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

1. Introduction

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:

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:

Common arrangements:

Specific arrangements:

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:

Approval process

Financial management

IT systems

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
Hospitality Yes Yes Yes
IT general controls Yes Yes Yes
Travel and travel cards Yes Yes Yes
Institute support grants Yes No No
Procurement Yes No No
Salary and payroll Yes No No
Canada Research Chairs No Yes No
Entity-level controls No Yes No
Financial management and budgeting No Yes No
Collaborative agreements No No Yes
Deferred revenue and revenue No No Yes
Networks of Centres of Excellence No No Yes
Recoveries No No Yes
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