Summary of the Assessment of Effectiveness of the Systems of Internal Control over Financial Reporting and the Action Plan of the Canadian Institutes of Health Research for the Fiscal Year 2013-14 (Unaudited)
Annex to the Statement of Management Responsibility Including Internal Control over Financial Reporting
This document provides summary information on the measures taken by the Canadian Institutes of Health Research (CIHR) to maintain an effective system of internal control over financial reporting, including information on internal control management, assessment results and related action plans. In particular, it provides summary information on the internal control assessments conducted by CIHR as of March 31, 2014, including progress, results and related action plans along with some financial highlights pertinent to understanding the control environment of the agency.
Detailed information on the CIHR authority, mandate and program activities can be found in the Departmental Performance Report and the Report on Plans and Priorities.
2. CIHR system of internal control over financial reporting
2.1 Internal control management
The agency has a well-established governance and accountability structure to support agency assessment efforts and oversight of its system of internal control. An agency internal control management framework, approved by the President, is in place, including:
- organizational accountability structures as they relate to internal control management to support sound financial management including roles and responsibilities for senior managers in their areas of responsibility for control management;
- values and ethics;
- ongoing communication and training on statutory requirements, policies, and procedures for sound financial management and control; and
- monitoring and regular updates, at least semi-annually, on internal control management plus assessment results and action plan to the President and CIHR senior management, and (as applicable) the Departmental Audit Committee (DAC).
The DAC provides advice to the President on the adequacy and functioning of CIHR’s risk management, control and governance frameworks and processes.
2.2 Service arrangements relevant to financial statements
CIHR relies on other organizations for the processing of certain transactions or the provision of information which impact its financial statements as follows:
- Public Works and Government Services Canada centrally administers the payments of salaries and benefits, the procurement of some goods and services as well as the provision of accommodations on behalf of CIHR; and
- Treasury Board Secretariat provides CIHR with information used to calculate various accruals and allowances, such as the employer’s contribution to the health and dental insurance plans, which are funded centrally.
- The Tri-Council Secretariat administers the Networks of Centres of Excellence and the Canada Research Chairs on behalf of CIHR’s Program Branch. The Secretariat has the authority and responsibility to ensure that funding decisions are fair, due process was followed, and payments are made in accordance with the terms and conditions set out by CIHR’s programs. As a result, reliance is placed on the control procedures of the Secretariat, which CIHR reviews at arm’s length by obtaining key control documentation.
Other government departments rely on CIHR for the processing of certain transactions or the provision of information that affects their financial statements. Operating effectiveness testing has been implemented for the key controls, and no issues were identified.
3. CIHR assessment results during fiscal year 2013–14
The key findings and significant adjustments required from the current year's assessment activities are summarized below.
New or significantly amended key controls: In the current year, there were no significantly amended key controls in existing processes which required a reassessment and there were no new processes to test for design and operating effectiveness.
Ongoing monitoring program: During 2013–14, ongoing monitoring was implemented according to plan.
The agency completed its reassessment of IT general computer controls, and of the financial controls within the grants and awards processes (including Networks of Centres of Excellence); financial operations processes such as financial statement close (including payables at year end and accruals), travel, hospitality, deferred revenue and revenue, collaborative agreements, grants and awards payments and recoveries. For the most part, the key controls that were tested performed as intended, with remediation required as follows:
- Establish defined deadlines for pre-approval and submission to central finance for travel, hospitality, conference and event (THCEE) plans; and
- Increase knowledge on roles and responsibilities over Section 32 signing authority.
- Improve the timeliness of Section 32 commitments for travel, hospitality, conference and event (THCEE) plans;
- Improve oversight of Section 32 surrounding grants and awards process;
- Refine the information contained in the grants and awards proactive disclosure report; and
- Increase collaboration among units to raise the performance related to the duties of financial management, control, financial reporting and disclosure requirements.
- Complete the implementation of defined retention periods for electronic files.
4. CIHR’s action plan
4.1 Progress during fiscal year 2013–14
CIHR continued to conduct its ongoing monitoring according to the previous fiscal year's rotational plan, as shown in the following table.
|Previous year's rotational ongoing monitoring plan for current year||Status|
|Financial statement close (including payables at year end and accruals), collaborative agreements, deferred revenue and revenue, and recoveries – operating effectiveness testing and remediation of deficiencies.||Completed as planned; no remedial action required.|
|Grants and awards (including Networks of Centres of Excellence), grants and awards payments process, hospitality, IT general controls, travel and travel cards – operating effectiveness testing and remediation of deficiencies.||Completed as planned; remedial actions started.|
4.2 Action plan for the next fiscal year and subsequent years
Building on the progress to date, CIHR has developed a risk-based annual validation of high-risk processes and controls in order to facilitate ongoing rotational monitoring. The plan takes into consideration any substantial changes to key controls in significant processes as well as addresses training to enhance the awareness and knowledge of internal controls over financial reporting and associated responsibilities across CIHR. The agency rotational ongoing monitoring plan over the next three years, shown in the following table, is based on an annual validation of the high-risk processes and controls and related adjustments to the ongoing monitoring plan as required.
|Key control areas||Fiscal year 2014–15||Fiscal year 2015–16||Fiscal year 2016–17|
|Financial statements close process (including payables at year end and accruals)||Yes||Yes||Yes|
|Grants and awards||Yes||Yes||Yes|
|Grants and awards payment process||Yes||Yes||Yes|
|IT general controls||Yes||Yes||Yes|
|Travel and travel cards||Yes||Yes||Yes|
|Institute support grants||Yes||No||No|
|Salary and payroll||Yes||No||No|
|Canada Research Chairs||No||Yes||No|
|Financial management and budgeting||No||Yes||No|
|Deferred revenue and revenue||No||No||Yes|
|Networks of Centres of Excellence||No||No||Yes|
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