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 2016–17 (Unaudited)
Annex to the Statement of Management Responsibility Including Internal Control over Financial Reporting
This document provides summary information on the measures taken by the Canadian Institutes of Health Research (CIHR) to maintain an effective system of internal control over financial reporting, including information on internal control management, assessment results and related action plans.
Detailed information on CIHR’s authority, mandate and program activities can be found in the 2015–16 Departmental Performance Report (DPR) and the 2017–18 Departmental Plan.
2. CIHR’s System of Internal Control over Financial Reporting
2.1 Internal Control Management
CIHR has a well-established governance and accountability structure to support agency assessment efforts and oversight of its system of internal control. 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
- At least annual monitoring of and regular updates on internal control management, as well as the provision of related assessment results and action plans to the President and departmental senior management and, as applicable, the Departmental Audit Committee.
The Audit Committee provides advice to the President on the adequacy and functioning of CIHR’s risk management, control and governance frameworks and processes.
2.2 Service Arrangements Relevant to Financial Statements
CIHR relies on other organizations for the processing of certain transactions that are recorded in its financial statements as follows.
- Public Services and Procurement Canada centrally administers the payments of salaries and the procurement of goods and services in accordance with CIHR’s Delegation of Authority, and provides accommodation services;
- The Treasury Board of Canada Secretariat provides CIHR with information used to calculate various accruals and allowances.
- The Department of Justice Canada provides legal services to CIHR; and
- Shared Services Canada provides information technology (IT) infrastructure services to CIHR. The scope and responsibilities are addressed in the interdepartmental arrangement between Shared Services Canada and CIHR.
- The Tri-Council Secretariat administers the Networks of Centres of Excellence, Business-Led Networks of Centres of Excellence, College and Community Innovation Program, Canada Excellence Research Chairs, Canada Graduate Scholarships, Canada First Research Excellence Fund and the Canada Research Chairs on behalf of CIHR’s Research, Knowledge Translation and Ethics Portfolio. The Secretariat has the authority and responsibility to ensure that funding decisions are fair, due process is followed, and payments are made in accordance with the terms and conditions set out by CIHR’s programs. As a result, reliance is placed on the control procedures of the Secretariat, which CIHR reviews at arm’s length by obtaining key control documentation.
3. CIHR Assessment Results during Fiscal Year 2016–17
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. Design effectiveness testing was conducted on the key controls for a new payroll subsystem. Significant adjustments were not required for the new key controls.
Ongoing monitoring plan: As part of its rotational ongoing monitoring plan, the Agency completed its reassessment of entity-level controls and the financial controls within the business processes of Grants and awards, Financial statements closing, Payables at year end and accruals, Tri-agency programs (i.e. Canadian Research Chairs, Canada First Research Excellence Fund, Networks of Centres of Excellence), Institute support grants, Hospitality, Travel and travel cards, Procurement and acquisition cards, Payroll and salary benefits, Financial management and budget, Collaborative agreements, Revenue, deferred revenue and receivables, and Self-assessment of IT general controls. For the most part, key controls that were tested operated effectively with minimal improvements required. The following remediation actions were needed:
- Ensure that Section 34 of the Financial Administration Act related to travel, grants and awards and collaborator invoicing is exercised adequately and in a timely fashion.
- Ensure that Section 32 of the Financial Administration Act related to travel, hospitality, grants and awards is exercised adequately and in a timely fashion.
- Refine the process to ensure that all event, hospitality and travel expenditures are committed in the financial system in a timely manner.
- Improve competition electronic file structure and naming convention as best practice.
- Improve transactional supporting documents tracking.
- Formalize the internal review of competition results spreadsheet.
- Standardize the verification process of mandatory applicant eligibility and compliance requirements.
4. Departmental Action Plan
4.1 Progress during Fiscal Year 2016–17
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|
|Operating effectiveness testing and remediation of deficiencies was undertaken for the following processes:|
||Monitoring was completed as planned and no remedial action was required.|
||Monitoring was completed as planned and remedial actions from the previous fiscal year advanced significantly.|
||Monitoring was completed as planned and remedial actions were completed as planned.|
4.2 Action Plan for the Next Fiscal Year and Subsequent Years
CIHR has implemented an ongoing rotational monitoring plan over the next three years based on a risk-based annual validation of high risk processes and controls. The plan takes into consideration any substantial changes to key controls in significant processes as well as addresses training to enhance the awareness and knowledge of internal controls over financial reporting and associated responsibilities across CIHR. CIHR’s rotational ongoing monitoring plan over the next three years is shown in the following table.
|Key control areas||Fiscal year 2017-18||Fiscal year 2018-19||Fiscal year 2019-20|
|Financial management (budgeting and forecasting)||No||Yes||No|
|Financial statements closing process (including Payables at year end and accruals)||Yes||Yes||Yes|
|Grants and awards including payment||Yes||Yes||Yes|
|Institute support grants||Yes||No||No|
|IT general controls||Yes||Yes||Yes|
|Payroll and salary Benefits||Yes||No||No|
|Procurement and acquisition cards||Yes||No||No|
|Revenue, deferred revenue and receivables||No||No||Yes|
|Canada First Research Excellence Fund||No||No||No|
|Canada Research Chairs||No||Yes||No|
|Networks of Centres of Excellence||No||No||Yes|
In addition to the on-going monitoring rotational plan, CIHR has completed or has planned the following assessment work to complement the system of internal control including:
- Internal Audit and Advisory Activities;
- Assessment of Core Management Controls;
- On-going control monitoring activities using data analytics; and
- Completing a Fraud Risk Assessment.
- Date modified: