Financial Statements for the Year Ended March 31, 2016

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Statement of Management Responsibility Including Internal Control Over Financial Reporting

Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2016, and all information contained in these statements rests with the management of the Department of 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 PSEPC'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 and accountable for maintaining an effective system of internal control 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 and applied throughout PSEPC 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, 2016 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 PSEPC's system of internal control is reviewed by the work of internal audit staff, who conduct periodic audits of different areas of PSEPC'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 PSEPC.

The financial statements of PSEPC have not been audited.

Original signed by Malcolm Brown
Malcolm Brown
Deputy Minister

Original signed by Mark Perlman
Mark Perlman
Chief Financial Officer and Assistant Deputy Minister
Corporate Management Branch

Ottawa, Canada
August 8, 2016


Statement of Financial Position (Unaudited) As at March 31 (in thousands of dollars)

2016

2015

Liabilities

Accounts payable and accrued liabilities (note 4)

274,611

376,568

Vacation pay and compensatory leave

3,840

3,952

Employee future benefits (note 5)

6,329

6,156

Disaster Financial Assistance Arrangements (DFAA) (note 6)

1,976,999

1,655,687

Total liabilities

2,261,779

2,042,363

Financial assets

Due from Consolidated Revenue Fund

273,186 365,980

Accounts receivable and advances (note 7)

1,954 2,254

Total financial assets

275,140 368,234

Departmental net debt

1,986,639 1,674,129

Non-financial assets

Tangible capital assets (note 8)

14,818

15,864

Total non-financial assets

14,818

15,864

Departmental net financial position

(1,971,821)

(1,658,265)

Contractual obligations (note 9)

Contingent liabilities (note 10)

The accompanying notes form an integral part of these financial statements

Original signed by Malcolm Brown
Malcolm Brown
Deputy Minister

Original signed by Mark Perlman
Mark Perlman
Chief Financial Officer and Assistant Deputy Minister
Corporate Management Branch

Ottawa, Canada
August 8, 2016


Statement of Operations and Departmental Net Financial Position (Unaudited) For the year ended March 31 (in thousands of dollars)

2016 Planned Results

2016

2015

Expenses

Emergency Management

528,167

501,115

80,245

Countering Crime

199,892 151,052 155,824

Internal Services

60,847 64,083 61,364

National Security

28,317 27,414 29,085

Border Strategies

4,844 4,343 4,860

Total expenses

822,067 748,007 331,378

Revenues

Interdepartmental provision of internal support services

2,700 1,782 2,045

Miscellaneous revenues

85 128 100

Revenues earned on behalf of government

(85) (128) (100)

Total revenues

2,700 1,782 2,045

Net cost of operations before government funding and transfers

819,367 746,225 329,333

Government funding and transfers

Net cash provided by Government

504,638 604,715

Change in due from the Consolidated Revenue Fund

(92,794) 169,707

Services provided without charge by other government departments (note 11)

20,873 20,651

Transfer of the transition payments for implementing salary payments in arrears (note 12)

(48) (3,335)

Net cost of operations after government funding and transfers

313,556 (462,405)

Departmental net financial position – Beginning of year

(1,658,265) (2,120,670)

Departmental net financial position – End of year

(1,971,821) (1,658,265)

Segmented information (note 14)

The accompanying notes form an integral part of these financial statements.


Statement of Change in Departmental Net Debt (Unaudited) For the year ended March 31 (in thousands of dollars)

2016

2015

Net cost of operations after government funding and transfers

313,556

(462,405)

Change due to tangible capital assets

Acquisition of tangible capital assets

1,733 2,185

Amortization of tangible capital assets

(2,779) (2,641)

Total change due to tangible capital assets

(1,046) (456)

Net increase (decrease) in departmental net debt due to operations

312,510 (462,861)

Departmental net debt – Beginning of year

1,674,129 2,136,990

Departmental net debt – End of year

1,986,639 1,674,129

The accompanying notes form an integral part of these financial statements.


Statement of Cash Flows (Unaudited) For the year ended March 31 (in thousands of dollars)

2016

2015

Operating activities

Net cost of operations before government funding and transfers

746,225 329,333

Non-cash items:

Amortization of tangible capital assets

(2,779) (2,641)

Services provided without charge by other government departments (note 11)

(20,873) (20,651)

Transition payments for implementing salary payments in arrears (note 12)

48 3,335

Variations in Statement of Financial Position:

Increase (decrease) in accounts receivable and advances

(300) 98

Decrease (increase) in accounts payable and accrued liabilities

101,957 (66,471)

Decrease (increase) in vacation pay and compensatory leave

112 665

Decrease (increase) in employee future benefits

(173) (1,081)

Decrease (increase) in DFAA program

(321,312) 359,943

Cash used in operating activities

502,905 602,530

Capital investing activities

Acquisition of tangible capital assets

1,733 2,185

Cash used in capital investing activities

1,733 2,185

Net cash provided by Government of Canada

504,638 604,715

The accompanying notes form an integral part of these financial statements.


Notes to the Financial Statements (Unaudited) For the year ended March 31, 2016

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. PSEPC 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 programs:

2. Summary of 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:

(a) Parliamentary authorities

PSEPC is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to PSEPC 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 “Expenses” and “Revenues” sections of the Statement of Operations and Departmental Net Financial Position are the amounts reported in the Future-oriented Statement of Operations included in the 2015-16 Report on Plans and Priorities. Planned results are not presented in the “Government funding and transfers” section of the Statement of Operations and Departmental Net Financial Position and in the Statement of Change in Departmental Net Debt because these amounts were not included in the 2015-16 Report on Plans and Priorities.

(b) Net cash provided by government

PSEPC operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by PSEPC is deposited to the CRF, and all cash disbursements made by PSEPC 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.

(c) 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 PSEPC is entitled to draw from the CRF without further authorities to discharge its liabilities.

(d) 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 PSEPC's liabilities. While the Deputy Head is expected to maintain accounting control, he 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.

(e) 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.

(f) Employee future benefits

(i) Pension benefits: Eligible employees participate in the Public Service Pension Plan, a multiemployer plan administered by the Government. PSEPC's contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to the Plan. PSEPC'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.

(ii) Severance benefits: Employees entitled to severance benefits under labour 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.

(g) Accounts receivable

Accounts receivable are stated at the lower of cost and net recoverable value. A valuation allowance is recorded for accounts receivable where recovery is considered uncertain.

(h) 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 if an amount cannot be reasonably estimated, the contingency is disclosed in note 10 to the financial statements.

(i) 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. PSEPC 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:

Amortization period by asset class

Asset Class

Amortization period

Computer hardware

4-7 years

Machinery and equipment

5 years

Computer software

3-5 years

Vehicles

3 years

Leasehold improvements

Lesser of the remaining term of the lease or useful life of the improvement

Other equipment including furniture

5 years

Assets under construction are recorded in the applicable capital asset class in the year that they become available for use and are not amortized until they become available for use.

(j) 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 liability for 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:

(a) Reconciliation of net cost of operations to current year authorities used (in thousands of dollars)

2016

2015

Net cost of operations before government funding and transfers

746,225

329,333

Adjustments for items affecting net cost of operations but not affecting authorities:

Amortization of tangible capital assets

(2,779)

(2,641)

Services provided without charge by other government departments

(20,873) (20,651)

Decrease (increase) in vacation pay and compensatory leave

112 665

Decrease (increase) in employee future benefits

(173) (1,081)

Refund of prior years' expenditures

882 861

Decrease (increase) in accruals for DFAA

(321,312) 359,943

Adjustments to previous years' payables at year-end

2,920 3,514
(341,223) 340,610

Adjustments for items not affecting net cost of operations but affecting authorities:

Acquisitions of tangible capital assets

1,733 2,185

Transition payments for implementing salary payments in arrears (note 12)

48 3,335
1,781 5,520

Current year authorities used

406,783 675,463
(b) Authorities provided and used (in thousands of dollars)

2016

2015

Authorities provided:

Vote 1 - Operating expenditures

125,904

125,824

Vote 5 - Grants & Contributions

1,005,557

1,046,154

Salary and motor car allowance

82

80

Contributions to employee benefits plan

13,949

13,611

1,145,492

1,185,669

Less:

Lapsed: Operating and transfer payments

(738,709)

(510,206)

Current year authorities used

406,783

675,463


4. Accounts payable and accrued liabilities

The following table presents details of PSEPC's accounts payable and accrued liabilities

Accounts payable and accrued liabilities (in thousands of dollars)

2016

2015

Accounts payable - Other government departments and agencies

1,701

1,999

Accounts payable - External parties

267,443

370,178

Total accounts payable 

269,144

372,177

Accrued liabilities

5,467

4,391

Total accounts payable and accrued liabilities 

274,611

376,568


5. Employee future benefits

(a) Pension benefits

PSEPC's employees participate in the Public Service Pension Plan (the “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 Plan benefits and they are indexed to inflation.

Both the employees and PSEPC contribute to the cost of the Plan. Due to the amendment of the Public Service Superannuation Act following the implementation of provisions related to Economic Action Plan 2012, employee contributors have been divided into two groups – Group 1 relates to existing plan members as of December 31, 2012 and Group 2 relates to members joining the Plan as of January 1, 2013. Each group has a distinct contribution rate.

The 2015-2016 expense amounts to $9,614,892 ($9,304,268 in 2014-2015). For Group 1 members, the expense represents approximately 1.25 times (1.41 times in 2014-2015) the employee contributions and, for Group 2 members, approximately 1.24 times (1.39 times in 2014-2015) the employee contributions.

PSEPC'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:

Severance benefits (in thousands of dollars)

2016

2015

Accrued benefit obligation - Beginning of year

6,156

5,075

Expense for the year

1,002

2,160

Benefits paid during the year

(829)

(1,079)

Accrued benefit obligation - End of year

6,329

6,156

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.

6. Disaster Financial Assistance Arrangements (DFAA)

IIn 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 $1,976,999,000 is the estimated cost to PSEPC of 62 natural disaster events for which the Federal Government has agreed to share the costs and final payments have not yet been made.

Disaster Financial Assistance Arrangements (DFAA) (in thousands of dollars)

2016

2015

Opening balance

1,655,687

2,015,630

Disbursements

(139,348)

(305,272)

Accrued expenses for the year

460,660

(54,671)

Closing balance

1,976,999

1,655,687

7. Accounts receivable and advances

The following table presents details of PSEPC's accounts receivable and advances balances

Accounts receivable and advances (in thousands of dollars)

2016

2015

Receivables – Other government departments and agencies

1,472

1,587

Receivables – External parties

547

738

Employee advances

15

9

Subtotal

2,034

2,334

Allowance for doubtful accounts on receivables from external parties

(80)

(80)

Total accounts receivable and advances

1,954

2,254


8. Tangible capital assets

Tangible capital assets (in thousands of dollars)

Cost

Accumulated amortization

Net book value

Capital asset class

Opening balance

Acquisitions

Disposals and write-offs

Closing balance

Opening balance

Amortization

Disposals and write-offs

Closing balance

2016

2015

Computer hardware

5,199

1,124

0 6,323 4,741 196 0 4,937 1,386 458

Machinery and equipment

16 0 0 16 10 2 0 12 4 6

Computer software

907 609 0 1,516 280 147 0 427 1,089 627

Other equipment including furniture

1,405 0 0 1,405 995 261 0 1,256 149 410

Vehicles

235 0 (98) 137 181 24 (98) 107 30 54

Leasehold improvements

26,419 0 0 26,419 12,110 2,149 0 14,259 12,160 14,309

Total

34,181 1,733 (98) 35,816 18,317 2,779 (98) 20,998
14,818 15,864

9. Contractual obligations

The nature of PSEPC's activities can result in some large multi-year contracts and obligations whereby PSEPC 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:

Contractual obligations (in thousands of dollars)

Fiscal Year

Total

2017

2018

2019

2020

2021

2022

Transfer payments

138,845

100,627

20,405

9,606

1,105

279

270,867

10. Contingent liabilities

Claims and litigation

Claims have been made against PSEPC 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. Claims and litigations for which the outcome is not determinable and a reasonable estimate can be made by management amount to approximately $77,110 ($77,110 in 2014-2015) at March 31, 2016.

11. Related party transactions

PSEPC is related as a result of common ownership to all Government of Canada departments, agencies, and Crown corporations. PSEPC enters into transactions with these entities in the normal course of business and on normal trade terms. In addition, PSEPC has agreements with Correctional Services Canada and with Royal Canadian Mounted Police related to the provision of human resources and finance system services. During the year, PSEPC 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, PSEPC 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 PSEPC's Statement of Operations and Departmental Net Financial Position as follows:

Common services provided without charge by other government departments (in thousands of dollars)

2016

2015

Accommodation

11,676

11,974

Employer's contribution to the health and dental insurance plans

7,785

7,110

Legal services

1,402

1,558

Workers' compensation

10

9

Total

20,873

20,651

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 Services and Procurement Canada and audit services provided by the Office of the Auditor General are not included in PSEPC's Statement of Operations and Departmental Net Financial Position.

(b) Other transactions with related parties (in thousands of dollars)

2016

2015

Accounts receivable – Other government departments and agencies

1,472

1,587

Accounts payable – Other government departments and agencies

1,701

1,999

Expenses – Other government departments and agencies

14,556

17,210

Revenues – Other government departments and agencies

1,782

2,045

Expenses and revenues disclosed in (b) exclude common services provided without charges, which are already disclosed in (a).

12. Transfer of the transition payments for implementing salary payments in arrears

The Government of Canada implemented salary payments in arrears in 2014-2015. As a result, a one-time payment was issued to employees and will be recovered from them in the future. The transition to salary payments in arrears forms part of the transformation initiative that replaces the pay system and also streamlines and modernizes the pay processes. This change to the pay system had no impact on the expenses of the Department.  However, it did result in the use of additional spending authorities by the Department, along with the creation of an interim account receivable. Prior to year end, this interim account receivable was transferred to Public Services and Procurement Canada, who is responsible for the administration of the Government pay system.

13. Transfer payments

The following table presents details of transfer payments as follows:

Transfer payments (in thousands of dollars)
2016 2015
Payments to territorial governments for operating expenditures 9,744 62,266
Payments to other levels of government 463,777 (4,240)
Payments to Native peoples 86,399 87,526
Payments to non-profit organizations 30,359 30,277
Other transfer to other countries and international organizations 143
Total 590,422 175,829

14. Segmented information

Presentation by segment is based on PSEPC's program alignment architecture. The presentation by segment is based on the same accounting policies as described in the Summary of significant accounting policies in note 2. The following table presents the expenses incurred and revenue generated for the main programs, by major object of expenses and by major type of revenues. The segment results for the period are as follows:

Segmented information (in thousands of dollars)
  2016 2015
Expenses National Security Emergency Management Countering Crime Border Strategies Internal Services Total Total
Transfer payments 1,860 465,930 122,632 0 0 590,422 175,829
Operating expenses
Salaries and employee benefits 18,656 25,483 22,096 3,326 41,875 111,436 106,284
Professional and special services 2,266 3,735 2,906 254 8,760 17,921 19,015
Accommodation 1,955 2,691 2,331 348 7,466 14,791 14,577
Equipment 510 239 40 14 1,174 1,977 1,699
Travel and relocation 802 1,277 806 138 392 3,415 3,156
Information 546 41 112 86 1,076 1,861 5,850
Amortization 432 1,159 2 0 1,186 2,779 2,641
Equipment rentals 165 244 63 0 804 1,276 938
Repairs 5 147 1 0 551 704 384
Utilities, material and supplies 210 124 61 177 683 1,255 869
Communication 5 45 2 0 112 164 136
Miscellaneous 2 0 0 0 4 6 0
Total operating expenses 25,554 35,185 28,420 4,343 64,083 157,585 155,549
Total expenses 27,414 501,115 151,052 4,343 64,083 748,007 331,378
Revenues
Interdepartmental provision of internal support services 0 0 0 0 1,782 1,782 2,045
Miscellaneous revenues 75 53 128 100
Revenues earned on behalf of government                            (75) (53) (128) (100)
Total revenues 0 1,782 1,782 2,045
Net cost of operations before government funding and transfers 27,414 501,115 151,052 4,343 62,301 746,225 329,333


Annex to the Statement of Management Responsibility

1. Introduction

This document provides summary information on the measures taken by Public Safety and Emergency Preparedness Canada (PSEPC) to maintain an effective system of internal control over financial reporting (ICFR), including information on internal control management and assessment results and related action plans.

Detailed information on the Department's authority, mandate and program activities can be found in the 2015-16 Departmental Performance Report and the 2016-2017 Report on Plans and Priorities.

2. Departmental system of internal control over financial reporting

2.1 Internal control management

Public Safety and Emergency Preparedness Canada has a well-established governance and accountability structure to support departmental assessment efforts and oversight of its system of internal control. The Departmental Financial Management Control Framework, approved by the Deputy Minister, is in place and includes:

The Departmental Audit Committee provides advice to the Deputy Head on the adequacy and functioning of the department's risk management, control and governance frameworks and processes.

2.2 Service arrangements relevant to financial statements

Public Safety and Emergency Preparedness Canada relies on other organizations for the processing of certain transactions that are recorded in its financial statements as follows:

Common Arrangements:
Specific Arrangements:

3. Departmental assessment results during fiscal year 2015-16

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.

Ongoing monitoring program: As part of its rotational ongoing monitoring plan, the department completed its reassessment of entity-level controls and the financial controls within the business processes of capital expenditures, grants and contributions, Disaster Financial Assistance Arrangements, financial close and reporting, and operating expenditures. For the most part, the key controls that were tested performed as intended, with remediation required as follows:

Reports and action plans addressing recommendations have been developed and the department has already initiated a course of action to remediate these control deficiencies.

4. Departmental action plan

4.1 Progress During Fiscal Year 2015-2016

PSEPC continued to conduct its ongoing monitoring according to the previous fiscal year's rotational plan as shown in the following table.

Progress during fiscal year 2015-16

Previous year's rotational ongoing monitoring plan for current year

Status

Capital expenditures

Completed as planned; remedial actions started.

Grants and Contributions & Disaster Financial Assistance Arrangements (DFAA)

Completed as planned; no remedial actions required.

Financial Close

Completed as planned; no remedial actions required.

Operating Expenditures (Procure to Payment)

Completed as planned; remedial actions started.

In 2015-16, the department conducted the following work in addition to the progress made in ongoing monitoring:

4.2 Action plan for the next fiscal year and subsequent years

Public Safety and Emergency Preparedness Canada'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.

Rotational Ongoing Monitoring Plan

Key Control Areas

Fiscal year
2016-17

Fiscal year
2017-18

Fiscal year
2018-19

Entity-level controls

Yes

Yes

Yes

IT general controls under departmental management

No

Yes

No

Grants and contributions & Disaster Financial Assistance Arrangements

Yes

Yes

Yes

Operating expenditures

Yes

Yes

Yes

Capital expenditures

No

No

Yes

Financial close

No

No

Yes

Payroll

Yes

Yes

No

Revenue

Yes

No

No

In addition to the ongoing monitoring rotational plan, Public Safety and Emergency Preparedness Canada plans to defer control work and testing related to the payroll transformation initiative until the system has been fully implemented and operating efficiently for a period of time.

Date modified: