which includes ensuring that all procurement activity is compliant with the relevant laws, regulations, trade agreements and policies, and fulfilling the government's commitment to fairness, openness and transparency.
2.2 Key Measures Taken By Public Safety
Public Safety's control environment also includes a series of measures to equip its staff to manage risk well through raising awareness, providing appropriate knowledge and tools as well as developing skills. Key measures include:
Governance:
- A Champion at the Director General level of Professional Ethics & Integrity, reporting directly to the CFO;
- A Corporate Risk Profile that is updated annually;
- Regularly updated authorities instruments to meet the operational and stewardship requirements of the organization;
- Annual employee performance agreements and learning plans with clear financial management responsibilities for budget managers;
- A risk-based multi-year internal audit plan developed with input from each member of the Department Management Committee prior to endorsement by the Departmental Audit Committee;
- A sub-certification signed by each member of the Departmental Management Committee as confirmation that their respective organizations have maintained a system of internal control designed to provide reasonable assurance that their financial information is reliable;
- A departmental Financial Management Framework was approved by DMC; and
- A departmental Transfer Payment Management Framework was approved by DMC.
Oversight:
- A Centralized Internal Control Unit with the assistance of external contractors dedicated to the documentation, design and operating effectiveness of internal controls over financial reporting;
- Working Groups devoted to addressing control weaknesses identified as part of the implementation of the Policy on Internal Control and the external review of the Department's Readiness Assessment for Internal Control over Financial Reporting;
- As per the Control Objectives for Information and related Technology (COBIT) control framework a review was undertaken of the General IT Controls within the Department and the application specific controls of the systems hosted by other government departments (Royal Canadian Mounted Police for the financial management system and the Correctional Services of Canada for the human resources information management system); and
- Thrice yearly Departmental Audit Committee meetings.
Capacity:
- Training and regular communications to employees on core areas of financial management, including internal controls;
- Mandatory Canada School Public Service financial courses are incorporated into the learning plans of financial specialists to ensure a skilled workforce;
- Hiring through developmental programs where employees are exposed to key aspects of financial stewardship in order to develop a competent and knowledgeable workforce.
3.0 Assessment of Public Safety's System of ICFR
3.1 Assessment Approach
To satisfy the requirements of the Policy on Internal Control, Public Safety must be able to maintain an effective system of ICFR with the objective to provide reasonable assurance that:
- Transactions are appropriately authorized;
- Financial records are properly maintained;
- Assets are safeguarded; and
- Applicable laws, regulations and policies are followed.
Over time, this includes assessment of design and operating effectiveness of the system of ICFR leading to the ongoing monitoring and continuous improvement of the departmental system of ICFR.
Design effectiveness means to ensure that key control points are identified, documented, in place and that they are aligned with the risks (i.e. controls are balanced with and proportionate to the risks they aim to mitigate) and that any remediation is addressed. This includes the mapping of key processes and IT systems to the main accounts by location as applicable.
Operating effectiveness means that the application of key controls has been tested over a defined period and that any required remediation is addressed.
Ongoing monitoring means that a systemic integrated approach to monitoring is in place, including periodic risk-based and timely remediation.
Such testing covers all departmental control levels, including corporate or entity, general computer and business process controls.
3.2 Scope of Public Safety's Assessment as of March 31st, 2012
As a cluster III department, this is Public Safety's first formal report on its system of ICFR. To satisfy the Policy on Internal Control, Public Safety Canada has taken measures to develop a baseline assessment of its system of ICFR. It used its annual financial statements as a starting point to identify its main business processes through a readiness assessment conducted by an external party in 2009. This baseline assessment determined the material accounts for the system of ICFR and has been the foundation for the development of a risk-based multi-year plan to implement the Policy on Internal Control.
Public Safety has developed a five-year plan which includes documentation, design testing, effectiveness testing, remediation and ongoing monitoring of its material business processes. The material business processes for Public Safety are:
- Grants and Contribution;
- Disaster Financial Assistance Arrangement;
- Salary Expenditures;
- Purchase to Pay (Operating Expenditures);
- Capital Assets; and
- Information Technology General and Application Specific Controls.
For these processes, except Capital Acquisitions, the following steps have been taken:
- Gathered information pertaining to processes, risks and controls relevant to ICFR, including appropriate policies and procedures which included interviews with key staff and the review of policies, guidelines, directives and tools;
- Mapped out key processes with the identification and documentation of key risks and control points on the basis of materiality, volumes, complexity, geographic dispersion, susceptibility to losses/fraud, areas subject to audit observations, past history, external attention and reliance on third parties;
- Completed design testing for the following business processes:
- Payroll (2009-2010);
- Grants and Contributions (2010-2011);
- Disaster Financial Assistance Arrangements (2010-2011); and
- Purchase to Pay (2010-11).
- Completed effectiveness testing for the Payroll process in 2010-2011; and
- Capital Acquisitions will be reviewed in 2012-13; focusing on documentation and process mapping related to identify the key controls. Thereafter, the Department will complete a test of design of the key controls. Effectiveness testing of the Capital Acquisitions key controls is planned for 2013-14.
4.0 Departmental Assessment Results as of March 31st, 2012
As a result of the assessment approach described above, Public Safety developed a baseline architecture of all key control points of its material business processes and main related information technology systems.
In assessing its key controls, Public Safety is focusing on design effectiveness which is the prerequisite to testing operating effectiveness.
4.1 Design Effectiveness of Key Controls
In completing design effectiveness assessments, Public Safety validated and documented all key controls, including their verification by process owners and confirmed whether the documented process and information technology systems documentation in place corresponds to actual practice. Design effectiveness also includes ensuring appropriate alignment of each key control point with risk. The next step in the process is to complete identified remediation requirements.
Public Safety has taken into account information from relevant audits, including:
- Audit of Grants and Contributions Payment processes (performed by Internal Audit);
- Audit of Financial Planning, Monitoring and Reporting processes (performed by Internal Audit);
- Audit of National Crime Prevention Strategy Program (performed by Internal Audit); and
- Readiness Assessment of Public Safety Internal Control over Financial Reporting (performed by an external party).
To date, test of design assessments supported by internal audit findings have resulted in action plans to address control weaknesses identified in the following processes:
- Payroll;
- Grants and Contribution;
- Disaster Financial Assistance Arrangements; and
- Purchase to Pay processes.
Key findings identified in the design assessment of Purchase-to-Pay and Disaster Financial Assistance Arrangements (DFAA) has been reviewed with remedial steps taken to address all control weaknesses identified in the Department.
The Department was not able to complete all elements of the remediation of the Grants and Contributions key control weaknesses, in that, the development of a standard payment request form was deferred to fiscal year 2012-13 as a result of delays associated with finalizing the Audit of the Grants and Contributions Payment processes. Key personal were redirected from this review to support the preparation of Deficit Reduction Action Plan (DRAP) Treasury Board Submission and subsequent follow-up activities from the review of the proposal by the Treasury Board Secretariat and the Strategic Operating Review Committee (SORC).
4.2 Operating Effectiveness of Key Controls
Public Safety began effectiveness testing of internal controls in 2009-10 with its payroll process. The approach involved a risk-based testing plan that identified the key controls to be tested over a defined period of time, with the appropriate method of testing and using technology to obtain assurance where possible. Subsequent effectiveness testing will also follow this approach.
Key findings related to the effectiveness testing of the payroll process demonstrated a lack of evidentiary consistency related to key control points. With the consolidation of pay services in a new Centre of Expertise in Miramichi, New Brunswick; the remediation of findings identified in the test of effectiveness of payroll will need to consider all partners involved in their resolution.
Public Safety Canada is one of six organizations identified in the first wave of the project (which commenced in 2011-12). PWGSC is working closely with impacted departments and agencies to transfer the work in a gradual and structured manner. As part of the process, Public Safety will be working with PWGSC to ensure that key control points are functioning as designed. Both PWGSC and Public Safety must be satisfied that joint or overlapping control points are providing reasonable assurance that the system of ICFR is functioning as designed. Public Safety will ensure that specific roles and responsibilities related to the system of ICFR are identified in the MOU between the departments.
5.0 Public Safety's Action Plan
5.1 Progress Made During the Fiscal Year Ending March 31, 2012
To date, Public Safety Canada made significant progress in assessing and improving its key financial controls. Below is a summary of the main progress made by the Department:
- Public Safety completed the documentation and commenced the design assessment testing for the following processes:
- Payroll;
- Grants and Contributions;
- Disaster Financial Assistance Arrangements; and
- Purchase to Pay;
In response to control weaknesses previously identified in internal audits and external reviews, the Department has implemented corrective measures and is in the process of implementing ongoing processes to strengthen monitoring to ensure that key control points are functioning effectively.
- Internal Control Working Groups with direction from the Corporate Management Branch have been meeting to ensure Branch alignment to standard practices related to key control points. The work of these Working Groups is reported to the Departmental Management Committee.
- Public Safety has undertaken a campaign to increase budget managers' awareness of their role in ensuring the system of ICFR is balanced with and proportionate to the risks which are being mitigated.
- The Department did not progress its remediation of the Salary process due to the new initiative to consolidate pay services within PWGSC;
- The Department was not able to complete all elements of the remediation of the Grants and Contributions key control weaknesses, in that, the development of a standard payment request form was deferred to fiscal year 2012-13 as a result of delays associated with finalizing the Audit of the Grants and Contributions Payment processes. Key personal were redirected from this review to support the preparation of Deficit Reduction Action Plan (DRAP) Treasury Board Submission and subsequent follow-up activities from the review of the proposal by the Treasury Board Secretariat and the Strategic Operating Review Committee (SORC).
- During 2011-12, Public Safety addressed control gaps within the Disaster Financial Assistance Arrangements Program and Purchase to Pay processes. The remedial actions taken are as follows:
- Realignment of the Departmental Management Committee to adopt a theme-based approach to meetings, ensuring that ICFR is a management priority;
- Approval of a departmental Financial Management Framework;
- Approval of a departmental Transfer Payment Management Framework;
- Implementation of Certification and Sub-Certification process to support the Statement of Management Responsibility;
- Approval of standard departmental certification and payment processes and alignment of individual Branch process to key control points;
- Adoption of an automated invoice processing procedure which permits the tracking and monitoring of invoice payments from the receipt of the invoices by the Department to the filing of the payment file in Records;
- Approval of a risk-based accounts verification procedure which will provide for 100% pre-payment of high-risk transactions and the post-payment verification of low and medium risk transactions;
- Completed a COBIT-based review of application specific information technology controls for the hosted resource management systems (financial and human resources); and
- Strengthening financial management within the Department through the creation of a FI-04 position within Resource Management and Corporate Reporting.
5.2 Action Plan – Future Years
Business Process | Prior Years | FY 2012-13 | FY 2013-14 | FY 2014-15 | FY 2015-16 | FY 2016-17 |
---|---|---|---|---|---|---|
Payroll Process | ||||||
Design Testing | X | |||||
Effectiveness Testing | X | |||||
Remediation | X | |||||
Monitoring | X | X | X | X | ||
Grants and Contributions Processes | ||||||
Payroll Process | X | |||||
Effectiveness Testing | X | |||||
Remediation | X | X | ||||
Monitoring | X | X | ||||
Disaster Financial Assistance Arrangements | ||||||
Design Testing | X | |||||
Effectiveness Testing | X | |||||
Remediation | X | |||||
Monitoring | X | X | X | |||
Purchase to Pay Processes | ||||||
Design Testing | X | |||||
Effectiveness Testing | X | |||||
Remediation | X | X | ||||
Monitoring | X | |||||
Capital Assets | ||||||
Design Testing | X | |||||
Effectiveness Testing | X | |||||
Remediation | X | |||||
Monitoring | X | X | ||||
IT General Controls | ||||||
Design Testing | X | |||||
Effectiveness Testing | X | |||||
Remediation | X | |||||
Monitoring | X | |||||
IT Application Specific Controls | ||||||
Design Testing | X | |||||
Effectiveness Testing | X | |||||
Remediation | X | |||||
Monitoring | X |
By the end of 2012-13, Public Safety plans to:
- Commence the assessment of the design effectiveness for:
- Capital Assets
- Conduct operating effectiveness testing for:
- Grants and Contributions Processes; and
- Disaster Financial Assistance Arrangement;
- Complete the remediation of the payroll process observations in conjunction with Public Works and Government Services as part of the Shared Services Initiative related to compensation services; and
- No monitoring activities are planned for 2012-13
By the end of 2013-14, Public Safety plans to:
- Commence the assessment of the design effectiveness for:
- IT General Controls;
- IT Application Specific Controls.
- Conduct operating effectiveness testing for:
- Purchase to Pay;
- Capital Assets;
- Initiate or complete the remediation of any observations arising from the effectiveness testing of:
- Grants and Contributions processes (expected to require 2 fiscal years);
- Disaster Financial Assistance Arrangement processes; and
- The Department should commence monitoring of the system of ICFR related to payroll processes.
By the end of 2014-15, Public Safety plans to:
- Conduct operating effectiveness testing for:
- IT General Controls; and
- IT Application Specific Controls;
- Initiate or complete the remediation of any observations arising from the effectiveness testing of:
- Grants and Contributions processes (final year of 2 year process);
- Purchase to Pay (expected to take 2 years)
- Capital Assets;
- Commence monitoring activities for the following Business Processes:
- Disaster Financial Assistance Arrangement processes; and
By the end of 2015-16, Public Safety plans to:
- Complete the remediation of any observations arising from the effectiveness testing of:
- Purchase to Pay (final year of 2 year process);
- IT General Controls; and
- IT Application Specific Controls;
- Commence monitoring activities for the following Business Processes:
- Grants and Contributions; and
- Capital Assets;
By the end of 2016-17, Public Safety plans to:
- Commence monitoring activities for the following Business Processes:
- Purchase to Pay;
- IT General Controls; and
- IT Application Specific Controls;
This timeline is contingent on the level of effort required to address any gaps that will be identified in future design and operating effectiveness phases. In Fiscal Year 2012-13, the Department has invested an additional $525K to accelerate the implementation of the Policy on Internal Control. The Department is also assessing whether it can commit a similar level of investment in 2013-14 to achieve compliance with the Policy sooner than planned.
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