Report of the Senior Committee on
the Review of the Financial
Management Framework of the
Government of Canada
March 21, 2007
Table of Contents
Foreword ................................................................................................1
Executive Summary .................................................................................4
1.
Introduction .....................................................................................9
2.
Background to Review of Financial Management Framework ................. 11
3.
Drivers of Change to the Financial Management Framework .................. 18
4.
New Financial Management Policy Framework: Analysis and
Recommendations .......................................................................... 21
5.
Creating a Supportive Environment for Change ................................... 36
Annex A—Mandate................................................................................. 45
Annex B—Biographical Notes for Senior Committee Members ....................... 48
Annex C—Shadow Committee of the Senior Committee on the Review of
the Financial Management Framework of the Government of Canada...... 57
Annex D—Bibliography ........................................................................... 59
Annex E—Financial Management Policy Framework and
Related Suite of Policies
E-1: Financial Management Policy Framework ..................................... 61
E-2: Policy on Financial Management Governance................................ 74
E-3: Policy on Internal Control .......................................................... 86
E-4: Policy on Financial Resource Management ................................. 112
E-5: Policy on Financial Information and Reporting ............................ 121
E-6: Policy on Financial Systems ..................................................... 132
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Report of the Senior Committee on the Review of the
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Foreword
As part of the Federal Accountability Action Plan, the Government of Canada made a
commitment to reduce the number of Treasury Board financial management policies, clarify
roles and responsibilities, and institute a more coherent set of requirements. In July 2006, the
President of the Treasury Board announced the creation of the Senior Committee on the Review
of the Financial Management Framework of the Government of Canada (the “Committee”), with
a mandate to review and bring forward recommendations to strengthen and streamline
Treasury Board financial management policies and report back to the President of the
Treasury Board. The Committee comprised selected deputy ministers and external chief financial
officers, including the Secretary of the Treasury Board and the Comptroller General of Canada.
This report fulfils that mandate. It outlines the context of the financial management policy
review, provides analysis and recommendations, and sets out a path for the long-term
strengthening of financial management across the Government of Canada. With the introduction
of the Federal Accountability Act, the newly developed Financial Management Policy
Framework was also reviewed to ensure full compatibility with the concept of the deputy head as
“accounting officer.” We set out to achieve certain objectives that guided our discussions and
shaped our recommendations:
First, to clarify roles and responsibilities. The policies clearly define the role of deputy
heads, the Comptroller General of Canada, chief financial officers, and assistant deputy
ministers across government with respect to financial management.
Second, to support deputy heads in their role as accounting officers. The new policies
and, particularly, the introduction of the chief financial officer model will provide
stronger support to deputy heads as they fulfill their responsibilities under the Federal
Accountability Act.
Third, to bring Canada in line with other leading jurisdictions. We reflected best
practices in the development of the new financial management policy suite, consistent
with different levels of government, both nationally and internationally, including
reference from the private sector, and incorporated these perspectives into our
recommendations.
The new financial management policy suite builds on the progress made with the introduction of
the new Policy on Internal Audit. The collective body of work represents an important step
forward in strengthening accountability and transparency in financial management and oversight
across government.
We would like to express our appreciation to the President of the Treasury Board for having
given us this opportunity to be an integral part of strengthening financial management across
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Report of the Senior Committee on the Review of the
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government. We would also like to thank all of the financial management experts and the
subcommittee of senior financial officers from across government (referred to as the “Shadow
Committee”) that supported the Committee’s review. The Shadow Committee’s
recommendations and briefings to Committee members were instrumental in advancing the
review process and represented significant consultative work and analysis.
We would like to thank the secretariat that supported the work of the Committee and the experts
at the Treasury Board of Canada Secretariat and the Privy Council Office for their contributions.
We submit our report in the hope that our conclusions and recommendations will strengthen
financial management and accountability across government.
__________________________________
Wayne G. Wouters
Secretary of the Treasury Board
Chair of the Senior Committee on the Review of the
Financial Management Framework of the Government of Canada
__________________________________
Charles-Antoine St-Jean, FCA
Comptroller General of Canada
__________________________________
Janice Charette, Deputy Minister
Human Resources and Social Development
__________________________________
Richard Dicerni, Deputy Minister
Industry
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__________________________________
Richard B. Fadden, Deputy Minister
Citizenship and Immigration
__________________________________
Michael Wernick, Deputy Minister
Indian Affairs and Northern Development
__________________________________
John D. Watson, FCA
Corporate Director and former EVP and CFO, EnCana Corporation
__________________________________
L.G. Serge Gadbois, FCA
Corporate Director and former CFO, Metro Inc.
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Report of the Senior Committee on the Review of the
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Executive Summary
In the Federal Accountability Action Plan, the government committed to strengthening Treasury
Board financial management policies, indicating, “We will look for ways to reduce the number
of financial management policies to clarify roles and responsibilities and institute a more
coherent set of requirements.”
In July 2006, the President of the Treasury Board announced the creation of the Senior
Committee on the Review of the Financial Management Framework of the Government of
Canada (the “Committee”), comprising selected deputy ministers and external chief financial
officers, including the Secretary of the Treasury Board and the Comptroller General of Canada,
as set out in Annex B.
Renewal of the financial management framework has been driven by several factors. The current
framework is dated and needs to be redrafted to streamline, clarify, and target its impact. As
well, there have been indications that financial management performance, although relatively
effective, needs improvement in several key areas.
The Government of Canada manages annual revenues and expenditures in excess of $220 billion.
It has a generally good record for the management of the dollars that pass through its hands.
However, results of ongoing or special reviews of financial management and accountability
carried out over the past decade point to a number of areas where financial management
practices can be improved. These include the need for clarity in accountability and responsibility;
greater recognition of governance and departmental organization; a better understanding of core
financial management activities; an expanded definition of financial management; provision of
sufficient discipline in documenting and reporting upon internal controls; and the need to
improve internal and external financial reporting.
Senior Committee’s Review
As part of the broader Treasury Board of Canada Secretariat Policy Renewal Initiative, the
Office of the Comptroller General conducted a comprehensive review of the existing financial
management framework and suite of financial management policy instruments. The review
concluded that, while the current framework and policies were comprehensive, they lacked
coherence and confused specific accountabilities. There would in effect be benefit from
rationalizing the current financial management policy suite to produce a much more focussed
and better-organized set of requirements. The results of the review revealed four main problems
with the current policy framework: unclear expectations and accountabilities; inconsistent format
and level of guidance; fragmented reporting requirements; and absence of monitoring guidance
and direction.
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Report of the Senior Committee on the Review of the
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As part of the Office of the Comptroller General review, a new financial management policy
framework and suite of policies were researched, designed, and developed during 2006. These
proposed policies were based upon national and international best-practices research and
consultations with subject-matter experts within the Treasury Board of Canada Secretariat and
with advisory bodies within and external to government. The Office of the Comptroller General
also provided the financial management policy suite to the Office of the Auditor General of
Canada for consultation and comments.
The Committee’s review was based upon the newly developed Financial Management Policy
Framework and suite of policies to ensure full compatibility with the concept of the deputy head
as “accounting officer” under the recently adopted Federal Accountability Act (FedAA).
As a result of its review, the Committee has developed 24 recommendations, which are reflected
in the policy framework and suite of financial management policies contained in Annex E to
this report.
Senior Committee’s Recommendations
The following selected Committee recommendations highlight a renewed approach to financial
management and the adoption of the chief financial officer model for the Government of Canada.
A complete set of detailed recommendations is set out in the report.
A
New financial management policy suite—The Comptroller General should submit, for
the approval of the Treasury Board, a new financial management policy suite organized
around the following five core policies: Financial Management Governance, Internal
Control, Financial Resource Management, Financial Information and Reporting, and
Financial Systems.
B
Clear definition of financial management roles and responsibilities—The financial
management policies should clearly define the specific financial management roles and
responsibilities of the deputy head, Comptroller General, chief financial officer, and other
assistant deputy ministers (ADMs) or equivalents.
C
Chief financial officer appointment—The deputy head should appoint an appropriately
qualified chief financial officer (CFO) to strengthen financial management and provide the
deputy head with strategic financial management advice. The CFO will report directly to
the deputy head.
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6
D
Internal control over financial reporting—The deputy head should sign an annual
Statement of Internal Control (SIC) over financial reporting to assure users of departmental
financial information that a process is in place to review the effectiveness of internal
controls over financial reporting and that this information is reliable, fairly stated, and fully
disclosed.
E
CFO challenge function—The deputy head should seek assurance from the sponsoring
ADMs or equivalents and the CFO before approving or recommending departmental
resource funding initiatives and submissions or major allocation and reallocation decisions.
F
System of budgetary allocation and control—The deputy head should obtain assurance
from the chief financial officer that the department has a well-functioning system of
budgetary allocation and control.
G
Annual audited departmental financial statements—Departments and agencies should
produce annual audited financial statements, accompanied by a Statement of Management
Responsibility and a Financial Statements Discussion and Analysis.
H
Seeking advice of Comptroller General—Where it can reasonably be expected that an
accounting treatment for a particular transaction could lead to a material misstatement, an
inappropriate application of authorities, or a qualification in an external audit report, the
CFO should have a duty to promptly inform the Comptroller General in writing and seek
his or her advice.
I
Integration of financial and related non-financial information—The chief financial
officer should be responsible for leading, in collaboration with other ADMs or equivalents,
the integration of financial and related non-financial information used for decision making,
reporting, and disclosures across the department unless the deputy head designates another
member of the department’s executive management team to do so.
J
Treasury Board Financial Systems Standards—The Comptroller General, in
collaboration with the Chief Information Officer of the Government of Canada when the
standards relate to information management or information technology, should issue
Treasury Board Financial Systems Standards (TBFSSs) to set mandated minimum
requirements, to promote greater inter-operability of financial and related non-financial
information, common data elements, classifications, and business processes, and
best-practice internal controls.
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K
Reporting on state of financial management—The Comptroller General should assess
the state of financial management of departments and agencies and report periodically to
the Treasury Board on the overall state of financial management, control, and reporting in
the Government of Canada.
L
Comptroller General to provide functional leadership—The Comptroller General
should provide functional leadership and support the development of sustainable financial
management capacity and communities across government.
M
Phased implementation schedule for new policy requirements—The Comptroller
General should develop a detailed phased implementation schedule that is sensitive to the
variations in the financial management capabilities and capacities of departments and
agencies and the need for a suitable transition period.
N
Funding to implement policy requirements—The Comptroller General should seek
additional funding for departments based on detailed cost estimates and taking account of
the phased implementation schedule and possible reallocations within departments, to
support implementation of the new financial management policies by departments and
agencies.
O
Delegation of new financial authorities for departments and agencies—The Treasury
Board should establish clear financial management criteria for the delegation of new
financial authorities for departments and agencies and then ensure that new delegations go
only to institutions whose performance is acceptable.
Phased Implementation to Reduce Risk and Burden
Any major change initiative on the scale of the proposed new Financial Management Policy
Framework and core policies requires a careful and flexible implementation plan. The Office of
the Comptroller General will need to develop directives to support the framework and five
policies. An increased funding envelope will have to be created. Staff in departments will need to
be informed of the changes and of the action that they must take as part of the implementation.
Training will be required for all specialists and general managers involved. Departments and
agencies will need time to undertake an assessment of their situation and prepare plans. The
government will require a means to adjust implementation of the policy to meet special
circumstances in some departments and agencies.
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Report of the Senior Committee on the Review of the
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Conclusion
The Committee respectfully recommends that the President of the Treasury Board accept the
recommendations set out in this report, including the Financial Management Policy Framework
and suite of financial management policies.
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1.
Introduction
In July 2006, the President of the Treasury Board announced the creation of the Senior
Committee on the Review of the Financial Management Framework of the Government of
Canada (the “Committee”), established to recommend changes to the financial management of
government that would “increase efficiency and accountability in the Government of Canada.”
“Financial management policies are the cornerstone of sound
oversight and accountability in government spending.”
The Honourable John Baird, then President of the Treasury Board of Canada
The role of the Committee was first laid out in the Federal Accountability Action Plan published
by the government in April 2006. The Plan accompanied the tabling of the Federal
Accountability Act (FedAA), which received Royal Assent on December 12, 2006. In the Plan,
the government indicated, “We will look for ways to reduce the number of financial management
policies to clarify roles and responsibilities and institute a more coherent set of requirements.”
The Committee was asked to report to the President of the Treasury Board by December 2006.
1(a) Mandate
The Committee was asked to consult with stakeholders and make recommendations to strengthen
and streamline the Treasury Board’s financial management policies and to recommend basic
principles of management accountability and transparency for the policies. It was also asked to
consider any legislative changes required to remove barriers and constraints and to recommend
ways to ensure that the government has the skilled financial experts it needs. At the Committee’s
first meeting, the Committee members agreed that several additional elements should be
considered as part of the context of financial management. They wanted to carefully examine the
model of financial management in departments, having regard to the proposed creation of the
position of chief financial officer. In addition, the Committee asked that it be allowed to review
progress on the implementation of the new Policy on Internal Audit. Finally, the Committee
members agreed to examine ways in which the general management environment could be
strengthened to support the changes in financial management. (The complete text of the mandate
can be found in Annex A.)
1(b) Committee members
The Secretary of the Treasury Board, Wayne G. Wouters, chaired the Committee. He is the
Deputy Minister to the President of the Treasury Board and has the overall responsibility for the
management framework and policies for the Government of Canada.
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Report of the Senior Committee on the Review of the
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Charles-Antoine St-Jean, Comptroller General of Canada, was a member of the Committee and
was responsible for bringing forward recommendations for the new financial management policy
framework to the Committee.
Four deputy ministers from major departments sat on the Committee: Janice Charette, Human
Resources and Social Development Canada; Richard Dicerni, Industry Canada;
Richard B. Fadden, Citizenship and Immigration Canada; and Michael Wernick, Indian and
Northern Affairs Canada.
Two corporate directors and former chief financial officers from the private sector,
L.G. Serge Gadbois and John D. Watson, also sat on the Committee.
Biographical notes for Committee members are found in Annex B.
A Shadow Committee was also established to support the work of the Committee. Eight senior
financial officers (SFOs) from government departments and agencies, including the four SFOs
from the departments of the deputy ministers on the Committee, plus senior staff members of the
Office of the Comptroller General made up the Shadow Committee, the role of which was to
review and comment upon material to be reviewed by the Committee. (A list of Shadow
Committee members is contained in Annex C.)
A small secretariat supported the work of the Committee. Norman Moyer, a senior advisor to the
Deputy Minister of Canadian Heritage, was loaned to the Treasury Board of Canada Secretariat
to act as Secretary to the Committee. Jim Roberge, then Executive Director, Financial
Management and Analysis Sector, Office of the Comptroller General, directed the research for
the Secretariat. Gilles Vézina, Senior Director, Policy Suite Renewal Project, Office of the
Comptroller General, assisted the Committee by drafting the financial management policies for
its consideration. Karine Lemay served as the administrative assistant to the Secretariat team.
1(c) Process adopted by Committee
The Committee based its review on the body of work developed by the Office of the Comptroller
General. Draft new policies and the related analysis had been developed in the months prior to
the creation of the Committee.
Because of the close connection between the work on the financial management framework and
the other priorities of the Treasury Board of Canada Secretariat, a process was also instituted for
circulation for review of the briefings and policy texts to the senior managers of the Secretariat.
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Although the Committee process did not include wide-ranging consultations with senior
managers likely to be affected by the new policies, the views of these managers were sought in
several ways. The Shadow Committee was structured to capture the views of a cross-section of
the senior financial management community in government. It met regularly and provided input
on all of the briefings and draft policies. Prior to the creation of the Committee, the Comptroller
General and the Office of the Comptroller General had discussed the general direction of the
proposed new policy framework with a wide cross-section of public service managers. The views
expressed in those sessions were reflected in the material prepared for the Committee. Over the
last six months, general information sessions were held with the financial management
community across government.
The Committee met seven times, including for a two-day session in August.
In the course of Committee meetings, differences of opinion among Committee members
emerged around certain aspects of the new policy framework. The Committee discussed various
options to resolve these differences and arrived at common recommendations, but did not always
succeed in arriving at a full consensus. This report has therefore been drafted to reflect the views
of the majority of the Committee members.
2. Background to Review of Financial Management
Framework
The main components of the current financial management framework of the Government of
Canada date back to the early 1980s. While some policies have been added since then, no
thorough review or revision of the whole policy suite has been performed since 1995. As a result,
the style and the content of the policies in place today vary considerably.
The organization and resourcing of the financial management function across government have
also varied greatly over the last two decades. At the time of the Royal Commission on Financial
Management and Accountability (Lambert Commission, 1976–79), a separate Office of the
Comptroller General was created, reporting directly to the President of the Treasury Board, and
was given responsibility for financial management, internal audit, and program evaluation.
Departments were encouraged to create separate comptroller positions. Qualifications for those
positions were laid out and resources available for comptrollership activities were significantly
expanded. By 1985, the government and most departments had well-structured and wellresourced financial management functions.
During the 1990s, much of this organization changed. Resources devoted to all management
activities, including financial management, were reduced during Program Review, which led to a
significant downsizing of government in the mid-1990s. The separate position of departmental
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Report of the Senior Committee on the Review of the
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comptroller largely disappeared and the Comptroller General’s position was merged with the
responsibilities of the Secretary of the Treasury Board.
In 2003, the government decided to re-establish the Office of the Comptroller General as a
separate organization within the Treasury Board of Canada Secretariat. The new Comptroller
General was given the focussed mandates of internal audit and financial management. He was
asked to undertake a major review and reform in both of these areas. In 2005, the Comptroller
General presented a new Policy on Internal Audit, adopted by the Treasury Board ministers,
which included several key features designed to ensure the relevance and capacity of the
function. At the same time, work began on the review of the existing financial management
policy suite and the preparation of recommendations for a reform of these policies.
2(a) Federal Accountability Act
The government made accountability its top legislative priority and presented to Parliament an
extensive legislative package of reform through the tabling the Federal Accountability Act
(FedAA) on April 11, 2006. On December 12, 2006, the FedAA was passed into law. The
FedAA contains several elements designed to reinforce financial management in government.
The capacity of Parliament to review the revenue and spending proposals of government will be
enhanced through the creation of a Parliamentary budget officer. The reach and scope of the
Auditor General of Canada will be increased. Accountability for the administration of
government will be made more transparent and effective by formalizing the role of deputy heads
as accounting officers for their departments and agencies in the Financial Administration Act.
The FedAA also supports the role of internal audit in departments by providing for a clear
mechanism for the appointment of independent departmental audit committee members. The net
impact of all of these changes will be a heightened focus on management issues in general and
on financial management accountability specifically.
2(b) New Policy on Internal Audit
Good internal audit is essential to the maintenance of sound controls and risk management in
departments and agencies. Since the early 1980s, efforts have been made to strengthen this
function. Despite pockets of expertise and excellence that have developed in some departments,
issues of objectivity, independence, professionalism, and senior management support for the
function have remained. The Comptroller General focussed on these issues in 2004 and 2005,
and developed a new Policy on Internal Audit to ensure these issues are effectively addressed.
Recognizing the important linkages between the new Policy on Internal Audit and the proposed
new suite of financial management policies, the Committee was given a briefing on the Policy on
Internal Audit and its implementation to date.
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The new Policy on Internal Audit has an effective date of April 1, 2006, and is to be fully phased
in by April 1, 2009. The main features of the policy are as follows:
It brings the focus of audit back to assurance and moves away from the “consulting
focus” that had crept in over the years.
The Office of the Comptroller General is responsible for providing functional direction
for internal audit across government and leading government-wide audits of risks that
transcend individual departments and agencies, as well as conducting horizontal and
sectoral audits of small agencies. The deputy head is responsible for the internal audit
function in his or her department.
The functions of the chief audit executive and the direct reporting relationship with the
deputy head are specified.
An independent departmental audit committee with a majority of external members is
required, with shared responsibility between the Office of the Comptroller General and
the deputy head for the recruitment and appointment of audit committee members. These
departmental audit committees are intended to provide a vigorous, external voice that can
guide the work of the auditors and assist the department in responding to external
auditors or other review bodies.
Direct access between the departmental audit committee and the minister is provided by
means of an expected in-camera annual meeting between them.
The Office of the Comptroller General is responsible for conducting government-wide
internal audits of selected activities and assisting small agencies in carrying out their
internal audit activities.
In the year since the Policy on Internal Audit became effective, important implementation steps
have been taken, including the following:
New internal audit organizations have been created and new chief audit executives have
been appointed and are being recruited.
Audit working papers have been given extended protection from publication to allow
audits to proceed in a forthright manner.
A number of departments have already established audit committees with external
membership.
The Treasury Board has approved incremental funding for implementation of the policy,
as well as the allocation of this funding to departments.
A draft Audit Standards Manual has been distributed to departments by the Office of the
Comptroller General.
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The Office of the Comptroller General is currently leading internal audits across
government.
The Committee has expressed general support for the new Policy on Internal Audit. However,
some concerns remain:
The need to clarify the focus of internal audit and distinguish it from program evaluation:
internal audit should focus on assuring that programs, processes, systems, and functions
are operating as intended and that effective internal controls are in place; evaluation
should focus principally on program relevance, as well as measuring outcomes and
results. The two disciplines can maximize their distinct contributions to government by
getting back to basics and ensuring that they accomplish their core mandates effectively.
The scope of activities and the mode of operation of independent audit committees need
to be clearly laid out.
A governance issue of the Policy on Internal Audit needs to be re-examined in light of the
FedAA and the accounting officer model. Since the deputy head is accountable for the
administration of the department, the annual in-camera meeting between the minister and
the departmental internal audit committee, without the deputy head in attendance, will
confuse and undermine the role of the deputy head. This provision should be clarified to
provide for the deputy head’s presence at all such meetings.
2(c) Role of deputy head and the impact of Federal Accountability
Act
The Committee indicated from the outset that it viewed the deputy head as the key leader
responsible for the operation of financial management in departments and agencies. The
proposed new Financial Management Policy Framework has been designed to support the
deputy head. The responsibilities and accountabilities of deputy heads, including deputy heads of
smaller organizations, are many and complex. They are outlined in the Privy Council Office
(PCO) publications Guidance for Deputy Ministers and A Guide Book for Heads of Agencies. As
a result of the enactment of the FedAA, revision to these guidelines is presently under way.
The PCO Guidance for Deputy Ministers sets out a number of areas of responsibility for
deputy ministers
1. supporting the minister’s individual and collective responsibilities
2. managing the department
3. advising on portfolio coordination
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4. supporting ministerial accountability in Parliament
5. providing information to bodies reporting to Parliament
The PCO Guidance for Deputy Ministers also sets out a number of areas of multiple
accountabilities for deputy ministers. Deputy ministers are appointed by and accountable to the
Prime Minister, through the Clerk of the Privy Council, for the overall exercise of their
responsibilities. On a day-to-day basis, deputy ministers are accountable to their ministers for
addressing errors in administration and taking appropriate corrective action. Finally, deputy
ministers are responsible to the Treasury Board and the Public Service Commission for certain
powers delegated directly to them.
The enactment of the FedAA and adoption of the accounting officer model codify the
longstanding practice of deputy ministers’ appearing before parliamentary committees to provide
information and explanations concerning departmental management. It obliges the accounting
officer to answer questions, but does not make the accounting officer accountable to the
committee for management in the four specified areas—that accountability belongs to the
minister. It is still appropriate for ministers to appear before parliamentary committees, such as
the House of Commons Standing Committee on Public Accounts, on management matters,
including the four specified areas. Ministers, unlike accounting officers, are accountable to
Parliament for these matters. The four areas are:
measures taken to organize resources to deliver departmental programs in compliance
with government policy and procedures
measures taken to maintain effective systems of internal control
signing of the departmental accounts
performance of other specific duties assigned to the accounting officer under the
Financial Administration Act or other acts in relation to the administration of the
department.
The four specified areas for which the accounting officer has an obligation to appear and answer
questions pertain to management of the organization. One important element of departmental
management is financial management, and the new Financial Management Policy Framework
will be of critical importance in supporting deputy ministers as “accounting officers.” It will
assist them in terms of clarifying their responsibilities—what they are supposed to be compliant
with—and providing them with better tools to assess whether they are compliant. It will also
assist them in understanding what is required for an effective system of internal control related to
financial management, as well as providing them with additional tools to increase their level of
comfort in signing the departmental accounts.
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The new suite of financial management policies will support deputy heads in at least
three critical ways:
1. The policies will provide more clarity on the financial management responsibilities of
deputy heads.
2. The policies, combined with applied resources, leadership, and sound implementation
efforts, will create a renewed system of financial management that will better enable
deputy heads to carry out their responsibilities.
3. The policies will clarify the respective roles and responsibilities of deputy heads and the
Comptroller General for financial management.
2(d) Role of Office of the Comptroller General
The 2006–07 Report on Plans and Priorities for the Treasury Board of Canada Secretariat sets
out the role of the Office of the Comptroller General as follows:
In 2004, the government re-established the Office of the Comptroller General (OCG) as a
distinct office within the Secretariat. The OCG is responsible for ensuring that
departments and agencies employ sound financial management and control practices and
plays a lead role in supporting the government’s commitment to strengthen financial
management, controls, and internal audit. This role is supportive of the management
policy development and oversight, as well as the expenditure management and financial
oversight functions of the Treasury Board.
To this end, the main priorities of the OCG include restoring public confidence in the
government’s financial management practices, improving the quality and credibility of
financial information, and strengthening the role of internal audit across government.
2(e) Treasury Board’s overall agenda for management change
The Treasury Board of Canada is responsible for the management framework of the Government
of Canada. It creates policies and sets directives in many areas, including human resource
management, expenditure management, information technology, procurement, and transfer
payments. Many of these policies have a direct impact on financial management. It is important
to note some of the other key priorities of the Treasury Board that influence the Review of the
Financial Management Framework of the Government of Canada.
Review of Expenditure Management System: The Expenditure Management System
(EMS) is the framework for the development and implementation of the government’s
spending plans and priorities. The 2006 budget committed the government to developing
a new ongoing approach to managing overall spending to ensure that all government
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programs are effective and efficient, are focussed on results, provide value for taxpayers’
money, and are aligned with the government’s priorities and responsibilities. The
proposed changes will strengthen expenditure management through improvements to the
way departments manage and evaluate the performance of their programs, to the way
Cabinet reviews the relevance, funding, and cost-effectiveness of existing programs, and
to the rigour with which it examines new funding proposals. The new financial
management policies are intended to support and complement the higher standards for the
quality of information and advice that the EMS changes will entail.
Review of Treasury Board policy suite: The government has tasked all the organizations
reporting to the Treasury Board to examine the entire suite of Treasury Board policies,
“to reduce the number of Treasury Board policies by more than half, clarify the
management responsibilities and accountabilities of ministers and deputy heads, and
clarify the responsibilities of functional experts. The renewed policies will also establish
clear compliance requirements and consequences.”1 The new financial management
policies have been drafted to meet these criteria and are consistent with the overall policy
suite initiative.
Management Accountability Framework: The Management Accountability Framework
(MAF) is the primary mechanism used by Treasury Board of Canada Secretariat to
monitor the performance of departments in the implementation of Treasury Board
management policies. The process involves the establishment of common and transparent
criteria to assess deputy head performance. The MAF provides an important mechanism
for the assessment of financial management performance in departments. The new
financial management policies will facilitate clarification of deputy head expectations
with regard to financial management performance in departments.
In its discussion of the new Financial Management Policy Framework, the Committee expressed
concern about the impacts of the implementation of the new policies on departments’
management workload, resource requirements, and capacity. These impacts are significant in and
of themselves, but could be overwhelming when looked at in the context of the level of effort
already required to implement the new Policy on Internal Audit and the extensive projects of
reform flowing from the broader Treasury Board agenda. Committee members noted that the
provision of new resources to cover implementation, including additional skilled personnel and
new business processes, will be essential and that the timeframes for completing the
implementation of all the new policies should be coordinated to avoid excessive demands in any
one year and ensure consistency.
1.
Federal Accountability Action Plan, p. 29
March 21, 2007
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3. Drivers of Change to the Financial Management
Framework
Renewal of the financial management framework is driven by several factors. The current
framework is dated and needs to be redrafted to streamline, clarify, and target its impact. As
well, there have been indications that financial management performance, although relatively
effective, needs improvement in several key areas. Renewal is also being influenced by financial
management changes in other sectors and jurisdictions, both nationally and internationally.
3(a) Assessment of current Financial Management Policy
Framework
In 2005, the Office of the Comptroller General undertook an analysis of the financial
management policies of the Government of Canada as part of the modernization of
Treasury Board policies. The initial step was to complete a review of the current financial
management framework, including the Financial Administration Act and proposed modifications
introduced through the FedAA.
The review of the current set of financial management policy instruments revealed four main
problems with the current policy framework: unclear expectations and accountabilities,
inconsistent format and level of guidance, fragmented reporting requirements, and absence of
monitoring guidance and direction. It was also concluded that the number of policy instruments
and their lack of organization contributed to confusion in departments and the Treasury Board of
Canada Secretariat. The perceived web of rules within the overall federal government
contributed to the need to reduce and streamline these policies. Finally, it was apparent that the
policies as a whole did not reflect a sense of the overarching priorities in the area of financial
management at this time.
3(b) State of financial management in departments today
The Government of Canada manages annual revenues and expenditures of more than
$220 billion. It has a generally good record for the management of the dollars that pass through
its hands. From the processes of parliamentary voting through to the final accounting for
revenues and expenditures, the vast majority of resources are administered with care and in
accordance with established legislative rules and policies. Canada is the only G8 nation that
consistently produces unqualified consolidated audited financial statements and is a recognized
world leader in financial reporting.
Generally, government departments administer well the resources allocated to them by
Parliament. In spite of complex social, economic, political, and international environments,
departments rarely overspend their votes. Every year, parliamentarians and Canadians can
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receive a detailed accounting for money requested and money spent by the government.
Achieving such results year after year is a clear indication that many of the fundamentals of
financial management are strong.
However, results of ongoing or special reviews of financial management and accountability
carried out over the past decade indicate that there are a number of important areas where
financial management practices can be improved. Materials reviewed have included the Modern
Comptrollership Project, which involved an extensive self-assessment by departments of their
management performance; relevant Auditor General of Canada reports; the report of the
Commission of Inquiry into the Sponsorship Program and Advertising Activities (Gomery
Commission); reports prepared by the Association of Professional Executives of the Public
Service of Canada (2006) and the Association of Canadian Financial Officers (2006); and a
report of the Conference Board of Canada on the new role of the chief financial officer in
government (2006). (See Annex D for a bibliography.)
The issues and opportunities below have been consistently identified in these reports.
Accountability and responsibility: Existing policies have not made clear the
accountabilities and responsibilities of key senior management.
Governance and departmental organization: Greater recognition is required of the role of
senior managers responsible for financial management. Also, such managers frequently
do not have the professional accreditation necessary for the job.
Weak understanding of core financial management activities: Every program and
financial officer in government should understand the core financial responsibilities
outlined in sections 32, 33, and 34 of the Financial Administration Act. There is still
evidence that, despite information and training provided, many managers do not
understand their basic obligations under the Financial Administration Act.
Narrow definition of financial management: Financial management is often seen as
nothing more than the basic functions of budgeting, accounting, and reporting.
Internal controls: Many of the building blocks for good internal control are in place, but
controls that could anticipate problems are underdeveloped. There is insufficient
discipline in documenting and reporting upon internal controls so that they can be
assessed and improved.
Internal and external financial reporting: While cash-based accounts are well maintained
and reported, only a few departments and agencies are producing audited financial
statements. Recent audit readiness assessments indicate that, once the process is initiated,
it will take a minimum of two to three years for most departments to be ready to produce
unqualified audited departmental financial statements. There is also still a need for
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Report of the Senior Committee on the Review of the
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departments to improve their internal in-year reporting and forecasting. In addition,
integration of financial and non-financial information needs significant improvement.
3(c) Evolving experience in other sectors and jurisdictions
Financial management in the Government of Canada is influenced by changes in other sectors
and jurisdictions. New initiatives that are seen as progressive and producing good results
elsewhere are often applied to the context of the Government of Canada.
The recent experience of financial frauds and scandals in the private sector have led national and
international regulators and the accounting profession to make significant changes to financial
management and controls for any company wanting to raise funds in capital markets. Canadian
Securities Administrators (CSA) has introduced strengthened internal control and financial
reporting regulations in the form of multilateral instruments (MIs), such as MI 52-109,
Certification of Disclosure in Issuers’ Annual and Interim Filings; MI 52-110, Audit
Committees; and MI 52-111, Reporting on Internal Control Over Financial Reporting.
The Public Company Accounting Reform and Investor Protection Act (Sarbanes-Oxley Act) in
the United States (US) has tightened all aspects of reporting and controls and, while certain
aspects of that legislation go further than is required in the Government of Canada, some of its
features are appropriate for good management of any institution, public or private.
In recent years, several national and provincial governments have made significant progress in
the renewal of their financial management governance frameworks, some of which may serve as
a model for Canada:
In the United Kingdom (UK), permanent secretaries (deputy ministers) are accounting
officers and are required to appoint senior-level chief financial officers with professional
financial qualifications.
The US Congress passed the Chief Financial Officers Act requiring that the President
name a qualified chief financial officer for every department.
Some provinces (e.g. Alberta), the US, UK, Australia, and New Zealand require the
production of audited annual departmental financial statements.
In the US and the UK, financial statements must be accompanied by attestations of
internal control over financial reporting, along with indications of weaknesses and plans
for dealing with those weaknesses.
A number of jurisdictions (e.g. European Union, China, Australia, and New Zealand)
have adopted International Financial Reporting Standards (IFRS), while the UK will be
confirming its position shortly.
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The IFRS will replace Canadian generally accepted accounting principles (GAAP) for
publicly traded companies in Canada by 2011.
As the above items show, the yardstick for good financial management nationally and
internationally has moved over the last decade. The standards of professional practice have
evolved and public expectations have shifted. There are now ample examples in the private, notfor-profit, and public sectors of the implementation of measures designed to meet these new
expectations. The Government of Canada has its own history and its own strengths and particular
weaknesses. It cannot simply adopt the model used in another sector or jurisdiction, but it can be
guided by successful practices elsewhere in designing its own approach.
4. New Financial Management Policy Framework:
Analysis and Recommendations
In this section, the specific components of the Financial Management Policy Framework (FMPF)
and the suite of policies are examined and new approaches are recommended.
4(a) Streamline and modernize existing financial management
policy suite
As part of the broader Treasury Board of Canada Secretariat Policy Renewal Initiative, the
Office of the Comptroller General conducted a comprehensive review of the financial
management framework and the suite of financial management policy instruments (policies,
directives, and standards). The review concluded that, while the current framework and policies
were comprehensive, they lacked coherence and confused specific accountabilities. There would
in effect be benefit from rationalizing the current financial management policy suite to produce a
much more focussed and better-organized set of requirements.
Specifically, the overhaul of the framework should seek to address four issues:
unclear accountabilities and expectations
inconsistent format and level of guidance
fragmented reporting requirements
insufficient monitoring and consequences for non-compliance
More significantly, the review noted that the policy framework is no longer current and fails to
respond to today’s priorities and recent developments in financial management accountability,
control, reporting, and disclosure.
As part of the Office of the Comptroller General review, a new FMPF and suite of policies were
researched, designed, and developed during 2006. The proposed policies were based upon
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national and international best-practices research and consultations with subject-matter experts
within the Treasury Board of Canada Secretariat and with advisory bodies within and external to
government. The Office of the Comptroller General also provided the text of the financial
management policy suite to the Office of the Auditor General of Canada for consultation and
comments.
With the introduction of the Federal Accountability Act, the newly developed policy framework
was reviewed to ensure full compatibility with the concept of the deputy head as “accounting
officer.” Successful implementation of the accounting officer model requires a renewed financial
management policy framework that provides deputy heads with the confidence that they will be
supported in discharging their financial management accountabilities and responsibilities.
The Federal Accountability Action Plan mandated the Committee to look for ways to reduce the
number of financial management policies, clarify roles and responsibilities, and institute a more
coherent set of requirements.
The work of the Committee involved a review of the proposed Treasury Board FMPF and of the
suite of financial management policy statements. Adjustments were made to some of the
statements, while others were either accepted as is or rejected. The subcommittee of senior
financial officers from across government (referred to as the “Shadow Committee”) supported
the Committee’s review. The Shadow Committee’s recommendations and briefings to
Committee members were instrumental in advancing the review process and represented
significant consultative work and analysis.
The results of the Committee’s work, based upon the specific recommendations presented below,
have been reflected in policy text set out in the FMPF and the suite of financial management
policies, contained in Annex E to this report. It should be noted that the number of financial
management policy instruments will be reduced by approximately 50 per cent.
The Committee noted the importance of further engagement with representative senior managers
across government, in addition to the consultations that have already taken place over the past
year, before the new policies are implemented. This broader engagement would help ensure a
better understanding of the intent of the financial management policy suite and would provide an
opportunity to prepare senior officers and managers for their new financial management
accountabilities and responsibilities.
Accordingly, it is recommended that:
R1—The Comptroller General submit for the approval of the Treasury Board a new
financial management policy suite that will reduce, streamline, and modernize the
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current array of policy instruments by approximately 50 per cent. The main features of
the new policy suite will follow the more detailed recommendations below and will be
organized around the following five core policies:
Financial Management Governance
Internal Control
Financial Resource Management
Financial Information and Reporting
Financial Systems
4(b) Clarify lines of responsibility for financial management
The current framework does not clearly articulate the accountabilities and responsibilities for
financial management of key individuals and managers. Current policies reflect institutional
rather than individual responsibilities. For example, they indicate that “the department shall”
instead of indicating who specifically is accountable.
Any articulation of roles and responsibilities must reflect the principle of the deputy head as
accounting officer, as well as the responsibilities of the Comptroller General for governmentwide financial management. In addition, it must be recognized that financial management is the
responsibility of all managers and not just the domain of financial specialists.
Accordingly, it is recommended that:
R2—To improve accountability, the specific financial management roles and
responsibilities of the deputy head, Comptroller General, chief financial officer, and
other assistant deputy ministers (ADMs) or equivalents be clearly defined.
Furthermore, their specific accountabilities should reflect the following key principles:
(a)
Deputy heads should be clearly accountable for financial management in
their departments and have the authority needed to carry out their
responsibilities.
(b)
The Comptroller General should be accountable for providing governmentwide functional direction and oversight for financial management,
recommending financial management policies, and issuing directives and
standards.
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(c)
The departmental chief financial officer should be accountable and
empowered to provide the requisite financial management leadership,
advice, and services to departmental management team members and staff.
(d)
Other ADMs or equivalents should be accountable for the effective financial
management of those areas under their purview.
4(c) Clarify the deputy head’s scope of management
It is imperative that, as accounting officers, deputy heads have a clear and ongoing understanding
of their scope of management and of the organizations under their purview. Often a minister will
have the responsibility for reporting to Parliament on a “portfolio” of departments and agencies.
The degree of accountability of the minister for management in these entities varies according to
the nature of the department or agency and the legislation that established it. General guidance
for ministers, deputy ministers, and deputy heads of agencies is provided through separate
publications of the Privy Council Office.
The deputy minister’s role in the portfolio arises from his or her responsibilities as the chief
public service policy advisor and not from any statutory responsibility over non-departmental
bodies. However, the roles and responsibilities of the deputy minister and other deputy heads in
the portfolio can get confused. First, a minister may seek advice from the deputy head about the
activities of an agency in the portfolio. Second, the larger entity in the portfolio may offer some
service to smaller agencies. Either of these actions can confuse accountability unless care is
taken to set out the roles clearly.
Accordingly, it is recommended that:
R3—The Privy Council Office set out the scope of portfolio responsibilities more
clearly in Guidance for Deputy Ministers and the Guide Book for Heads of Agencies.
4(d) Appoint professionally qualified chief financial officers
With annual expenditures in the order of more than $220 billion, financial management in the
federal public service is complex and risk intensive. In spite of this, and as commented on by the
Auditor General, in most departments and agencies the senior financial officer (SFO) is not an
accredited financial specialist. Moreover, most SFOs, who often occupy the positions of
corporate ADMs in larger departments, are also responsible for a broad array of other
administrative domains, such as human resources, information management and information
technology, procurement, and facility management, and are therefore unable to devote enough
time to financial management issues.
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Under the current SFO model in departments, a senior full-time financial officer (SFFO)
supports the SFO. In larger departments, the SFFO occupies a position at the director general
level, but is not a member of the executive committee. As a result, the advice of financial
specialists tends to be filtered before it reaches senior management. In addition, the career path
for SFFOs has tended to be limited to jobs in the Financial Management stream.
While the SFFO will learn a lot about the business of the department through the lens of
financial management, he or she often lacks the hands-on business sense of those who have
delivered programs and developed policies.
Accordingly, it is recommended that:
R4—The deputy head appoint an appropriately qualified chief financial officer (CFO)
to strengthen financial management and to provide the deputy head with strategic
financial management advice. The CFO will report directly to the deputy head. It is
further recommended that:
(a)
To ensure the consistent quality of CFOs across government, the
Comptroller General be responsible for setting the knowledge and
accreditation standards for CFOs, and it be mandatory that the Comptroller
General, or his or her delegate, be offered the opportunity to participate as a
full member of any selection committee convening to select a CFO.
(b)
The CFO report directly to the deputy head, to help ensure that the position
of CFO is given appropriate weight and profile, commensurate with the
responsibilities involved. While the level of the position will vary with the
size and complexity of the department, the CFO of larger organizations
should be at the ADM level, to be expected to fully participate at the
executive management table.
(c)
CFOs’ non-financial functional responsibilities (e.g. for departmental
management of human resources, records, security, or information
technology) be limited. Specifically, the deputy head should be required to
consult with the Comptroller General on the scope of the duties of CFOs, to
ensure an appropriate level of specialization and independence.
(d)
When the deputy head and the Comptroller General agree that the
classification of a CFO position is inadequate, they jointly seek the
authority of the Treasury Board to classify the CFO position at the
appropriate level.
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(e)
To provide flexibility in the implementation of the CFO model, where,
because of the size and capacity limitations of the department or agency, an
appropriately-qualified CFO cannot be appointed, the deputy head may
request that a CFO of another department be designated to act as his or her
CFO, with the concurrence of the appropriate deputy head and in
consultation with the Comptroller General.
The application of the current classification and compensation system for executives may not
yield the results deemed necessary to attract sufficiently qualified candidates and recognize the
full weight of CFO responsibilities. The Comptroller General requested that the Public Service
Human Resources Management Agency of Canada (PSHRMAC) examine whether the current
executive classification system adequately supports the classification of CFO positions in the
largest and most financially-complex departments (i.e. National Defence, Public Works and
Government Services Canada, Health Canada, Industry Canada, and Indian and Northern Affairs
Canada).
These broader-scope assistant deputy minister corporate positions are currently classified at the
EX-04 level, with one at the EX-05 level. PSHRMAC concluded that none of these positions
performing purely financial management functions would support an EX-05 classification.
Indeed, only one of the five would even support an EX-04 classification. The Committee
recognizes that this issue is not unique to the financial community.
While the deputy head has the flexibility to seek exceptions from the Treasury Board on a caseby-case basis, it may be an appropriate time for an independent review of the application of the
classification system in the federal public service, to ensure that the public service can attract and
retain the requisite leadership talent in this area.
Accordingly, it is recommended that:
R5—An independent review be conducted of the classification system for functional
specialist executives, to ensure that it continues to meet the needs of the federal
public service.
4(e) Procedure where a proposed course of action could lead to
undue financial risk or violate the requirements of any legislation,
regulations, or policy
There may occasionally be instances where, in the opinion of the CFO, a proposed course of
action endorsed by the deputy head could give rise to undue financial risk or violate the spirit or
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form of any legislation, regulations, or policy. The Committee is of the view that that the
protocol contained in the current Policy on Responsibilities and Organization for
Comptrollership (to be superseded by the new Policy on Financial Management Governance) is
still appropriate in the context of the proposed new Financial Management Policy Framework.
Accordingly, it is recommended that:
R6—Where a CFO is convinced that an action being proposed by the deputy head will
create significant financial risk or violate either the spirit or form of the financial
requirements of any legislation, regulations, or government policy, he or she must
make every effort, in consultation with the Comptroller General, to persuade the deputy
head to follow an alternate course of action. If the deputy head does not accept the
recommendation offered by the CFO, then the CFO must request that the deputy head
seek the advice of the Comptroller General. Should the deputy head and the
Comptroller General not come to an agreement, they must jointly discuss the matter
with the Secretary of the Treasury Board.
4(f) Statement of Internal Control over financial reporting
As an accounting officer, the deputy head is specifically accountable before committees of
Parliament for the measures taken to maintain systems of internal control in his or her
department. The CFO is responsible for the nature and effectiveness of internal controls over
financial management, including internal controls over financial reporting across the department.
ADMs or equivalents are responsible for the nature and effectiveness of the internal controls and
internal controls over financial reporting within their purview.
The Auditor General has noted that departments are unable to demonstrate with appropriate
evidence that adequate controls are in place. In relation to financial reporting, this conclusion has
been confirmed by recently conducted departmental audit readiness assessments for the
introduction of audited financial statements. These assessments found that departments lack
documented processes and performance information to demonstrate the reliability of their
financial reporting.
Other jurisdictions such as the US and the UK have adopted a protocol whereby the heads of
agencies must prepare statements of internal control for financial reporting, attesting to their
knowledge of the effectiveness of their internal controls for purposes of ensuring the reliability
of their financial reporting. The introduction of this concept in departments is expected to yield
similar benefits and will require more rigorous systems of internal control.
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The deputy head must be supported by the CFO and other senior executives who are collectively
responsible for implementing the department’s internal controls over financial reporting and for
gathering the evidence necessary to support the information in the deputy head’s Statement of
Internal Control (SIC) over financial reporting that accompanies the departmental financial
statements. In addition, the deputy head will need to rely upon the chief audit executive and
departmental audit committee for independent advice on the effectiveness of the system of
internal control over financial reporting.
Departmental annual statements of internal control over financial reporting will also provide a
basis for government-wide reporting by the Comptroller General on issues of internal control.
Frequently, internal control issues can arise from systemic problems that may relate to systems,
the policies themselves, the capacity of the financial management function, or other matters. By
assessing departments’ SICs for financial reporting, the Comptroller General will be able to
assess and report to the Treasury Board upon the state of internal control over financial reporting
across the government.
Accordingly, it is recommended that:
R7—The deputy head sign an annual Statement of Internal Control (SIC) over
financial reporting to assure users of departmental financial information that a
process is in place to review the effectiveness of internal controls over financial
reporting, and that this information is reliable and has been fairly stated and fully
disclosed. Furthermore, the following processes will be established to ensure that the
deputy head is adequately supported in this role:
28
(a)
The CFO will support the deputy head by providing leadership and
guidance on the system of internal control over financial management and
support ADMs or equivalents and managers, who are accountable for the
adequacy of internal controls over financial reporting for areas under their
purview, by advising them on the use of best practices. The CFO will be
required to formally submit annually to the deputy head a signed Chief
Financial Officer Statement of Internal Control (CFO SIC) over financial
reporting, supported by appropriate evidence. In preparing the CFO SIC for
the department, the CFO will obtain appropriate assurances from other
ADMs or equivalents of the adequacy of internal control over financial
reporting in areas under their purview.
(b)
Other ADMs or equivalents will be required to formally submit to their
deputy head formal assurances of the adequacy of internal controls over
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financial reporting in areas under their purview by means of an annual
signed Assistant Deputy Minister Statement of Internal Control (ADM SIC)
over financial reporting, supported by appropriate evidence.
(c)
The chief audit executive will provide the deputy head with any information
relevant to the state of internal controls arising from internal audit activities
and provide assurance that the assertions in the SIC over financial
reporting are consistent with relevant internal audit work. In addition, the
deputy head will review the effectiveness of the system of internal control
and the annual SIC over financial reporting with the departmental audit
committee.
(d)
The Comptroller General will issue guidance on internal controls to
departments and specify the format and content of the various statements of
internal control over financial reporting.
4(g) Sound and fairly presented proposals for new initiatives
Good financial management and sound expenditure management are totally interdependent.
When developing policy proposals and funding options for the consideration of ministers,
departments are required to present a wide variety of information and analyses, a significant
portion of which deals with financial and related information, such as the proposal’s cost, risks,
and sustainability. The department’s finance organization is well placed to provide ministers
with assurance that new proposals submitted for approval are supported by sound analysis and
are fairly presented.
For example, current policy requires the SFO to sign off on the financial elements of memoranda
to Cabinet. However, the application of that process is uneven and, as a result, not fully reliable.
While significant progress has been made in adding to the rigour of due diligence, there is room
for improvement. Consistent with the business case rigour of the Treasury Board submission
process, what is required is a more disciplined approach whereby program and policy ADMs
work closely and early with the CFO to develop well-crafted departmental funding initiatives
and submissions that provide decision makers with the confidence that:
the proposal is aligned with the priorities of the department and consistent with the
departmental financial strategy;
significant management risks have been identified and the risk mitigation strategies are
reasonable under the circumstances; and
assumptions are clear, reasonable, and relevant, and financial projections and costs are
reasonable in the circumstances.
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In addition, for funding proposals submitted for Treasury Board approval, decision makers will
be provided with confidence that:
relevant laws, regulations, and Treasury Board policies, directives, and standards are
being adhered to with respect to financial management;
stewardship measures and processes are in place to achieve results and sustain capacities;
and
financial and related non-financial performance measurement strategies and related
measures are appropriate to monitor progress in achieving planned results.
In relation to the rigour of the review of memoranda to Cabinet, the level of assurance provided
by the chief financial officer to the deputy head has to be proportional to the quality of the
proposal itself, the information provided, and the level of assurance expected. This assurance
should be based upon review criteria elaborated upon in the Memorandum to Cabinet to address
the reasonableness of the proposal in the circumstances.
To achieve the desired level of rigour and collaboration, both the sponsoring ADM and the CFO
should be required by the deputy head to confirm the foregoing key management assertions. The
sponsoring ADM would make the assertions stated above to provide confidence to decision
makers as the developer of the proposal and/or eventual program operator. The chief financial
officer would have to be able to support two roles in exercising responsibility for the sign-off of
new proposals. The first would involve the CFO and his or her staff providing supporting
financial analyses to the designers of the proposal. The second, notwithstanding the first, would
involve always being in a position to challenge the assertions of the designers and offer
independent advice to the deputy head when required.
Accordingly, it is recommended that:
R8—The deputy head, before approving or recommending departmental resource
funding initiatives and submissions or major allocation and reallocation decisions,
seek assurance from:
(a)
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March 21, 2007
the sponsoring ADM or equivalent that financial resource planning,
budgeting, and related proposals and decisions under his or her purview are
supported by sound analysis and information, based upon a fair assessment
of financial risk, costing, and variances; moreover, when developing new
funding or program initiatives, the sponsoring ADM should seek the early
and ongoing advice of the CFO and cooperate with the CFO in the review
of the proposal’s key management assertions; and
Report of the Senior Committee on the Review of the
Financial Management Framework of the Government of Canada
(b)
the CFO that all departmental funding initiatives and submissions requiring
the deputy head’s approval are supported by sound analysis and that
significant management risks and costs are reasonable in the
circumstances, by confirming the proposal’s key management assertions.
In some cases, because of the risk, size, or nature of a proposed initiative, it may be desirable to
have the Comptroller General independently provide advice on the key management assertions
underpinning a department’s proposal. As a result of Budget 2004, the President of the
Treasury Board announced that the Comptroller General would henceforth “sign off” on all new
government spending initiatives. The announcement created some uncertainty among
parliamentarians and departments with regard to the circumstances when the Comptroller
General would be involved and the impact of that involvement on the accountability of the
deputy head.
After careful consideration of this announcement, it was recognized that the process for
requesting a formal sign-off by the Comptroller General needed to be channelled and managed in
some way. It was also noted that the Treasury Board and/or the President of the Treasury Board
could request such a sign-off at any time.
Accordingly, it is recommended that:
R9—The Clerk of the Privy Council or the Secretary of the Treasury Board may
formally request that the Comptroller General independently provide advice on the key
management assertions of a department’s proposal. In such cases, the advice of the
Comptroller General will be considered advice to the person making the request and
will in no way derogate from the accountabilities of the sponsoring deputy head.
4(h) Timely budgets and reliable forecasts
The need for more timely and transparent decisions on the allocation of departmental budgets
and more reliable financial forecasts from managers has been a long-standing financial
management issue.
Budgeting in most departments remains incremental, based largely on the previous year’s
allocation. Few organizations have a formal process to rigorously estimate and cost the workload
and priorities. As a result, it is very difficult to challenge the funding requests and forecasts of
managers. The Auditor General of Canada has criticized the government for having only very
limited cost and performance information available to support resource allocation and decision
making. Moreover, the departmental budget process itself is frequently not timely, with budgets
and expenditure reports often not provided to managers until well into the fiscal year. At the
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same time, there is a lack of strong incentives for managers to disclose surplus funding and
forecast their spending accurately. A recent survey of SFOs and SFFOs found that only about
one in five found managers’ forecasts prior to the final quarter of the year credible.
Accordingly, it is recommended that:
R10—The deputy head obtain assurance from the chief financial officer that the
department has a well-functioning system of budgetary allocation and control. This
will require the CFO to prepare timely and fairly presented financial resource
utilization information and related reports for the regular and prompt review of
management. Other ADMs or equivalents and managers must ensure that operational
plans and budgets are aligned with departmental priorities and that rigorous budgetary
control is exercised to monitor, safeguard, and account for all resources under their
purview.
4(i) Audited departmental financial statements
As accounting officer, the deputy head is answerable before the appropriate committee of
Parliament for the signed departmental accounts. He or she is accordingly responsible for
ensuring the fair presentation of all departmental reporting and disclosures. While current policy
requires the deputy head and SFO to sign the Statement of Management Responsibility for the
departmental financial statements, departmental financial statements are generally not audited. In
contrast, audited financial statements of companies and their divisions have long been the
standard in the private sector and are increasingly being required of organizations that receive
funding from the federal government.
As a result of the implementation of the Financial Information Strategy (FIS) in 2001, the federal
government introduced a requirement for the preparation of accrual-based unaudited
departmental financial statements. Although the consolidated Public Accounts (financial
statements) of the Government of Canada are audited annually, departmental financial statements
are generally not audited, and appropriations remain largely on a cash basis. In contrast, other
jurisdictions such as the UK, the US, Australia, and New Zealand have already implemented
audited departmental financial statements and, with the exception of the US, have introduced a
form of accrual-based budgeting and allocation.
To further ensure transparency, financial statements of some public sector jurisdictions and
private sector organizations are accompanied by a signed Statement of Management
Responsibility and Management Discussion and Analysis (MD&A) documents. To meet public
sector requirements, the Public Sector Accounting Board (PSAB) has modified the MD&A,
introducing the Financial Statements Discussion and Analysis (FSD&A), which gives additional
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assurance and interpretative information to assist readers of financial statements, including
parliamentarians and the public.
Recent audit readiness assessments have been carried out in a selection of departments to
determine how quickly and efficiently the government could move to audited departmental
financial statements. These assessments have shown that, with some additional funding and
sufficient professional help, larger departments could produce audited financial statements
within two years of a decision to do so. It is noted that smaller departments and agencies may be
exempted from the initial implementation schedule for this requirement.
Accordingly, it is recommended that:
R11—Departments and agencies produce annual audited financial statements,
accompanied by a Statement of Management Responsibility and a Financial
Statements Discussion and Analysis.
It is also common practice, at least for publicly traded private companies, to issue quarterly
financial statements and related notes to provide readers of financial statements with information
throughout the year. Recently, Senator Hugh Segal introduced legislation (Bill S-217) that would
make public unaudited quarterly statements a legal requirement for all departments and agencies.
While the introduction of such financial statements is in many ways the next logical progression
in financial reporting and, as such, an appropriate long-term goal, it is the opinion of the
Committee that it would be premature to make this a policy requirement at this time. It should be
noted, however, that regular internal management reporting that utilizes both cash and accrual
information is critical for monitoring financial performance throughout the year.
Accordingly, it is recommended that:
R12—The Financial Management Policy Framework defer the requirement for
departments to produce quarterly financial statements. This requirement will be
revisited once departments have succeeded in producing unqualified annual audited
financial statements.
4(j) Early notice of problematic accounting transactions
The Comptroller General supports departments in preparing their financial statements and in
submitting financial information to central agencies by issuing and interpreting Treasury Board
Accounting Standards (TBASs). While every effort is made to make these standards as
comprehensive as possible, not every conceivable situation can be covered and legitimate
disagreements arise about how best to apply generally accepted accounting principles (GAAP)
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and TBASs to particular transactions. In these situations, professional judgment must be applied
to arrive at an appropriate response. A protocol is needed whereby the Office of the Comptroller
General is promptly informed of such situations when the transaction is material, to ensure that
departments and the government receive consistent and well-reasoned advice.
Accordingly, it is recommended that:
R13—Where it can reasonably be expected that an accounting treatment for a
particular transaction could lead to a material misstatement, an inappropriate
application of authorities, or a qualification in an external audit report, the CFO have
a duty to promptly inform the Comptroller General in writing and seek his or her
advice. This early notification will allow the Comptroller General to seek an advance
audit opinion if deemed necessary and provide guidance to the CFO. In the event that
the Comptroller General does not agree with the accounting treatment proposed by the
department or agency, he or she will inform the deputy head in writing of the
disagreement, as well as the Secretary and President of the Treasury Board.
4(k) Integrating financial and non-financial information
Considerable progress has been made in improving federal government reporting to citizens and
Parliament on how resources and programming are aligned with government priorities and on
what results have been obtained from the spending of public monies. Critical in this regard is the
integration of robust financial and non-financial information.
While the Management Accountability Framework has an element dedicated to the integration of
financial and non-financial information for decision making and reporting, the practice in many
departments is still to manage systems and information discretely, frustrating efforts to integrate
information.
At the same time, only rarely is someone clearly designated within the organization to properly
determine what financial and non-financial information is required and how the department will
obtain and integrate this information. While the chief financial officer is generally in the best
position to integrate financial and related non-financial information, in collaboration with other
ADMs or equivalents, it has been recognized that flexibility to designate others to carry out this
task is necessary.
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The requirement to address this issue is becoming more imperative with the pending expansion
of expenditure management information systems (i.e. much more detailed program costing and
results data) and the new financial reporting requirements proposed in this report.
Accordingly, it is recommended that:
R14—The chief financial officer be responsible for leading, in collaboration with other
ADMs or equivalents, the integration of financial and related non-financial
information used for decision making, reporting, and disclosures across the
department, unless the deputy head designates another member of the department’s
executive management team to do so.
4(l) Departmental financial systems that meet organizational and
government-wide requirements
Under the Financial Information Strategy, the government made significant investments to
introduce modern and highly sophisticated departmental financial systems capable of meeting
accrual-based reporting requirements. These systems are the backbone of financial management
and require significant and ongoing investments to keep them current and responsive to
emerging requirements. At the same time, the complexity of these systems poses significant
governance and management challenges to ensure that they meet departmental needs.
Departmental financial systems have developed and evolved somewhat organically. Currently,
the federal government operates seven different Treasury Board-approved vendor-supported
financial systems (i.e. SAP, Oracle, etc.), but even within a particular financial system cluster
group, there is often little uniformity in how the particular system was implemented across
participating departments and agencies. Opportunities for greater transaction processing
efficiencies, better and more consistent internal controls, and enhanced horizontal reporting
across organizations have been lost because systems are not sufficiently standardized.
Accordingly, it is recommended that:
R15—The chief financial officer provide assurance to the deputy head that investment
in the departmental financial system is consistent with the approved departmental
financial information and reporting strategy and that the financial systems are
compliant with government-wide standards and policies and are appropriate for the
breadth and level of complexity of departmental operations.
R16—The Comptroller General issue Treasury Board Financial Systems Standards
(TBFSSs), to set mandated minimum requirements, to promote greater interoperability
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of financial and related non-financial information, common data elements and
classifications, common business processes, and best-practice internal controls. These
standards should be developed in collaboration with the Chief Information Officer of
the Government of Canada when they relate to information management or
information technology.
4(m)Periodic report on state of financial management
Strong oversight by the Treasury Board of financial management performance of departments
and agencies is an essential element of an effective financial management policy framework. We
have already noted that monitoring under the current framework is not sufficiently rigorous. To
be successful, oversight must be continuous, structured (i.e. repeatable), and evidence-based. The
Management Accountability Framework used by the Treasury Board of Canada Secretariat to
assess overall departmental performance and compliance is constructed on this basis.
Through the proposed new Financial Management Policy Framework, the Office of the
Comptroller General is putting in place an improved basis for monitoring and reporting to the
Treasury Board, specifically on financial management. Using the various financial disclosure
documents issued by departments (i.e. the complete set of departmental financial statements and
the Statement of Internal Control over financial reporting), as well as the findings contained in
internal and external audit reports and the data gathered as part of the MAF process, the
Comptroller General will be able to support a much more effective oversight regime. It is
important that the Comptroller General’s assessment and reporting on the state of financial
management be integrated with the MAF.
Accordingly, it is recommended that:
R17—The Comptroller General assess the state of financial management of
departments and agencies and report periodically to the Treasury Board on the overall
state of financial management, control, and reporting in the Government of Canada.
5.
Creating a Supportive Environment for Change
Changes to the financial management policies of the Government of Canada are only part of the
answer. Each of the issues of human resource capacity, resource availability, legislative barriers,
and management culture must also be addressed if the reform of financial management is to
succeed.
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5(a) Building financial management capacity and communities
The Committee received an overview from the Office of the Comptroller General of the human
resource capacity challenges facing both the financial management and internal audit
communities. Several key challenges were identified. To meet rising expectations, the most
senior leadership in both the financial management and internal audit communities needs to be
strengthened in terms of professional qualifications and business experience. The general
management community lacks a thorough understanding of financial management and internal
audit and of how to work with these functions. Many of the leaders in the financial management
community are nearing retirement, and there is no adequate back-up or succession strategy in
place. Positions may have to be reclassified to reflect new duties, and the qualification gap will
have to be addressed through both recruitment and training.
The Office of the Comptroller General is already working with departments and PSHRMAC, the
Canada School of the Public Service, and departments and agencies across government to build
and nurture the development of our financial management capacity and communities. Generic
position profiles are being developed for key positions. Specific projects and targets have been
set for recruitment and training. A good base has been set for the change required.
Accordingly, it is recommended that:
R18—The Comptroller General provide functional leadership and support the
development of sustainable financial management capacity and communities across
government by continuing to pursue the following priority areas:
(a)
recruitment of highly qualified and experienced CFOs and other financial
management executives;
(b)
coordinated government-wide collective staffing processes for financial
officers;
(c)
encouragement of financial officers to acquire professional accreditation in
financial management;
(d)
accelerated development programs for financial management practitioners
that focus on developing general management and leadership skills and
experience; and
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Report of the Senior Committee on the Review of the
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(e)
practical training on financial management for non-financial managers so
that they obtain a better understanding of their financial management roles
and responsibilities and the application of best practices in this domain to
areas under their purview.
5(b) Promoting greater professionalism
The new Financial Management Policy Framework and core policies raise the bar with respect
to financial management across government. Financial specialists will need to upgrade their
skills and training to meet these new requirements. Professional accreditation is an important
element in the solution.
The benefits of professional accreditation have been recognized for some time. As a result of
collective bargaining, members of the Financial Management (FI) group are entitled to have the
employer pay up to $1,000 towards the cost of their first professional designation. However,
rising professional dues and the introduction of dual designations (e.g. the CA-IT, CMA-CIPFA,
and IA-CISA designations recently introduced in Canada) are limiting the benefit offered to FIs
and discouraging further professionalization. In addition, no comparable benefit is available for
members of the internal audit community (part of the general AS group) or executives (members
of the EX group).
The Committee moreover recognizes that this situation is not unique. Other functional areas,
such as human resources and information management and information technology are also
promoting greater professionalization, yet current policy respecting memberships precludes
payment of their professional dues because professional accreditation for people working in
these fields, unlike for practicing lawyers or engineers, is not a legal requirement of their
positions. Any decision to support or extend the payment of professional dues for financial
officers and executives should take into account the potential impact on these other groups.
Accordingly, it is recommended that:
R19—Professional dues to obtain and maintain a professional designation in
accounting or audit by functional specialists and executives be paid.
5(c) Incremental funding to support departments and agencies
The Office of the Comptroller General has conducted a preliminary review of the incremental
costs likely to be incurred by departments to implement the chief financial officer model and to
produce audited financial statements and the statements of internal control. It is estimated that
there will be costs related to the greater workload, the increased calibre of staff, the training of
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managers, system modifications, and the publication of the documents. Some of these cost
increases can be accommodated within financial management budgets in departments; however,
it is expected that there will be significant incremental costs associated with these new policies.
For example, the government has provided annual incremental funding of $40 million for
departments to implement the new Policy on Internal Audit.
A source of funding must be earmarked in the fiscal framework to support departments and the
Office of the Comptroller General in the implementation of the renewed Financial Management
Policy Framework and suite of financial management policies. Funding would need to be
accessed through a Treasury Board submission with detailed cost estimates.
Accordingly, it is recommended that:
R20—The Comptroller General seek additional annual funding for departments
through a Treasury Board submission, based on detailed cost estimates and taking
account of the phased implementation schedule and possible reallocations within
departments, in order to support implementation of these new financial management
policies by departments and agencies.
5(d) Phased implementation to reduce risk and burden
Any major change initiative on the scale of the proposed new Financial Management Policy
Framework and core policies requires a careful and flexible implementation plan. The Office of
the Comptroller General will have to develop directives to support the five policies. An increased
funding envelope will have to be created. Staff in departments will have to be informed of the
changes and of the action they must take as part of the implementation. Training will be required
for all specialists and general managers involved. Departments and agencies will need time to
undertake an assessment of their situation and prepare plans. The government will require a
means to adjust the implementation of the policy to meet special circumstances in some
departments and agencies.
The Committee recognizes that full implementation will take years and that the scope of the
requirements and their timing will have to be adjusted to take account of the size, rank, and
complexity of departments and agencies. This should not be a “one-size-fits-all” approach.
Special circumstances, particularly of smaller agencies, need to be considered. Flexibility to
adapt the implementation of the core policies to the specific situations of a department or agency
should be built into the financial management policies. Approval would need to be sought from
the Treasury Board for authority for the Secretary of the Treasury Board or the Comptroller
General to introduce a phased-in implementation schedule for the framework and suite of
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financial management policies that sets out the criteria and means to vary the implementation
schedule for policy requirements in selected departments and agencies.
The Office of the Comptroller General has developed an approach that will allow
implementation to take place over several years and to be scaled in content to recognize the
varied capacities and risk profiles of departments and agencies. Departments and agencies will
be divided into three tiers, based largely on total budget, number of employees, and complexity
of operations. Tier One will include the 24 largest institutions, Tier Two, the 19 mid-size
institutions, and Tier Three, the 64 smaller departments and agencies. It is proposed that
implementation begin as soon as the policy comes into force, but that a multi-year timetable
organized by tier be established for implementing key aspects of the policy, including the
appointment of an appropriately qualified CFO, the production of audited financial statements,
the preparation of the first Statement of Internal Control (SIC) for financial reporting, and
compliance with Treasury Board Financial Systems Standards (TBFSSs). Tier-One departments,
by virtue of the magnitude of financial risk they pose and their existing financial management
capacity, will be expected to act as early adopters, while the much smaller Tier-Three entities
will be given additional time to become compliant or even have some policy requirements
modified.
Accordingly, it is recommended that:
R21—The Comptroller General develop a detailed phased implementation plan that is
sensitive to the variations in the financial management capabilities and capacities of
departments and agencies and the need for a suitable transition period. Key elements
of the plan should be issued in the form of a directive, pursuant to the suite of financial
management policies, to clearly articulate, by tier, when core elements of the policies
such as appointment of a qualified CFO and production of audited financial
statements and the first Statement of Internal Control for financial reporting will need
to be implemented in order to be compliant with the policy. Implementation plans
should also be developed for the Office of the Comptroller General itself to ensure that
organizations are properly supported in their implementation efforts and that
meaningful and timely progress can be monitored and momentum sustained,
particularly during the early stages of the plan.
R22—Approval be sought from Treasury Board to provide authority to the Secretary of
the Treasury Board or the Comptroller General to put in place a phased
implementation schedule for the framework and suite of financial management
policies that sets out the criteria and means to vary the implementation schedule for
policy requirements in selected departments and agencies.
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5(e) Removal of legislative barriers
In the course of the Committee’s deliberations, five potential areas were identified where
legislative changes to the Financial Administration Act are required to help improve financial
management and accountabilities.
1. There are legislative issues surrounding the provision of shared administrative services
between departments, as well as the delivery of program and services to the public by one
department on behalf of another. Typically in such situations, the department that has
obtained the funding and mandate from Parliament lacks the expertise and infrastructure
available in another department. It is sometimes easier to “contract out” services to third
parties than to collaborate with other departments. While departments can transfer access
to their appropriations to other departments, the mechanisms to do so are cumbersome
and limited. Moreover, the current work-around arrangements raise accountability,
human resource, and privacy issues. Legislative changes could be introduced to allow
departments to recover the costs they incur on behalf of another department and to
exchange personnel and sensitive program information, as required.
2. Government reorganizations are the prerogative of the Prime Minister. The Public
Service Rearrangement and Transfer of Duties Act provides for the timely transfer of
powers, duties, and functions of departments, as well as their staff. However,
appropriations cannot be transferred until the next available opportunity to obtain supply
(i.e. typically Supplementary Estimates). Thus, often for an extended period, the
authorities to act and to spend funds are found in two separate organizations. While
negotiated memoranda of understanding and other arrangements provide some relief, the
process again is cumbersome and does not fully resolve all issues.
3. Parliamentary appropriations are under what is commonly referred to as a modified cash
basis. One exception is that, under the Policy on Payables at Year-End (PAYE),
departments can charge costs incurred, but not yet paid, to the current fiscal year’s
appropriation. No similar provision exists to allow departments to credit revenues earned
but not yet collected to their current fiscal year’s appropriation. This distortion frustrates
the proper use of accrual information in decision making—a long-standing criticism of
the Auditor General of Canada.
4. The Financial Administration Act limits set-off procedures for collecting non-tax Crown
debts to six years or the applicable provincial limitation period. Extending this period to
ten years (i.e. consistent with the current procedure for tax debts) would improve and
harmonize collections.
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Report of the Senior Committee on the Review of the
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5. Only the Treasury Board can recommend the remission of non-tax debts and waiver of
fees to the Governor in Council. The process to obtain the necessary approvals is
burdensome and involves a requirement to prepare an order, make a Treasury Board
submission, and have the decision appear in the Canada Gazette, even when the amount
involved may be insignificant. While the current process does serve to protect ministers
from undue pressure to forgive debts, some discretion may be appropriate.
Accordingly, it is recommended that:
R23—The Treasury Board of Canada Secretariat, in consultation with the Privy
Council Office, Department of Finance Canada, Department of Justice Canada, and
affected departments and agencies, develop legislative proposals to amend the
Financial Administration Act to:
(a)
facilitate the provision of administrative and program delivery services by
one department to, and also on behalf of, another;
(b)
ensure that funding, and not just mandates and personnel, follow
machinery changes in a timely fashion;
(c)
allow accrued revenues at year-end to be credited to departmental
appropriations in the same manner that payables at year-end can be
charged to departmental appropriations;
(d)
extend the period for non-tax debt recovery and set-off to ten years; and,
(e)
provide some ministerial discretion for debt remission.
5(f) Changing the culture of public service management
Major reviews of financial management in the federal government, from the Lambert to the
Gomery commissions, have all expressed concern that senior public service executives devote
insufficient priority to management tasks. The Federal Accountability Act and the
Treasury Board’s management agenda are important steps in making the necessary changes to
the culture of public service management. The new proposed financial management policy
framework and core policies will also contribute by:
clarifying the financial management responsibilities of the deputy head and other senior
executives;
establishing the position of the CFO and an expanded role and profile for finance within
departments;
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increasing transparency through public documents such as audited and comprehensive
departmental financial statements and the Statement of Internal Control; and
strengthening oversight by the Office of the Comptroller General.
These reforms, while significant, by themselves are not enough. What are also needed are
stronger rewards for good financial management performances, both at the level of the individual
and at that of the institution. The new proposed financial management policies, the observed
quality of financial information and reporting, and internal and external audit findings will
provide the government with a timely, objective, transparent, and equitable basis to measure and
reward financial management success in a meaningful way.
5(g) Institutional rewards
Future Treasury Board decisions may lead to increased delegation of financial authorities to
departments and agencies. Discussions about increasing opportunities for carry-forward of
unspent budgets are already underway. Options to increase the use of multi-year financing are
being considered. To benefit fully from these reforms, departments would have to have good
financial management and systems in place. It would therefore be logical that one of the criteria
for allowing access by departments to these new authorities should be proof of acceptable
financial management capacity. The proposed new financial management framework and core
policies provide a relatively straightforward benchmark against which institutional performance
can be measured.
Accordingly, it is recommended that:
R24—The Treasury Board establish clear financial management criteria for the
delegation of new financial authorities for departments and agencies, and then ensure
that new delegations go only to institutions whose performance is acceptable. The
assessment of a department’s or agency’s performance could address the following:
(a)
A qualified CFO and appropriate financial management governance
structure are in place.
(b)
A qualified CAE (chief audit executive) and appropriate internal audit
structure are in place.
(c)
Acceptable statements of internal control are produced.
(d)
Unqualified and timely audited departmental financial statements are
produced.
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(e)
Internal and external audits and reviews have not identified evidence of
systemic and material financial management weaknesses.
5(h) Individual rewards
The Committee believes that it is very important that leadership and management competencies,
including those in the area of financial management, be among the competencies required of
deputy heads and senior executives. Furthermore, the Committee believes that, to emphasize this
importance, the pay-at-risk performance pay for deputies and executives must continue to
include an assessment of overall management performance.
Each year, the Secretary of the Treasury Board establishes management performance priorities of
deputy heads for communication by the Clerk. At the end of the year, the Secretary assesses
deputy head management performance and advises the Clerk.
Deputy heads should similarly set the management performance objectives, including those
relating to financial management, for their senior staff and assess their staff’s performance at
year-end.
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Annex A—Mandate
Introduction
On April 11, 2006, the Government of Canada introduced the Federal Accountability Action
Plan. Through this plan, the government is bringing forward specific measures to help strengthen
accountability and increase transparency and oversight in government operations. The Action
Plan aims to strike an appropriate balance between oversight and flexibility. The goal is to create
policy that helps ensure achievement of desired outcomes, improves accountability, and
encourages management efficiency. In the Action Plan, the government announced that it would
create a senior committee to report on ways to “streamline its management policies to replace
superfluous controls and rules.”
Mandate of the Committee
In the Federal Accountability Action Plan, the government sets out the mandate for a committee
that will review the financial management framework in the Government of Canada. It states:
We will look for ways to reduce the number of financial management policies
to clarify roles and responsibilities and institute a more coherent set of
requirements. We will mandate a committee of deputy ministers, including the
Secretary of the Treasury Board and the Comptroller General, to consult with
stakeholders and:
review and bring forward recommendations to strengthen and
streamline Treasury Board financial management policies;
identify where unnecessary or unproductive policy or legislative
requirements exist and recommend basic principles of management
accountability and transparency for the policies;
give consideration to eliminating legislative barriers and constraints;
recommend measures, including training strategies, so that the
Government has the skilled financial experts it needs to ensure
effective financial control and accountability; and
report to the President of the Treasury Board on its findings and
recommendations by December 2006.
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Scope of Activities
The committee will review the current and proposed Treasury Board financial management
policy instruments, including sections of the Financial Administration Act, and regulations they
support in order to determine whether they contribute to effective control, accountability, and
transparency while avoiding unnecessary policy or legislative requirements on federal
government departments. The goal is to have simple, clear policy instruments that promote
enhanced compliance. Accordingly, the committee will explore whether financial management
practices and processes might be streamlined to encourage compliance. With regard to the
context for this policy review, the committee will consider the impact of the new Policy on
Internal Audit and the requirement for audited departmental financial statements.
The committee will also review the proposed chief financial officer model and related capacity
development strategies to determine if they, along with the proposed financial management
policies, will enable more effective control and accountability.
The committee will recommend any required changes to the Financial Administration Act,
regulations, Treasury Board management policies, and the chief financial officer model and
related strategies to ensure effective control and accountability. It will also identify elements in
related financial or management policy areas that could be adjusted to provide positive
reinforcement for the changes to the financial management framework.
Conduct of Review
The committee will be expected to test the proposed new policy direction to confirm that
compliance with the requirements of the policy will result in a federal financial management
regime that demonstrates sound stewardship in all financial transactions. In order to fulfill its
mandate the committee will need to take into consideration related initiatives proposed by the
Federal Accountability Act and Action Plan.
The review should also look at instruments, other than “rules” to strengthen oversight of
management and accountability such as:
clear roles and responsibilities for financial management;
appropriate incentives to encourage sound comptrollership;
the use of transparency to foster effective management practice;
enhancements to existing internal management information, reporting, and information
systems to support decision making in effective financial management; and
mechanisms to assess management performance and provide built-in incentives for
continuous improvement in government-wide financial management.
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Committee of Senior Officials
The Secretary of the Treasury Board will chair the committee. The Comptroller General of
Canada will also be a member. Four other senior officials (deputy heads) have been selected to
serve on the committee based on their knowledge of the federal government financial
management accountability and control regime and their experience. To provide a private sector
perspective on financial management and accountability, two corporate chief financial officers
will also sit on the committee.
Committee Members
Chair:
Wayne G. Wouters, Secretary of the Treasury Board
Members:
Charles-Antoine St-Jean, Comptroller General of Canada
Janice Charette, Deputy Minister, Human Resources and Social Development
Richard Dicerni, Deputy Minister, Industry
Richard B. Fadden, Deputy Minister, Citizen and Immigration
L.G. Serge Gadbois, Corporate Director and former CFO, Metro Inc.,
Montréal
John D. Watson, Corporate Director and former EVP and CFO, EnCana,
Calgary
Michael Wernick, Deputy Minister, Indian Affairs and Northern Development
Secretary:
Norman Moyer, Senior Advisor, Canadian Heritage
Secretariat:
Karine Lemay, Administrative Assistant
James Roberge, Executive Director, Financial Management Analysis
Peter Ostapchuk, Financial Management Consultant, icorp.ca.inc.
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Report of the Senior Committee on the Review of the
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Annex B—Biographical Notes for Senior Committee
Members
Wayne G. Wouters
Secretary of the Treasury Board
Biographical Note
Wayne G. Wouters was born in Edam, Saskatchewan. He attended the University of
Saskatchewan, where he earned a Bachelor of Commerce (Economics). After graduation, he
studied at Queen’s University, earning a Master’s Degree in Economics.
Professional Experience
Mr. Wouters became Secretary of the Treasury Board in December 2004.
Previously, Mr. Wouters served as Deputy Minister, Human Resources and Skills
Development, and Chairperson, Canada Employment Insurance Commission.
Prior to this, he was Deputy Minister, Human Resources Development, and Chairperson,
Canada Employment Insurance Commission, and Deputy Minister of Labour.
Mr. Wouters started work in 1975 as a lecturer in economics at the University of
Saskatchewan. His public sector career began in 1977 with the Government of
Saskatchewan, where he held several positions between 1977 and 1982. His employment
with the province culminated with his position as Director, Energy Policy Branch,
Department of Mineral Resources.
In 1982, Mr. Wouters joined the federal Department of Energy, Mines and Resources, as the
Director of Industry Analysis. In 1986, he became Deputy Director General, Project and
Fiscal Analysis. In 1989, he was appointed Director General, Financial and Market Analysis.
In 1990, Mr. Wouters accepted a position as Director of the Economic Development Policy
Branch of the Department of Finance, becoming General Director in 1993.
In 1994, Mr. Wouters joined the Privy Council Office (PCO). From March to September of
that year, he was the head of the federal Task Force on the Newfoundland Economy.
Upon completion of those duties in September 1994, he became the Assistant Secretary to
the Cabinet (Program Review), where he oversaw preparation of the expenditure reduction
plan in readiness for the 1995 federal budget. In December 1994, Mr.Wouters was appointed
Deputy Secretary to the Cabinet (Plans and Consultation).
Mr. Wouters remained with the Privy Council Office until September 1997, when he was
appointed Deputy Minister of Fisheries and Oceans. In 2002, he became Deputy Minister of
Human Resources Development and, in December 2003, Deputy Minister of Human
Resources and Skills Development.
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Financial Management Framework of the Government of Canada
Charles-Antoine St-Jean, FCA
Comptroller General of Canada
Biographical Note
Charles-Antoine St-Jean was appointed Comptroller General of Canada in June 2004.
Mr. St-Jean joined Ernst & Young (then Clarkson Gordon) in 1976 and practiced public
accountancy in both Canada and Europe.
Mr. St-Jean holds a B.Adm. and a B.Com (specialization in Accounting) from the University of
Ottawa. He is also a member of the Ontario Institute of Chartered Accountants and the Ordre des
comptables agréés du Québec.
Professional Experience
In 1983, he transferred to the consulting arm of Ernst & Young and later became a partner in
both the accounting and consulting practices.
Between 1984 and 1998, Mr. St-Jean provided services to several public sector portfolio
clients, including the Canada Post Corporation, Canadian Broadcasting Corporation, and
Canada Customs and Revenue Agency.
He also worked with many federal and provincial departments. In 2000, he joined Cap
Gemini Ernst & Young as a vice-president after the worldwide merger of Ernst & Young
Consulting and Cap Gemini.
Mr. St-Jean was the Canadian Public Sector Leader for Cap Gemini Ernst & Young and a
member of its Global Public Sector network.
March 21, 2007
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Report of the Senior Committee on the Review of the
Financial Management Framework of the Government of Canada
Janice Charette
Deputy Minister, Human Resources and
Social DevelopmentBiographical Note
Janice Charette was appointed Deputy Minister of Human Resources and Social Development
and Chairperson of the Canada Employment Insurance Commission in 2006.
Professional Experience
Ms. Charette had previously held the position of Deputy Minister of Citizenship and
Immigration from 2004 to 2005.
Prior to that, she had been the Associate Deputy Minister of Health since July 2003.
Ms. Charette was also the Deputy Secretary to the Cabinet (Plans and Consultation), Privy
Council Office (PCO).
Ms. Charette was Assistant Secretary to Cabinet (Priorities and Planning) at the PCO in
2000–02, and Senior Assistant Deputy Minister for the Policy Sector at the Department of
Justice in 1999–2000.
From 1996 to 1999, Ms. Charette held a series of positions in the private sector, including
Principal in the management consulting firm of Ernst & Young and Director of the Transition
Team for the start-up of the Canada Pension Plan Investment Board.
From 1993 to 1996, she held positions with the PCO and Prime Minister’s Office, including
Executive Director of the team that coordinated the federal government’s Program Review
exercise.
Prior to 1993, Ms. Charette held policy advisor positions with the Department of Finance, the
Office of Privatization and Regulatory Affairs, and the Federal-Provincial Relations Office.
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Report of the Senior Committee on the Review of the
Financial Management Framework of the Government of Canada
Richard Dicerni
Deputy Minister, Industry
Biographical Note
Richard Dicerni holds a BA from the Université de Montréal and a Master’s in Public
Administration from the John F. Kennedy School of Government, Harvard University.
Professional Experience
Since 2006: Deputy Minister, Industry
Since December 2005: Partner, Mercer Delta Canada
1997–2005: Senior Vice President, Corporate and Environmental Affairs, Executive Vice
President and Corporate Secretary, then Acting President and Chief Executive Officer,
Ontario Power Generation Inc.
1996–97: President and Chief Executive Officer, Canadian Newspaper Association
1995–96: Deputy Minister, Education and Training, and Deputy Minister, Intergovernmental
Affairs, Government of Ontario
1992–95: Deputy Minister, Environment and Energy, Government of Ontario, and member
of the Board of Directors of Ontario Hydro
1991–92: Deputy Secretary, Public Affairs, Federal-Provincial Relations Office
1990–91: Senior Assistant Deputy Minister, Health and Welfare Canada
1981–89: Assistant Deputy Minister, Corporate Policy, then Assistant Deputy Minister,
Citizenship
1977–80: Director General, Canadian Unity Information Office
1973–77: Various Positions, Department of Employment and Immigration
1969–73: Special Assistant to the Honourable Robert Andras in the following portfolios:
Housing, Urban Affairs, Consumer and Corporate Affairs, and Employment and Immigration
March 21, 2007
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Report of the Senior Committee on the Review of the
Financial Management Framework of the Government of Canada
Richard B. Fadden
Deputy Minister, Citizenship and Immigration
Biographical Note
Richard B. Fadden holds a graduate degree in Law from the University of Ottawa, a Bachelor of
Laws from the Université de Montréal, and a Bachelor of Political Science from McGill
University.
Professional Experience
2006 to present: Deputy Minister, Citizenship and Immigration
2005–06: Deputy Minister, Natural Resources
2002–05: President, Canadian Food Inspection Agency
2000–02: Deputy Clerk of the Privy Council and Counsel and, beginning in February 2001,
assumed the additional duties of Security and Intelligence Coordinator
1998–2000: Assistant Secretary, Government Operations Sector and Infrastructure Works,
Treasury Board of Canada Secretariat
1996–98: Assistant Deputy Minister, Corporate Services, Natural Resources Canada
1992–96: Assistant Auditor General, Audit Operations, and Legal Advisor, Office of the
Auditor General of Canada
1990–92: Legal Advisor to the Auditor General, Office of the Auditor General of Canada
1988–90: Principal, Audit Operations, Office of the Auditor General of Canada
1983–88: Privy Council Officer, then Director of Policy, Security and Intelligence
Secretariat, Privy Council Office
1981–83: Executive Assistant to the Under Secretary of State for External Affairs
1977–81: Various positions with External Affairs and International Trade Canada
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Report of the Senior Committee on the Review of the
Financial Management Framework of the Government of Canada
Michael Wernick
Deputy Minister, Indian Affairs and Northern
Development
Biographical Note
Michael Wernick was appointed Deputy Minister of Indian Affairs and Northern Development in
May 2006.
He holds a BA and an MA, both in Economics, from the University of Toronto.
Professional Experience
Since joining the federal public service in 1981, Mr. Wernick has served:
from 1981 to 1991, in various positions with the Social Policy Division of the
Department of Finance, the Economic and Regional Development Policy Secretariat of
the Privy Council Office, and Consumer and Corporate Affairs Canada;
from 1991 to 1996, at the Constitutional Affairs Secretariat of the Federal-Provincial
Relations Office;
from 1996 to 2003, as Assistant Deputy Minister and then as Associate Deputy Minister
at the Department of Canadian Heritage;
from 2003 to 2006, as Deputy Secretary to the Cabinet, Plans and Consultations, at the
Privy Council Office.
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Report of the Senior Committee on the Review of the
Financial Management Framework of the Government of Canada
John D. Watson, FCA
Corporate Director and former EVP and CFO
EnCana Corporation
Biographical Note
John recently retired as Executive Vice President and Chief Financial Officer. He was a member
of the senior management team and was directly responsible for EnCana’s capital markets,
financial reporting, financial compliance, financial risk management, and internal audit, as well
as the tax and treasury functions.
John is a Fellow of the Chartered Accountants of Alberta and holds a BA from Concordia
University in Montréal, an MBA from Queen’s University in Kingston, and an ICD.D.
designation from the Institute of Corporate Directors.
Professional Experience
After graduation and prior to joining EnCana and one of its legacy companies 30 years ago,
John worked for a national investment dealer and a national public accounting firm.
He was one of the architects of the historic merger that formed EnCana and has extensive
financial experience.
John is a member of Financial Executives International, the Institute of Chartered
Accountants of Alberta, and the Institute of Chartered Accountants of Ontario.
John is a director of the UTS Energy Corporation, a member of the Audit Committee of the
Province of Alberta, Immediate Past Chair of the Calgary Police Commission, a director of
Nortel Corporation, and a recipient of the City of Calgary’s 2003 Calgary Award for
Commerce.
John also serves as Honorary Lieutenant-Colonel of the South Alberta Light Horse
Regiment.
With an enterprise value of approximately US$50 billion, EnCana is one of North America’s
leading independent oil and gas companies. It pursues predictable, reliable, profitable growth
from its portfolio of long-life resource plays situated in Canada and the United States.
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Report of the Senior Committee on the Review of the
Financial Management Framework of the Government of Canada
L.G. Serge Gadbois, FCA
Corporate Director and former CFO, Metro Inc.
Education
HEC Montréal (MBA) – Finance (1973)
Order of Chartered Accountants of Quebec (CA) (1969)
Bachelor of Commerce (1967)
Awards and Honours
Académie Perform award for financial executive of the year (2002)
Queen Elizabeth II Jubilee Medal (2002)
Fellow of the Order of Chartered Accountants of Quebec (FCA) (1995)
MBA Emeritus, HEC Montréal (1991)
Career
L.G. Serge Gadbois began his career as an auditor at various certified accountant firms, then
held the position of Treasurer with the Town of Boucherville for three years. From 1970 to
1975, he taught at the École des Hautes Études Commerciales and École Polytechnique.
In 1976, Mr. Gadbois joined the Montreal Island School Council, where he served for
eight years as comptroller and director of financial services.
In 1984, he joined Metro Inc. as the company’s comptroller, and became Vice-President,
Finance, one year later. He was appointed Senior Vice-President, Finance, in 1997, and
Treasurer in 2002.
His work included instituting many financing programs as a result of the rapid expansion of
the company.
He was also responsible for the company’s capitalization when Metro became a publicly
traded company. He supervised the procedures necessary for Metro to be listed on the stock
exchange. He also played an active role in the company’s development through the
acquisition of McMahon Pharmaceutical Distributors Inc., Super C, Steinberg, Loeb, and
A&P.
March 21, 2007
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Report of the Senior Committee on the Review of the
Financial Management Framework of the Government of Canada
Professional Membership
Ordre des comptables agréés du Québec (formerly also called Order of Chartered
Accountants of Quebec)
Association of MBAs
Financial Executives Institute (FEI)
Boards of Directors
Industrial Alliance Insurance and Financial Services Inc. (2006– )
Director and Member of the Audit Committee
Supremex Income Fund (2006– )
Chair, Board of Directors
Mecachrome International Inc. (2006– )
Director
Spectra Premium Industries Inc. (2006– )
Director
Desjardins Asset Management Inc. (2004–06)
Director and Member of the Audit Committee
Elantis, global asset management arm of Desjardins (2002–04)
Director and Member of the Audit Committee
Affiliation with education, health, and volunteer organizations
Petits Frères des Pauvres Foundation
Le chaînon (women’s shelter)
IRCM (Clinical Research Institute of Montréal)
ICCRM (International Centre for Conflict Resolution and Mediation)
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Report of the Senior Committee on the Review of the
Financial Management Framework of the Government of Canada
Annex C—Shadow Committee of the Senior Committee
on the Review of the Financial Management Framework
of the Government of Canada
Membership
Shadow Committee Members (Senior Financial Officers)
Jim Quinn
James Ralston
Kevin Lindsey
Paul Gauvin
Sherry Harrison
Sue Stimpson
Sylvie Lafontaine
Wayne Ganim
Indian and Northern Affairs Canada
Canada Revenue Agency
Industry Canada
Royal Canadian Mounted Police
Human Resources and Social Development Canada
Library of Parliament
Service Canada
Citizenship and Immigration Canada
Office of the Comptroller General
John Morgan, Assistant Comptroller General of Canada, Financial Management and Analyses
Ann Marie Sahagian, Assistant Comptroller General of Canada, Management, Capacity Building
and Community Development
Jim Van Adel, Assistant Comptroller General of Canada, Internal Audit
Gilles Vezina, Senior Director, Policy Renewal Project
Treasury Board of Canada Secretariat
David Moloney, Assistant Secretary, Expenditure Management
Wilma Vreeswijk, Advisor to the Assistant Secretary, Expenditure Management
Secretariat
Secretary, Norm Moyer, Senior Advisor, Canadian Heritage
Jim Roberge, Executive Director, Financial Management and Analysis Sector, OCG
Peter Ostapchuk, Financial Management Consultant, icorp.ca.inc.
Karine Lemay, Administrative Assistant to the Secretariat
March 21, 2007
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Report of the Senior Committee on the Review of the
Financial Management Framework of the Government of Canada
Annex D—Bibliography
Association of Canadian Financial Officers. Checks and Balances 1 (2003), 3 (2006).
Association of Professional Executives of the Public Service of Canada. Improving Financial
Management in the Government of Canada. January 2006 (unpublished).
Canada. Commission of Inquiry into the Sponsorship Program and Advertising Activities.
Restoring Accountability. Ottawa: Public Works and Government Services Canada, 2006.
Canada. Office of the Auditor General of Canada. Report of the Auditor General of Canada to
the House of Commons, April 2002, Chapter 7, “Strategies to Implement Modern
Comptrollership.” Ottawa: Office of the Auditor General of Canada, 2002.
Canada. Office of the Auditor General of Canada. Report of the Auditor General of Canada to
the House of Commons, December 2002, Chapter 5, “Financial Management and Control in
the Government of Canada.” Ottawa: Office of the Auditor General of Canada, 2002.
Canada. Office of the Auditor General of Canada. Report of the Auditor General of Canada to
the House of Commons, April 2003, Chapter 2, “Managing the Quality of Financial
Information.” Ottawa: Office of the Auditor General of Canada, 2003.
Canada. Office of the Auditor General of Canada. Report of the Auditor General of Canada to
the House of Commons, November 2003, Chapter 2, “Accountability and Ethics in
Government.” Ottawa: Office of the Auditor General of Canada, 2003.
Canada. Office of the Auditor General of Canada. Report of the Auditor General of Canada to
the House of Commons, November 2004, Chapter 1, “Internal Audit in Departments and
Agencies.” Ottawa: Office of the Auditor General of Canada, 2004.
Canada. Report of the Independent Review Panel on Modernization of Comptrollership in the
Government of Canada.
Canada. Royal Commission on Financial Management and Accountability (Allen Thomas
Lambert, Commissioner). Final Report. Ottawa: Auditor General of Canada, 1979.
Government of Canada. Federal Accountability Action Plan: Turning a New Leaf. April 2006.
Kelly, M. State of Management Practices in the Public Service of Canada: A Self Assessment.
Prepared for the Treasury Board of Canada Secretariat (unpublished). November 2003.
59
Report of the Senior Committee on the Review of the
Financial Management Framework of the Government of Canada
Milne, Janet. Strategy, Accountability and the New Role of the CFO: Modernizing Financial
Management in Government. Ottawa: Conference Board of Canada, 2006.
O’Neill, Tim. Review of Canadian Federal Fiscal Forecasting: Processes and Systems.
June 2005.
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Financial Management Policy Framework
DRAFT
E-1: Financial Management Policy Framework
(Publié aussi en français sous le titre Cadres des politiques de gestion financière)
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DRAFT
Contents
1.
Purpose......................................................................................................63
2.
Effective date.............................................................................................63
3.
Context.......................................................................................................63
4.
Structure ....................................................................................................64
5.
Financial management policies ...............................................................65
6.
Financial management directives and standards ..................................66
7.
Relationship to other Treasury Board frameworks................................66
8.
Monitoring and reporting .........................................................................67
9.
Consequences...........................................................................................67
Appendix A – Accountability Model of Selected Stakeholders in Financial
Management ..............................................................................................68
Appendix B – Expenditure Management/Financial Management..................69
Appendix C – List of Policies, Directives, Standards and Regulations........71
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Financial Management Policy Framework
1.
DRAFT
Purpose
The purpose of the Financial Management Policy Framework (FMPF) is to establish the
context and structure of financial management policies for the Government of Canada.
The FMPF also provides an overview of the financial management governance, roles and
responsibilities of key stakeholders.
This framework applies to all departments and organizations defined as departments
within the meaning of section 2 of the Financial Administration Act (FAA). The term
“deputy head” refers to deputy ministers and deputy heads of these organizations.
Throughout this framework, the terms “government-wide” and “across government” refer
to these organizations.
2.
Effective date
The Financial Management Policy Framework takes effect on XXX 1, 20XX.
3.
Context
The Treasury Board of Canada has the authority to take effective measures to ensure that
the government as a whole is managed in a coherent and effective manner. This
committee of Cabinet acts as the “management board” of the public service and issues
policies and regulations on all matters relating to general administrative policy, the
organization of the public service and financial management.
The financial management policy suite is set out in the Financial Management Policy
Framework (FMPF), which elaborates on the five financial management core policies.
The suite also includes a series of directives and standards supporting the policies.
The FMPF is consistent with the principles and commitments set out in the Management,
Resources and Results Structure Policy (MRRS), the Values and Ethics Code, and the
Risk Management Framework. The FMPF builds on the success and the direction set in
the Modern Comptrollership Initiative implemented by the Government of Canada over
the last 10 years and the subsequent development of the Management Accountability
Framework (MAF). The FMPF also directly supports the Financial Administration Act
(FAA) and its regulations, any other applicable legislation, and is consistent with the
most recent amendments to the FAA further to the adoption of the Federal Accountability
Act (FedAA).
The financial management policy suite, along with the FAA and its regulations, convey
an integrated approach to the discipline of public sector management. Applied
consistently across government, this framework fosters public service values such as
probity, prudence, equity and transparency and provides clear direction to senior
departmental managers on how to be good stewards of public resources and assets, and
assists ministers in their accountability to Parliament.
The financial management policy suite states clearly the expectations of Treasury Board.
The policy requirements are designed to put in place the mechanisms that, when
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Financial Management Policy Framework
DRAFT
implemented, will assist and support deputy heads in meeting their legal obligations
under the FAA. Deputy heads benefit from the roles and responsibilities attributed to the
CFO, which are designed to support the deputy head in discharging his or her
responsibilities. Stronger central direction and clear expectations of the Comptroller
General of Canada reinforce functional direction through the CFO model and increase the
capacity and capability of the financial community. Furthermore, deputy heads benefit
from a better understanding by program and functional assistant deputy ministers
(ADMs) of their roles and responsibility with respect to financial management.
A compelling vision of improved financial management and control across the
government is supported by an on-going review of the effectiveness of the systems of
internal control and better oversight capability by Treasury Board through better
accountability processes and mechanisms government-wide. Furthermore, improved use
of financial systems, reliable financial information, and improved reporting and
disclosures ensure that the Government of Canada is aligned with the world’s best
financial management practices.
4.
Structure
The FMPF establishes the Treasury Board financial management policy structure and
provides an overview of the financial management roles and responsibilities of deputy
heads and key offices for each policy. Appendix A illustrates some of the accountabilities
of selected stakeholders for financial management. For the purpose of the Framework
and the five core policies, the sections entitled “assistant deputy minister or equivalent”
are directed at officials reporting directly to a deputy head. In larger departments, these
officials are at the ADM level. However, a deputy head may decide that these
requirements are also applicable to other lower ranking officers reporting directly to him
or her. In smaller organizations, this section applies to officials reporting directly to the
deputy head.
A second set of Treasury Board documents, the Policy on Internal Audit and related
directives and standards, establishes the responsibilities and accountabilities for effective
internal audit. The FMPF and the Policy on Internal Audit should be read in conjunction
and with the Foundation Framework for Treasury Board Policy Instruments.
For clarity purposes, the meaning of the expressions “financial management” and
“expenditure management” is elaborated upon in Appendix B.
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Financial Management Policy Framework
5.
DRAFT
Financial management policies
The Treasury Board financial management policies set the tone and foundation for
effective financial management across government. The five core financial management
policies are:
Policy on Financial Management Governance (PFMG). It defines the financial
management capabilities and the governance responsibilities that deputy heads,
the Comptroller General of Canada, Chief Financial Officers, departmental
ADMs and financial officers are accountable for in their management of public
resources.
The PFMG outlines the key elements that must be understood and addressed by
deputy heads and their managers across the government. These responsibilities
are designed to ensure strong financial management of public resources and to
contribute to better decision-making through the development and maintenance of
human resources capabilities and capacity for financial management.
As well, the PFMG supports the establishment of an effective accountability
regime by outlining and communicating clearly the roles, responsibilities and
capabilities of the key stakeholders of financial management. The PFMG also
contributes to the strengthening of financial management across the government
by ensuring that departmental financial management organizations meet
professional standards and competency levels.
Policy on Internal Control (PIC). It defines the responsibilities of deputy heads for
the maintenance of an effective and integrated system of internal controls.
Internal control is an essential element of financial management as it facilitates
the effectiveness and efficiency of departmental programs and operations, helps
ensure the reliability of internal and external financial reporting and disclosures,
and supports compliance with laws, regulations and policies. Supporting the
deputy head in the achievement of the departmental mandate, the PIC also ensures
that the government-wide system of internal controls is effective.
Policy on Financial Resource Management (PFRM). It defines responsibilities of
deputy heads for strategic planning and budgeting, resource allocation, resource
utilization, performance management, and departmental funding of programs and
activities through appropriations and authorities.
The PFRM reaffirms the importance of the application of sound financial
management and control as an integral part of the strategic and operational
management governance regime of every department. The PRM supports sound
financial decision-making to achieve efficiency, effectiveness, and economy in
the management of public resources.
Policy on Financial Information and Reporting (PFIR). It defines the
responsibilities of deputy heads for management and control of financial
information, and requires the production of departmental financial statements in
accordance with stated accounting principles and standards.
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The PFIR ensures that departmental decision-making and reporting is supported
by integrated financial and related non-financial information that is timely,
relevant, reliable, accurate and complete. The PFIR ensures that managers can be
confident that the financial and related non-financial information at their disposal
allows them to make better-informed decisions. In addition, it provides assurance
to all users of departmental financial information that this information is reliable.
Policy on Financial Systems (PFS). It defines the responsibilities of deputy heads
for the implementation and maintenance of reliable financial systems that are in
compliance with government-wide standards and protocols.
The PFS fosters the integration of operational and functional systems and the use
of government-wide standards and protocols. It also defines the role of the
Comptroller General of Canada to approve changes to Government of Canada
financial systems.
In addition to the five core financial management policies, Treasury Board may also
approve related policies and assign responsibility for implementation and monitoring to
the Comptroller General of Canada.
6.
Financial management directives and standards
The policies set strategic level roles and responsibilities and are directed specifically at
deputy heads. Directives define the mandatory requirements with respect to specific
aspects of financial management. Standards also define mandatory requirements but are
more technical in nature and are directed at functional specialists. A list of policies,
related directives and standards, and regulations is provided in Appendix C.
Treasury Board has delegated to the Comptroller General the authority to establish and
amend financial management directives and standards.
7.
Relationship to other Treasury Board frameworks
All the policies, directives and standards under the Financial Management Policy
Framework are influenced by, and influence, other Treasury Board Secretariat and Public
Service Human Resources Management Agency of Canada policy frameworks. They
have been collectively designed to function on an integrated basis.
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8.
DRAFT
Monitoring and reporting
At the departmental level, monitoring of all the policies, directives and standards under
this framework will be effected through the:
Management Accountability Framework process;
Review of recommendations prepared by the Departmental Audit Committee;
Review of internal and external auditor reports; and
Review of the reports and management representations issued by the department;
In addition, the Comptroller General will have measures in place to monitor the adequacy
and skill capacity and capability of the financial management community across
government for all aspects of financial management.
The Comptroller General will report periodically to Treasury Board on the state of
financial management, control and reporting across government.
The Comptroller General will establish a framework to guide the evaluation of all
policies, directives and standards under this framework.
9.
Consequences
Consequences of non-compliance with this policy can include any measure allowed by
the Financial Administration Act that the Treasury Board would determine as appropriate
and acceptable in the circumstances, such as the establishment and freezing of an
allotment under section 31 of the Financial Administration Act.
Two types of consequences are applicable, institutional or personal. Institutional
consequences may involve withdrawal of delegated authorities, imposition of various
conditions, additional reporting, special audits or reviews, and request that corrective
action be taken and reported to Treasury Board. Personal consequences may involve a
range of disciplinary measures, including the withdrawal of financial authorities
delegated to managers and executives.
When corrective action is not implemented satisfactorily, the Secretary of the Treasury
Board may recommend to Treasury Board the withdrawal of spending authority or other
measures as appropriate.
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Appendix A – Accountability Model of Selected Stakeholders in
Financial Management
Minister
Chief
Audit
Executive
Deputy
Head
Independent
Audit
Committee
Chief
Financial
Officer
Comptroller
General
Legend
Accountability
Advice
Functional direction
Assurance findings
Functional guidance
NOTE: This graphic is a very general
representation of the relationships that may exist.
Several variations of this generic representation can
be found in certain departments and other entities,
reflecting specific constitutional or legislative
requirements.
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Appendix B – Expenditure Management/Financial Management
Expenditure management
The Expenditure Management System is the framework for identifying and implementing the
Government’s spending plans in support of its priorities. EMS guides decisions on government
spending and the development of expenditure plans which include priority spending, fiscal and
Budget decisions, and resource allocations for departmental programs. It also provides for
Parliamentary scrutiny and approval of these plans.
A key element of a sound EMS is the timely availability of high quality information and analysis
to support results-based management and decision-making. This is essential to assess the
performance and relevance of all spending and for making decisions on new spending proposals.
For Ministers to allocate resources effectively between new initiatives and existing programs,
new policy proposals must be well developed, accurately costed and respond to Government
priorities. New proposals must be considered in the context of existing programs, and robust
performance assessments and analyses of the efficiency, effectiveness and relevance of existing
programs must be available to decision-makers throughout the policy process. This information
must support results-based management, decision-making, and reporting.
Expenditure management comprises the many processes and components that collect and
analyze information from departments and agencies about priorities, programs and activities, and
then integrate this information in reports and documents that decision-makers use. It consists of
information on programs’ costs, expected results and evaluations of performance in terms of
objectives achieved and the efficiency and timeliness with which the objectives were achieved,
continued alignment with priorities, and optimal funding levels. This information supports
Cabinet in allocating and reallocating resources and departments and agencies in designing and
managing programs. It also provides better information to Parliament to hold government to
account on spending and results.
Expenditure management includes the governance, rules, policies, guidelines, processes and
publications on the use of the spending authorities approved by Parliament to ensure that no
more than the approved amount of funds is used for the purposes intended.
Sound financial management, including accounting practices, control and reporting, is an
essential pillar for reliable expenditure management. Proposed changes to the EMS will ensure
good management and value for money of all spending.
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Financial management
Financial management encompasses all the activities required for the sound management of all
the monetary aspects of resource management. The term “financial management” refers to a
continuum of finance-related activities undertaken to ensure prudent use of public resources in
an effective, efficient and economic manner. These activities include planning, budgeting,
accounting, reporting, internal control and oversight, analysis, costing, decision support and
advice, and the management of financial systems. Financial management’s focus is primarily to
ensure rigorous accounting, control and reporting at the departmental level.
Financial management provides the governance, rules, guidelines, processes, information,
advice, oversight and disclosure requirements necessary to protect the integrity of the public
resources management system. In addition, financial management supports three essential
requirements of modern management: transparency, accountability and control.
Transparency is ensured by full disclosure of financial information used by all key stakeholders,
from parliamentarians to Canadians in general, including central agencies and decision makers at
every level of the public service. Financial information is not limited to accounting data, but
includes aggregated information and knowledge developed and used to understand, manage and
report on the monetary aspects of any activity.
Accountability is supported through full financial disclosure and by tracking financial plans and
results at all levels, from each individual manager to departments government-wide.
Control is achieved through the implementation of a system of internal controls that provides
assurance that objectives of transparency and accountability are achieved while also ensuring
that departmental objectives and priorities are achieved.
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Financial Management Policy Framework
DRAFT
Appendix C – List of Policies, Directives, Standards and Regulations
The policies set strategic level roles and responsibilities and are directed specifically at deputy
heads. Directives define the mandatory requirements with respect to specific aspects of financial
management. Standards also define mandatory requirements but are more technical in nature
and are directed at functional specialists.
Policy on Financial Management Governance
Directive on Delegation of Authorities
Directive on the Payment of Financial Management Professional Dues
Directive on Financial Officers Competencies Profile
Directive on the Appointment of Chief Financial Officers
Policy on Internal Control
Directive on Internal Control
Expenditure
Directive on Account Verification
Directive on Acquisition Cards
Directive on Claims and Ex Gratia Payment
Directive on Commitment Control
Directive on Financial Management of Pay Administration
Directive on Contingencies
Directive on Departmental Bank Accounts
Directive on Electronic Authorization and Authentication
Directive on Period End Recording
Directive on Payment Requisitioning and Cheque Control
Directive on Travel Cards and Travellers Cheques
Revenue and receivables
Directive on Accountable Advances
Directive on Losses of Money and Offences and Other Illegal Acts Against the
Crown
Directive on Receipt, Deposit and Recording Money
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Directive on Receivables Management and Charging Interest on Overdue
Accounts
Directive on Security for Debts Due to Her Majesty
Tax management
Directive on Application of the Goods and Services Tax and the Harmonized
Sales Tax
Directive on Payment, Collection and Remittance of Provincial Sales Taxes
Other
Directive on the Use of Consolidated Revenue Fund for Crown Corporations
Directive on Financial Management of Assets and Inventories
Policy on Resource Management
Directive on Financial Planning and Budgeting
Directive on Loans and Loan Guarantees
Directive on Self-Insurance
Directive on Special Revenue Spending Authorities
Directive on Specified Purpose Accounts
Policy on Financial Information and Reporting
Treasury Board Accounting Standard XX – Accounting Manual
Treasury Board Accounting Standard 1.A – Statement of Management
Responsibility
Treasury Board Accounting Standard 1.B – Financial Statements Discussion and
Analyses
Treasury Board Accounting Standard 1.2 - Departmental and Agency Financial
Statements
Treasury Board Accounting Standard 2.2 – Materiality
Treasury Board Accounting Standard 3.1 – Capital Assets
Treasury Board Accounting Standard 3.1.1 – Software
Treasury Board Accounting Standard 3.2 - Transfer Payments (Grants and
Contributions)
Treasury Board Accounting Standard 3.3 - Prepayments
Treasury Board Accounting Standard 3.4 – Inventories
Treasury Board Accounting Standard 3.6 – Contingencies
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Policy on Financial Systems
Directive on Financial Systems
Directive on Recording of Financial Transactions in the Central Accounts
Treasury Board Financial Systems Standards
Regulations issued pursuant to the Financial Administration Act
Accountable Advances Regulations
Assignment of Crown Debt Regulations
Cheque Issue Regulations
Debt Write-Off Regulations
Destruction of Paid Instruments Regulations, 1996
Electronic Payments Regulations
Interest and Administrative Charges Regulations
Payments and Settlements Requisitioning Regulations, 1997
Payments to Estates Regulations, 1997
Receipt and Deposit of Public Money Regulations
Regulations Respecting Revenue Trust Accounts
Repayment of Receipts Regulations
Security for Debts Due to Her Majesty Regulations
Other Policies
Policy on Transfer Payments
Directive on Grants, Contributions and Repayable Contributions
Directive on Conditional Grants
Directive on Transfers to Other Levels of Government
Directive on Transfers to International Organizations
Directive on Aboriginal Transfer Payments
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Policy on Financial Management Governance
DRAFT
E-2: Policy on Financial Management
Governance
(Publié aussi en français sous le titre Politique sur la gouvernance en matière de
gestion financière)
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Policy on Financial Management Governance
DRAFT
Contents
1.
Effective date................................................................................................... 76
2.
Application....................................................................................................... 76
3.
Context............................................................................................................. 76
4.
Policy statement.............................................................................................. 77
5.
Policy requirements ........................................................................................ 77
6.
Monitoring and reporting................................................................................ 84
7.
Consequences................................................................................................. 84
8.
Enquiries.......................................................................................................... 85
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Policy on Financial Management Governance
DRAFT
1.
Effective date
1.1
This policy takes effect on XXX 1, 20XX. Upon approval of the Financial Management
Policy Framework and the related suite of financial management policies, an
implementation schedule, including full compliance instructions, will be issued.
1.2
The Policy on Financial Management Governance supersedes both the Policy on
Responsibilities and Organization for Comptrollership, dated February 22, 1996, and the
guidance on Financial Management and Accountability in Departments and Agencies
(updated March 8, 1991).
2.
Application
This policy applies to all departments and organizations defined as departments within
the meaning of section 2 of the Financial Administration Act (FAA). Throughout this
policy, the terms “government-wide” and “across government” refer to these
organizations.
3.
Context
3.1
The financial management policy suite is summarized in the Financial Management
Policy Framework (FMPF), which includes five financial management core policies, and
a series of directives and standards supporting the policies. The FMPF establishes the
Treasury Board financial management policy structure and provides an overview of the
financial management roles and responsibilities of deputy heads and key officials for
each policy.
3.2
The financial management policy suite, along with the FAA and its regulations, convey
an integrated approach to the discipline of public sector management. Applied
consistently across government, this framework will foster public service values such as
probity, prudence, equity and transparency and provide clear direction to senior
departmental managers on how to be good stewards of public resources and assets, and
assist ministers in their accountability to Parliament.
3.3
The Policy on Financial Management Governance is one of the five core policies of the
Financial Management Policy Framework (FMPF). This policy outlines the general
responsibilities of deputy heads and other stakeholders for effective financial
management capabilities and the management of the financial function.
3.4
This policy sets the minimum responsibilities with respect to financial management
governance and capabilities. These responsibilities are designed to ensure strong financial
management of public resources, reinforce the principles of probity and prudence, and
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contribute to better decision-making through the development and maintenance of human
resources capabilities and capacity for financial management.
3.5
At the departmental level, this policy provides deputy heads with a clear outline of what
they can expect of their Chief Financial Officer and senior departmental managers.
3.6
This policy should be read in conjunction with the Policy on Internal Audit and the other
four core policies under the FMPF. Further contextual information is included in the
FMPF and in the Foundation Framework for Treasury Board Policies.
3.7
This policy is issued pursuant to section 7 of the Financial Administration Act.
4.
Policy statement
4.1
Objective
The objective of this policy is to define the roles and responsibilities for financial
management governance that deputy heads, the Comptroller General of Canada, Chief
Financial Officers, and senior departmental managers must exercise and be accountable
for the stewardship, management and oversight of public resources.
4.2
Results
The expected results of this policy is a better understanding by all key stakeholders of
their roles and responsibilities for financial management and a reinforcement of the
principles of probity and prudence. This policy will lead to strengthened financial
management across government and better decision-making at all levels.
5.
Policy requirements
5.1
Deputy head – The deputy head:
5.1.1
Sets the tone from the top, by demonstrating financial responsibility,
transparency, accountability, and ethical conduct in financial and resources
management;
5.1.2
Manages the department and departmental programs in compliance with
legislation, regulations and Treasury Board policies and within financial
authorities;
5.1.3
Assumes overall stewardship responsibilities for the integrity of the department’s
financial management capabilities, and their capacity to meet the needs of the
department and the government;
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5.1.4 Ensures the strategic planning process gives due consideration to financial risks
and sustainability, governance, resource allocation and performance monitoring;
5.1.5
Establishes a sound financial management governance structure that fosters
prudent stewardship of public resources in the delivery of the mandate of the
organization, consistent with the Management, Resources and Results Structure
(MRRS) and the Management Accountability Framework (MAF);
5.1.6
Approves and signs off on all key external financial management representations
and disclosures, including:
x
Memoranda to Cabinet;
x
Treasury Board funding submissions;
x
Annual Statement on Internal Control;
x
Departmental financial statements, including:
Statement of Management Responsibility; and
Financial Statements Discussion and Analyses;
5.1.7
5.1.8
Appoints and removes the Chief Financial Officer of his or her department and
ensures that:
x
The Comptroller General, or his/her representative, is a member of the
selection committee;
x
The appointed Chief Financial Officer meets all the requirements of the
Directive on the Appointment of Chief Financial Officers; and
x
Where, because of the size and capacity limitations of the department, he
or she cannot appoint a Chief Financial Officer that meets the
requirements of the directive, requests a Chief Financial Officer of another
department be designated to act as his or her Chief Financial Officer, with
the concurrence of the appropriate deputy head and the Comptroller
General of Canada in compliance with their respective legislative
mandates, program and financial authorities and Privacy Act requirements.
In consultation with the Comptroller General of Canada,
x
Establishes clear responsibilities and performance expectations of the
Chief Financial Officer;
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5.2
5.3
DRAFT
x
Undertakes the periodic performance evaluation of the Chief Financial
Officer;
x
Consults the Comptroller General of Canada on the classification and level
of the position of Chief Financial Officer of the department; and
x
Must discuss with the Comptroller General of Canada any situation where
the deputy head does not accept the advice offered by the Chief Financial
Officer in relation to a course of action proposed or undertaken by the
deputy head and which, in the opinion of the Chief Financial Officer, is
expected to create undue financial risk or control exposure for the
department, or will violate either the spirit or the letter of the financial
requirements of any legislation, regulation or policy. When the deputy
head and the Comptroller General cannot agree on a course of action, the
matter will be referred to the Secretary of Treasury Board Secretariat.
Departmental Audit Committee – The Departmental Audit Committee:
5.2.1
Acts as an independent and objective advisor to the deputy head;
5.2.2
Provides guidance and assurance to the deputy head on the adequacy of the
department's control, financial reporting and disclosures.
Comptroller General of Canada – The Comptroller General:
5.3.1
Provides government-wide functional direction and assurance for financial
management and stewardship over public resources, as assigned by the Treasury
Board, in collaboration with other central agencies and the Receiver General for
Canada;
5.3.2
Promotes strong government-wide financial management and internal control,
provides oversight of government-wide financial information systems, provides
direction for the preparation of departmental and government-wide financial
statements and Public Accounts in collaboration with the Receiver General for
Canada;
5.3.3
Acts as the authority on financial management policies, directives and standards
for the Government of Canada and provides ongoing support and direction to
Chief Financial Officers;
5.3.4 Oversees and communicates a financial management policy framework in support
of effective government-wide and departmental financial management and
stewardship;
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5.3.5 Monitors government-wide compliance with Treasury Board policies for effective
financial management, and reports periodically to Treasury Board on the state of
financial management, control and reporting across government;
5.4
5.3.6
Provides guidance on the financial management framework applicable to
departments and agencies of the Government of Canada and for the periodic
assessment of departmental financial management performance;
5.3.7
Sets knowledge and certification standards for departmental Chief Financial
Officers and financial management across departments;
5.3.8
Develops and implements, in collaboration with the Canada School of Public
Service, a government-wide core learning strategy on financial management for
all public servants involved with the management of resources;
5.3.9
Provides functional leadership and supports the development of sustainable
capacity of the financial management community across government.
Chief Financial Officer – The Chief Financial Officer:
5.4.1
5.4.2
Supports the deputy head in the achievement of his/her mandate as:
x
The most senior departmental executive in charge of financial
management reporting to the deputy head;
x
An objective strategic advisor for business and financial management;
x
The key steward with respect to relevant legislation, regulations, policy,
directives and standards related to financial management;
x
A senior departmental executive providing him or her with an independent
recommendation on all funding initiatives and resource allocations
requiring the deputy head’s approval; and
x
The lead departmental executive for all aspects of financial management,
program financing, and financial reporting and disclosure with central
agencies and other stakeholders;
Supports the deputy head for overall stewardship responsibilities for the integrity
of the department’s financial management culture and capabilities, and their
capacity to meet the needs of the department;
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5.4.3
Develops, communicates and maintains the departmental financial management
framework, and provides leadership and oversight on the proper application and
monitoring of financial management across the department;
5.4.4
Leads the financial component of the departmental planning process on behalf of
the deputy head, and in collaboration with the Executive Management Team,
assesses principal business risks and financial resource implications of options
and policy alternatives, and their impact on the department’s financial position;
5.4.5
Signs the following financial management representations and disclosures,
including:
x
Annual Chief Financial Officer Statement on Internal Control;
x
Departmental financial statements, including
Statement of Management Responsibility;
Financial Statements Discussion and Analyses;
5.4.6
Provides the deputy head with assurance that processes are in place to ensure the
effectiveness of departmental financial management;
5.4.7
Establishes and communicates clear responsibilities for holders of positions with
delegated financial and contracting authorities, and monitors adherence to these
responsibilities;
5.4.8
Provides a challenge function on financial management matters and use of public
resources across the department;
5.4.9
Signs off on all financial and related reports and disclosures of the department
requiring approval of the deputy head, for submission and reporting to central
agencies, the Receiver General, and Parliament;
5.4.10 Advises the deputy head to follow an alternate course of action in the event the
deputy head is proposing or undertaking an action that is expected to create undue
financial risk or control exposure for the department, or will violate either the
spirit or the form of the financial requirements of any legislation, regulation or
policy:
x
In the event the deputy head does not accept the recommendation of the
Chief Financial Officer, the Chief Financial Officer must seek the advice
of the Comptroller General of Canada on an appropriate course of action;
and
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Policy on Financial Management Governance
x
DRAFT
If the deputy head does not accept the recommendation offered by the
Chief Financial Officer after his or her consultation with the Comptroller
General, the Chief Financial Officer must request that the deputy head
seek the advice of the Comptroller General of Canada;
5.4.11 Provides functional guidance, direction and advice to managers across the
department on matters of financial management;
5.4.12 Maintains financial management services that meet the needs of the department
and managers at every level, maintains financial management service standards
and reports thereupon to stakeholders;
5.4.13 Provides functional leadership and direction to the financial management
community of the department;
5.4.14 Seeks clarification, as required and for accountability purposes, on the scope of
the management and accounting entity or entities under his or her purview;
5.4.15 Is the primary contact point with the Office of the Comptroller General of Canada
and the Treasury Board Secretariat on all departmental financial resource
management matters, including all departmental financial information
preparation, reporting and disclosure matters;
5.4.16 Unless an exemption has been granted by the Comptroller General of Canada, is
an employee of the department, on secondment or a participant in an exchange
program, or a Chief Financial Officer.
5.5
Assistant deputy minister or Equivalent – The assistant deputy minister or equivalent:
5.5.1
Exercises his or her financial management authorities, responsibilities, and
accountabilities, manages financial resources entrusted to him or her in a prudent
manner, complies with legislation, regulations, Treasury Board policies, directives
and standards, and ensures that delegated financial and other authorities are
respected in his or her organization;
5.5.2
Signs the annual Assistant Deputy Minister or Equivalent Statement on Internal
Control;
5.5.3
Ensures that his or her staff understand the departmental financial management
framework applicable to them, exercises his or her financial management
authorities and responsibilities, is properly trained in effective financial
management, and takes appropriate action to correct undesirable performance;
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5.5.4 Considers alternative business models for delivery of programs, with appropriate
analysis of financial risks, controls, sustainability and benefits associated with
each;
5.6
5.5.5
Seeks the advice and support of the Chief Financial Officer on the development
and maintenance of an effective financial management, risk and control
framework over programs, and on the integration of financial and related non
financial information;
5.5.6
Seeks the advice and support of the Chief Financial Officer to carry out the duties
of his or her position in financial management, control, and financial reporting
and disclosures.
Financial officer – The Financial officer:
5.6.1 Understands and exercises his or her financial management authorities,
responsibilities and accountabilities;
5.6.2
Exercises with integrity, probity and professionalism the authorities delegated to
him or her and the specific responsibilities assigned;
5.6.3 Supports managers in the exercise of their authorities and responsibilities;
5.6.4 Supports the Chief Financial Officer in the exercise of his or her authorities and
responsibilities for departmental financial management;
5.6.5 Provides assurance on the appropriateness of the design of risk and control
framework of programs;
5.6.6 Provides decision-support advice and analysis to managers in the development of
new programs or reallocation of resources initiative;
5.6.7
Actively seeks to obtain and maintain relevant professional credentials and when
necessary accounting designations, unless otherwise exempted by the Chief
Financial Officer in accordance with the Directive on the Competency Profile of
Financial Officers;
5.6.8
Supports the development of a strong financial management culture throughout
the department by actively seeking opportunities to assist managers in the
business of financial management of their programs and operations.
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5.7
DRAFT
Other
Payment of professional dues
Subject to criteria outlined in the Directive on the Payment of Financial Management
Professional Dues, professional dues to obtain and maintain a professional designation in
accounting, audit, finance and financial management disciplines are paid by the
department.
6.
Monitoring and reporting
6.1
At the departmental level, monitoring of this policy will be effected through the:
Management Accountability Framework process;
Review of recommendations prepared by the Departmental Audit Committee;
Review of internal and external auditor reports; and
Review of the reports and management representations issued by the department.
6.2
In addition, the Comptroller General will have measures in place to monitor the
adequacy, skill capacity and capability of the financial management community across
government for all aspects of financial management.
6.3
The Comptroller General will report periodically to Treasury Board on the state of
financial management, control and reporting across government.
6.4
The Comptroller General will establish an evaluation framework for this policy.
7.
Consequences
7.1
Consequences of non-compliance with this policy can include any measure allowed by
the Financial Administration Act that the Treasury Board would determine as appropriate
and acceptable in the circumstances, such as the establishment and freezing of an
allotment under section 31 of the Financial Administration Act.
7.2
Two types of consequences are applicable, institutional or personal. Institutional
consequences may involve withdrawal of delegated authorities, imposition of various
conditions, additional reporting, special audits or reviews, and the request that corrective
action be taken and reported to Treasury Board. Personal consequences may involve a
range of disciplinary measures, including the withdrawal of financial authorities
delegated to managers and executives.
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7.3
When corrective action is not implemented satisfactorily, the Secretary of Treasury Board
may recommend to Treasury Board the withdrawal of spending authority or other
measures as appropriate.
8.
Enquiries
Please send any questions about this policy to:
Assistant Comptroller General
Financial Management and Analysis Sector
Office of the Comptroller General
300 Laurier Avenue West Ottawa ON K1A 0R5
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Policy on Internal Control
DRAFT
E-3: Policy on Internal Control
(Publié aussi en français sous le titre Politique sur le contrôle interne)
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Contents
1.
Effective date.............................................................................................88
2.
Application ................................................................................................88
3.
Context.......................................................................................................88
4.
Policy statement........................................................................................89
5.
Policy requirements..................................................................................89
6.
Monitoring and reporting .........................................................................93
7.
Consequences...........................................................................................94
8.
Enquiries....................................................................................................94
Appendix A – Definitions..................................................................................95
Appendix B – Pro forma Statement on Internal Control ................................97
B.1 – Pro forma Annual Deputy Head Statement on
Internal Control (DH SIC) ..........................................................99
B.2 – Pro forma annual Chief Financial Officer Statement on
Internal Control (CFO SIC)......................................................103
B.3 – Pro forma Annual Assistant Deputy Minister or
Equivalent Statement on Internal Control (ADM SIC) ..........107
Appendix C – Types of Evidence for the Annual Statement on Internal
Control .....................................................................................................111
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1.
Effective date
1.1
This policy takes effect on XXX 1, 20XX. Upon approval of the Financial Management
Policy Framework and the related suite of financial management policies, an
implementation schedule, including full compliance instructions, will be issued.
1.2
In relation to the disclosure of the annual Statement on Internal Control (SIC), references
to the “system of internal control” are limited to the system of internal control over
financial reporting only.
2.
Application
This policy applies to all departments and organizations defined as departments within
the meaning of section 2 of the Financial Administration Act. Throughout this policy, the
terms “government-wide” and “across government” refer to these organizations.
3.
Context
3.1
The financial management policy suite is summarized in the Financial Management
Policy Framework (FMPF), which includes five financial management core policies, and
a series of directives and standards supporting the policies. The FMPF establishes the
Treasury Board financial management policy structure and provides an overview of the
financial management roles and responsibilities of deputy heads and key officials for
each policy.
3.2
The financial management policy suite, along with the FAA and its regulations, convey
an integrated approach to the discipline of public sector management. Applied
consistently across government, this framework fosters public service values such as
probity, prudence, equity and transparency and provides clear direction to senior
departmental managers on how to be good stewards of public resources and assets, and
assist ministers in their accountability to Parliament.
3.3
The Policy on Internal Control is one of the five core policies of the Financial
Management Policy Framework (FMPF). This policy outlines the responsibilities of
deputy heads, the Comptroller General of Canada, Chief Financial Officers and senior
departmental managers with respect to the maintenance of an effective and integrated
system of internal control.
3.4
Internal control is an essential element of financial management. An effective system of
internal control provides reasonable assurance that operations are conducted prudently,
efficiently and effectively, in compliance with relevant laws, regulations and policies, and
that results and outcomes are achieved.
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3.5
At the departmental level, this policy will support the deputy heads in their role as
Accounting Officers. They will be provided with assurance that the effectiveness of the
system of internal control is monitored across their organization and that weaknesses are
identified and addressed. Government-wide, this policy provides a solid monitoring tool
and ensures that adequate direction and guidance are provided by the Comptroller
General.
3.6
This policy is consistent with existing related TB policies, such as those related to IT
controls. It is also consistent with the internal control practices recommended by
professional associations and bodies from both the private and public sectors.
3.7
This policy should be read in conjunction with the Policy on Internal Audit and the other
four core policies under the FMPF. The policies under the Policy Framework for Assets
and Acquired Services should be consulted as well. Further contextual information is
included in the FMPF and in the Foundation Framework for Treasury Board Policies.
3.8
This policy is issued pursuant to section 7 of the Financial Administration Act.
4.
Policy statement
4.1
Objective
The objective of this policy is to define the roles and responsibilities for internal control
management that deputy heads, the Comptroller General of Canada, Chief Financial
Officers, and senior departmental managers must exercise and be accountable for in the
stewardship, management, and oversight of public resources.
4.2
Result
The expected result of this policy is a clear understanding by all key stakeholders of their
responsibilities with respect to internal control.
5.
Policy requirements
5.1
General
Disclosure and reporting - Annual Statement on Internal Control (SIC):
5.1.1
Every deputy head will provide to his or her responsible Minister or applicable
oversight body, the Secretary of the Treasury Board Secretariat, and the
Comptroller General of Canada, an annual departmental Statement on Internal
Control. The Statement on Internal Control will be provided within 90 days after
the end of the fiscal year and will be published annually;
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5.1.2
The annual departmental Statement on Internal Control will consist of at least all
of the elements included in the pro forma Statement on Internal Control outlined
in Appendix B-1;
5.1.3
The Comptroller General of Canada will provide to Treasury Board an annual
government-wide Statement on Internal Control that will also be published
annually.
Deputy head – The deputy head:
5.2.1
Is responsible for the establishment, maintenance and ongoing monitoring of a
system of internal control that mitigates risk to ensure the achievement of
departmental objectives;
5.2.2
Obtains assurance that the system of internal control ensures that financial
information is reliable, departmental assets are safeguarded, and that transactions
are processed in accordance with the Financial Administration Act, regulations
and Treasury Board policy, are within Parliamentary and delegated authorities,
and are properly recorded;
5.2.3
Obtains, within 90 days after the appointment of a new minister, the approval of
all departmental delegated authorities;
5.2.4
Reviews the effectiveness of the system of internal control and the annual
departmental Statement on Internal Control with the Departmental Audit
Committee (Appendix B.1 – Pro forma Statement on Internal Control);
5.2.5
Obtains assurance that appropriate evidence is gathered, maintained and used to
support the review process described in the annual departmental Statement on
Internal Control as outlined in Appendix C – Types of Evidence for the Annual
Statement on Internal Control;
5.2.6
Ensures that appropriate timely action is taken to address significant internal
control issues and deficiencies.
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5.4
DRAFT
Comptroller General - The Comptroller General of Canada:
5.3.1
Issues guidance on the system of internal control applicable to departments of the
Government of Canada;
5.3.2
Oversees the effectiveness of the system of internal control across government by
reviewing departmental Statements on Internal Control, internal and external
audit reports, and horizontal or special audits commissioned by the Comptroller
General of Canada;
5.3.3
Monitors that appropriate action is taken to address significant internal control
issues and deficiencies across government that have been identified through the
review of Statements on Internal Control, audit reports or other information.
Chief Financial Officer – The Chief Financial Officer:
5.4.1
Establishes and maintains a system of internal control over financial management,
financial information systems, records, and reporting, including all financial
internal controls across the department, and ensures that this system is based on
effective management of financial risks;
5.4.2
Provides guidance and exercises oversight on the proper application and
monitoring of the system of internal control over financial management across the
department;
5.4.3
Provides assurance to the deputy head that the system of internal control over
financial management is effective and ensures that financial information is
reliable, fairly presented, and complete in all material respects, that assets are
safeguarded, and that transactions are executed in accordance with the Financial
Administration Act, regulations and Treasury Board policy, are within
Parliamentary authorities, and properly recorded;
5.4.4
Obtains assurance on the effectiveness of the system of internal control over
financial management from external and common financial management service
providers for outsourced services, or from participating entities or departments in
joint or shared projects or horizontal initiatives;
5.4.5
Provides the deputy head and the Departmental Audit Committee with an annual
Chief Financial Officer Statement on Internal Control, which includes the
elements included in the pro forma Statement on Internal Control outlined in
Appendix B-2, along with assurance of the following:
x
The system of internal control over financial management across the
department mitigates financial risk to an appropriately agreed upon extent;
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5.4.6
5.5
DRAFT
x
The control objectives and performance expectations are communicated to
all appropriate officers and used to design efficient controls to mitigate
identified risks;
x
Financial plans and programs are revised to take into account changes in
the environment;
x
Financial resources are allocated or reallocated within approved plans and
priorities;
x
Financial decisions are made by those authorized to make them;
x
Financial resources are safeguarded against material loss due to waste,
abuse, mismanagement, errors, fraud, omissions and other irregularities;
x
Relevant laws, regulations, policies, directives and standards with respect
to financial management controls are adhered to;
x
Decision-makers receive relevant, reliable and timely financial and related
non-financial information to measure performance;
x
Actions from financial decisions are monitored to ensure achievement of
intended purposes; and
x
Appropriate actions are taken to correct undesirable performance of
financial internal controls;
Gathers and maintains evidence to support the annual Chief Financial Officer
Statement on Internal Control.
Assistant deputy minister or Equivalent – The assistant deputy minister or equivalent:
5.5.1
Is responsible for establishing a system of internal control that is consistent with
guidance on internal control provided by the Chief Financial Officer over the
operations for which he or she is accountable for;
5.5.2
Provides the deputy head, the Chief Financial Officer, and the Chief Audit
Executive with an annual Assistant Deputy Minister or Equivalent Statement on
Internal Control that includes the elements outlined in the pro forma Assistant
Deputy Minister or Equivalent Statement on Internal Control (see Appendix B-3),
along with assurance of the following:
x
Applicable laws, regulations, Treasury Board policies, directives and
standards are adhered to;
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DRAFT
x
Control objectives and performance expectations, as communicated to all
individuals within their area of responsibility, are used to guide the design
and operation of effective controls to mitigate identified risks;
x
Financial plans and programs are revised to take into account changes in
the environment;
x
Financial resources are allocated or reallocated within approved plans and
priorities;
x
Internal and external risks, including financial risks, to which his or her
area of responsibility is exposed, are reviewed on an on-going basis and
controls are implemented to mitigate these risks;
x
Processes and systems controls, as implemented across his or her area of
responsibility, are documented;
x
Managers understand their responsibilities and accountabilities with
respect to internal control and financial management;
x
Resources for which he or she is accountable are safeguarded against
material loss due to waste, abuse, mismanagement, errors, fraud,
omissions and other irregularities;
x
Reliable and comprehensive systems are in place to monitor the financial
performance and continued effectiveness of controls;
x
Actions from financial decisions are monitored to ensure achievement of
intended purposes; and
x
Appropriate action is taken to correct undesirable performance of financial
internal controls;
Gathers and maintains evidence to support the Assistant Deputy Minister or
Equivalent Statement on Internal Control.
6.
Monitoring and reporting
6.1
At the departmental level, monitoring of this policy will be accomplished through the:
Management Accountability Framework process;
Review of recommendations prepared by the Departmental Audit Committee;
Review of internal and external auditor reports; and
Review of the reports and management representations issued by the department.
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6.2
In addition, the Comptroller General will have measures in place to monitor the adequacy
and skill capacity and capability of the financial management community across
government for all aspects of financial management.
6.3
The Comptroller General will report periodically to Treasury Board on the state of
financial management, control and reporting across government.
6.4
The Comptroller General will establish an evaluation framework for this policy.
7.
Consequences
7.1
Consequences of non-compliance of this policy can include any measure allowed by the
Financial Administration Act that the Treasury Board would determine as appropriate
and acceptable in the circumstances, such as the establishment and freezing of an
allotment under section 31 of the Financial Administration Act.
7.2
Two types of consequences are applicable, institutional or personal. Institutional
consequences may involve withdrawal of delegated authorities, imposition of various
conditions, additional reporting, special audits or reviews, and a request that corrective
action be taken and reported to Treasury Board. Personal consequences may involve a
range of disciplinary measures, including the withdrawal of financial authorities
delegated to managers and executives.
7.3
When corrective action is not implemented satisfactorily, the Secretary of the Treasury
Board may recommend to Treasury Board the withdrawal of spending authority or other
measures as appropriate.
8.
Enquiries
Please send any questions about this policy to:
Assistant Comptroller General
Financial Management and Analysis Sector
Office of the Comptroller General
300 Laurier Avenue West
Ottawa ON K1A 0R5
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Appendix A – Definitions
Accountability (responsabilisation) – Is the obligation to render an account, and accept
responsibility for, one’s actions, both in terms of the results obtained and the means used. To be
held accountable, an individual must be provided with the authority, resources and responsibility
for a task, activity or result. It is important to note that authority and responsibility can be
delegated, but accountability cannot.
Authority (pouvoir) – Is the power to make certain decisions and/or perform certain tasks within
defined limits.
Control (contrôle) – the exercise of power and authority; control starts with a manager’s will to
exercise authority, and to be accountable, to administer, and to intervene. Control is also defined
as any action taken by management and other parties to manage risk and increase the likelihood
that established objectives and goals will be achieved.
Control framework (cadre de contrôle) – Is a systematic method to categorize controls and the
basis for a document outlining the departmental system of internal control as implemented.
Treasury Board recognizes that a suitable control framework based upon best-practices is
Enterprise Risk Management (ERM) – Integrated Framework, which includes Internal Control –
Integrated Framework. These documents have been collectively developed and maintained by
the Committee of Sponsoring Organizations (COSO), as recognized by the Risk Management
and Governance Board of the Canadian Institute of Chartered Accountants (CICA).
Control framework(s) for information technology (IT) in relation to internal control over
financial reporting (Cadre(s) de contrôle pour la technologie de l’information (TI) relativement
au contrôle interne exercé sur les rapports financiers ) – Is a suitable control framework for
information technology (IT) in relation to departmental internal controls over financial reporting
and access security processes. Treasury Board recognizes that such IT frameworks should
include at least:
ƒ
CobiT (Control Objectives for Information and related Technology) for IT control
objectives embedded in financial and information systems; and
ƒ
Government Security Policy (GSP), including Treasury Board related IT control
policies, as approved by Treasury Board.
Internal control (contrôle interne) – Is broadly defined as a process designed to provide
reasonable assurance regarding the achievement of objectives in the following categories:
ƒ
Effectiveness and efficiency of operations;
ƒ
Reliability of financial and related non-financial reporting and disclosures;
ƒ
Compliance with applicable laws, regulations, and policies.
Responsibility (responsibilité) – Responsibility identifies the field within which a public office
holder (whether elected or unelected) can act; it is defined by the specific authority given to an
office holder (by law or delegation).
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Risk management (gestion des risques) – Is a process applied in the formulation of strategic
direction, designed to identify potential events that may affect the entity and its ability to meet
and accomplish its objectives and expected results. Risk management includes steps and actions
to counteract the potential risk factors.
Statement on Internal Control (SIC) (Énoncé sur le contrôle interne [ECI]) – Is a summary
certified by the deputy head describing the manner in which the department maintains a sound
system of internal control on financial reporting that supports the achievement of the
department's policies, objectives, mandate, and results. The Statement also outlines how the
deputy head, along with the departmental Audit Committee and the Chief Financial Officer,
regularly reviews the effectiveness of that system.
System of Internal Control (système de contôle interne) – Is a set of internal controls that
constitutes a process to mitigate risk, over departmental resources, systems, procedures, culture,
structure and tasks, and the achievement of expected results and outcomes.
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Appendix B – Pro forma Statement on Internal Control
Deputy heads are required to make an annual Statement on Internal Control (SIC), published in
accordance with this pro forma minimum requirement relating to internal control over financial
reporting.
The term “internal control over financial reporting” means a process designed to provide
reasonable assurance regarding the reliability of financial information and statements prepared
for internal and external purposes. This process is designed to:
a) Ensure the maintenance of records that fairly reflect all financial transactions of the
department;
b) Provide reasonable assurance that transactions are recorded to permit preparation of
internal and external financial information and statements in accordance with TB
policies and standards, and that receipts and expenditures of the department are being
made in accordance with delegated authorities; and
c) Provide reasonable assurance that unauthorized transactions that could have a
material effect on internal financial information and the annual or periodic external
financial statements are prevented or detected in a timely manner.
To sign a SIC, deputy heads require evidence based assurance on the maintenance and review of
the system of internal control over financial reporting across the department. Such evidence and
assurance are obtained from assistant deputy ministers (ADMs) or equivalents across the
department and the Chief Financial Officer (CFO) in the form of annual ADM SICs within their
purview of responsibility and CFO SIC, along with the annual holistic opinion from the Chief
Audit Executive. Where the deputy head has changed during the period covered by the SIC, or between
the end of the period and the date of signature, the deputy head in place on the date of signature is the
person who should sign the SIC.
In providing such assurance, Chief Financial Officers must follow the Directive on Internal
Control, and each of the deputy head, ADM and CFO SICs must cover the accounting period and
the period up to the date of sign off.
ADM SICs and the CFO SIC require that designated ADMs or Equivalents across the
department as well as the CFO report annually at the financial year end, and if required on an
interim basis, on the work they have performed to mitigate financial risk and to ensure that
internal control over financial reporting procedures are effective and appropriate to
circumstances.
The Statement of Internal Control also describes how personnel are trained to mitigate risk, and
includes a confirmation that it has been reviewed by the Departmental Audit Committee. In
addition, disclosure is required in relation to any significant internal control issues or
deficiencies.
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In this pro forma Statement of Internal Control:
a) Text in normal script must be replicated in every SIC;
b) Text in italic script provides additional guidance on the information that needs to be
added to the SIC.
Three pro forma SICs follows. Each is applicable to the deputy head (B-1), the CFO (B-2), and
ADMs or Equivalents (B-3) respectively.
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B.1 – Pro forma Annual Deputy Head Statement on Internal Control
(DH SIC)
Deputy Head Statement on Internal Control
Scope of responsibility
As deputy head, I have responsibility for maintaining a sound system of internal control over
financial reporting that supports the achievement of [Department/Agency] objectives, mandate
and results, while safeguarding public resources and departmental assets, in accordance with the
responsibilities assigned to me by legislation, regulations, and policy. (Deputy heads should add
to this paragraph an explanation of the accountability arrangements surrounding their role. In
particular, they should comment on:
a)
Processes in place by which they inform ministers [or appropriate oversight
body], on risk mitigation and the maintenance of internal controls over financial
reporting; and
b)
Mechanisms in place to obtain assurance on the review of the effectiveness of
internal control over financial reporting where the department:
x
obtains services from any external service entities;
x
has initiated a new program or venture during the fiscal year; or
x
has a material interest in shared horizontal initiatives.
The purpose of the system of internal control
The system of internal control over financial reporting is designed to mitigate risk to a
reasonable level rather than to eliminate all risk of failure to achieve objectives, mandate and
results. It can therefore only provide reasonable and not absolute assurance of effectiveness. The
system of internal control over financial reporting is based upon an ongoing process designed to
identify and prioritize risks and the controls effected to mitigate risks in the achievement of
departmental objectives, mandate and results. The system of internal control over financial
reporting has been in place in [Department/Agency] for the year ended 31 March 200X and up to
the signing of the departmental financial statements, in accordance with Treasury Board
guidance.
Capacity to mitigate risk
[Describe the key elements in which:
The risk management process is implemented;
Staff are trained or equipped to mitigate risk through the management of controls
appropriate to their authority and duties. Include comments on the guidance
provided to them and the manner in which you seek to learn from good practices.]
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The risk and control framework
[Describe the key elements of the risk management strategy, including the way in which risk (or
change in risk) is identified, evaluated and controlled. Include mention of how risk priorities are
determined and the control framework applied.
Describe the manner in which internal control over financial reporting is embedded in the
activity of the department, including mention of the system of internal control over financial
reporting.
Describe the manner, and any limitations, in which risk management is embedded when relying
upon or participating with external service entities and/or horizontal initiatives, including
mention of the review, or the obtaining of credible assurance, of the effectiveness of such
internal controls over financial reporting.
Only those departments to which this section is relevant should insert the following:
Describe the key elements of the manner in which public stakeholders are involved in the
management of risks that impact on them, including any reference to systems of internal control
over financial reporting.]
Review of effectiveness
As deputy head, I have responsibility for reviewing the effectiveness of the system of internal
control over financial reporting. My review is informed by the work and evidence of the internal
auditors, the Chief Financial Officer, and assistant deputy ministers or equivalents.
I have been advised on the implications of the result of my review of the effectiveness of the
system of internal control over financial reporting by the Departmental Audit Committee and a
plan and timeline to address issues or deficiencies and ensure continuous improvement of the
system is in place.
[Describe the process that has been applied in maintaining and reviewing the effectiveness of the
system of internal control over financial reporting and the role of:
The Departmental Audit Committee – role and process;
The Chief Audit Executive and internal audit, respecting the annual CAE holistic
opinion on the effectiveness and adequacy of risk management and control – role
and process;
The Chief Financial Officer, respecting the CFO Statement on Internal Control –
role and process;
Assistant deputy minister or Equivalent, respecting their ADM Statement on
Internal Control within their purview of responsibility – role and process;
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External auditors, evaluators, and other review parties for other explicit review /
assurance mechanisms that provide appropriate evidence, such as auditor reports,
evaluations, special Assessments, etc. – role and process;
[External service providers or horizontal government initiative departments as
appropriate associated with the department]; and
The Risk Committee (if one exists) and/or risk managers (if relevant) – role and
process.
Include an outline of the actions taken or proposed to deal with any significant internal control
over financial reporting issues or deficiencies and with any undesirable performance respecting
financial management controls, if applicable.
Factors that may be helpful in deciding whether a particular issue or deficiency falls into this
category include:
The issue prevented achievement of a Performance Agreement target;
The issue has resulted in a need to seek additional funding from Treasury Board
to allow it to be resolved, or has resulted in significant diversion of resources
from another aspect of the department;
The external auditor regards it as having a material impact on the financial
statements and Public Accounts;
The Departmental Audit Committee advises it should be considered significant;
The Chief Audit Executive reports on it as significant in the annual CAE holistic
opinion on the departmental risk management, control and governance processes;
The Chief Financial Officer reports on it as significant in their CFO Statement on
Internal Control;
Assistant deputy ministers or Equivalents report on it as significant in their ADM
Statement on Internal Control within their purview of responsibility; and
the issue has harmed the reputation of the department.
When material changes have been made in the year, they should be reported in the SIC, to reflect
changes to risk mitigation. If an element of the internal control over financial reporting
management process has been absent for a material period of time in the year, a department will
only be able to make a qualified SIC for the relevant period.]
Establishment of new departments/agencies and machinery of government changes
(if applicable)
[When new departments/agencies are established or restructured as part of a machinery change,
there will be an impact on the SIC for the entities concerned. The SIC should identify how the
effectiveness of the internal controls over financial reporting has been maintained.
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In circumstances when all the elements of risk management and the system of internal control
over financial reporting have not been in place for the whole of the first accounting period:
The SIC should give a brief explanation of how the department/agency has come
into existence, including reference to any responsibilities inherited from other
bodies, and should set out a timetable to implement key elements of the risk
management and the system of internal control over financial reporting; and
Subsequent SICs should refer to progress against that timetable, particularly
explaining any material delays against plan.]
________________________________
Deputy head
________________
Date
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B.2 – Pro forma annual Chief Financial Officer Statement on Internal
Control (CFO SIC)
Chief Financial Officer Statement on Internal Control
Scope of responsibility
As Chief Financial Officer of [Department / Agency], I am aware that you are required to
provide an assurance on the system of internal control over financial reporting across the
department to enable you to sign the departmental Statement on Internal Control (SIC) in relation
to the annual departmental financial statements and other external reporting for which you are
directly responsible.
As Chief Financial Officer of [Department/Agency], I have responsibility for maintaining a
sound system of internal control over financial management across the department that supports
the achievement of [the Department’s/Agency’s] objectives, mandate and results. At the same
time, I have responsibility for safeguarding public resources and departmental assets, in
accordance with the responsibilities assigned to me by legislation, regulations, and policy.
(Chief Financial Officers should add to this paragraph an explanation of the accountability
arrangements surrounding their role. In particular, they should comment on:
a)
Processes in place by which I inform the deputy head, assistant deputy ministers
or equivalents, and the Chief Audit Executive on risk mitigation and the
maintenance of internal controls over financial reporting; and
b)
Mechanisms in place to obtain assurance on the review of the effectiveness of
internal control over financial reporting where the department:
x
obtains services from any external service entities;
x
has initiated a new program or venture during the fiscal year; or
x
has a material interest in shared horizontal initiatives.
The Purpose of the system of internal control
The system of internal control over financial reporting is designed to mitigate risk to a
reasonable level rather than to eliminate all risk of failure to achieve objectives, mandate and
results. It can therefore only provide reasonable and not absolute assurance of effectiveness. The
system of internal control over financial reporting is based upon an ongoing process designed to
identify and prioritize risks and the controls effected to mitigate risks in the achievement of
departmental objectives, mandate and results. The system of internal control over financial
reporting has been in place in [Department/Agency] for the year ending 31 March 200X and up
to the signing of the departmental financial statements, in accordance with Treasury Board
guidance.
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Capacity to mitigate risk
[Describe the manner in which:
Leadership is shown with regard to the risk management process as it is
implemented within your area of responsibility;
Staff across the department are trained or equipped to mitigate risk through the
management of controls appropriate to their authority and duties. Include
comments on guidance provided to staff and the manner in which you seek to
learn from good practices.]
The risk and control framework
[Describe the key elements of the risk management strategy across the department, including the
way in which risk (or change in risk) is identified, evaluated, and controlled. Include mention of
how risk priorities are determined and how suitable internal controls are applied. Describe the
manner in which control is embedded in the activity of the department, including mention of the
system of internal control over financial reporting.
Describe the manner (if applicable), and any limitations, in which risk management is
implemented when relying upon external service entities or participating in horizontal initiatives.
Describe as well how credible assurance of the effectiveness of internal control over financial
reporting is obtained for such arrangements.
Only those Chief Financial Officers to whom this section is relevant should insert it:
Describe the key elements of the manner in which public stakeholders are
involved in the management of risks that impact on them, including any reference
to systems of internal control over financial reporting.
When required: I have also received appropriate assurances from external service
providers or horizontal government initiative departments associated with the
Department.]
Review of effectiveness
To assist you and the Departmental Audit Committee in the SIC review process, I can confirm
that I have a process in place to review the effectiveness of the system of internal control over
financial reporting across the department, in accordance with guidance set out in the Directive on
Internal Control.
[Following text to be modified as appropriate]Having undertaken that review, I can confirm the
system of internal control over financial reporting across the department has been, and is
effective. There are, in my opinion, no significant issues or deficiencies arising that would
require to be raised specifically in your Deputy Head Statement on Internal Control;
OR
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I would draw your attention to the following matters, which you may wish to consider when
preparing the assurance you are required to give in your Deputy Head Statement on Internal
Control:
[Include an outline of the actions taken, or proposed to deal with any significant internal control
over financial reporting issues or deficiencies, if applicable.]
Factors that may be helpful in deciding whether a particular issue or deficiency falls into this
category include:
The issue prevented achievement of a Performance Agreement target;
The issue has resulted in a need to seek additional funding from Treasury Board
to allow it to be resolved, or has resulted in significant diversion of resources
from another aspect of the department;
The external auditor regards it as having a material impact on the financial
statements and Public Accounts;
The Departmental Audit Committee advises the issue should be considered
significant;
The Chief Audit Executive reports on the issue as significant, for this purpose, in
the annual holistic opinion on the departmental risk management, control and
governance processes; and
The issue harmed the reputation of the department.
When material changes have been made in the course of the year, they should be reflected in the
CFO SIC, to reflect changes to risk mitigation. If an element of internal control over financial
reporting across the department has not been in place for a significant amount of time during the
year, it should be reported as such in the CFO SIC.
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Establishment of new programs/branches/functions, and machinery of government
changes (if applicable)
When new departments/agencies/programs/branches/functions/policy areas are established or
restructured as part of a machinery change, there will be an impact on the CFO Statement on
Internal Control for the areas concerned. The CFO SIC should identify how internal controls
over financial reporting have been maintained.
In circumstances when all the elements of risk management and the system of internal control
over financial reporting have not been in place for the whole of the first accounting period:
The CFO SIC should give a brief explanation of how the department/agency/
program/function/policy area has come into existence, including reference to any
responsibilities inherited from other bodies, and set out a timetable to implement
key elements of the risk management and the system of internal control over
financial reporting; and
Subsequent CFO SICs should refer to progress against that timetable, particularly
explaining any material delays against plan.
_________________________________________
Chief Financial Officer
______________________
Date
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B.3 – Pro forma Annual Assistant Deputy Minister or Equivalent
Statement on Internal Control (ADM SIC)
Assistant Deputy Minister or Equivalent Statement on Internal Control
Scope of responsibility
As assistant deputy minister or equivalent of [XX], I am aware that you are required to provide
an assurance on the system of internal control over financial reporting across the department to
enable you to sign the departmental Statement on Internal Control (SIC) in relation to the annual
departmental financial statements and other external reporting for which you are directly
responsible.
As assistant deputy minister or equivalent of [XX], I have responsibility for maintaining a sound
system of internal control over financial reporting within my purview of responsibility that
supports the achievement of [XX’s] objectives, mandate and results. At the same time, I have
responsibility for safeguarding public resources and departmental assets within my purview of
responsibility, in accordance with the responsibilities assigned to me by legislation, regulations,
and policy. (Assistant deputy ministers or equivalents should add to this paragraph an
explanation of the accountability arrangements surrounding their role. In particular, they
should comment on:
a)
Processes in place by which I inform and work with the Chief Financial Officer
and other ADMs or Equivalents on risk mitigation and the maintenance of internal
controls over financial reporting; and
b)
Mechanisms in place to obtain assurance on the review of the effectiveness of
internal control over financial reporting where the department:
x
obtains services from any external service entities;
x
has initiated a new program or venture during the fiscal year; or
x
has a material interest in shared horizontal initiatives.
The purpose of the system of internal control
The system of internal control over financial reporting is designed to mitigate risk to a
reasonable level rather than to eliminate all risk of failure to achieve objectives, mandate and
results. It can therefore only provide reasonable and not absolute assurance of effectiveness. The
system of internal control over financial reporting is based upon an ongoing process designed to
identify and prioritize risks and the controls effected to mitigate risks in the achievement of
departmental objectives, mandate and results. The system of internal control over financial
reporting has been in place in [Department/Agency] for the year ending 31 March 200X and up
to the date of the signing of the departmental financial statements, in accordance with Treasury
Board guidance.
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Capacity to mitigate risk
[Describe the manner in which:
Leadership is shown with regard to the risk management process as it is
implemented within your area of responsibility;
Staff within your area of responsibility are trained or equipped to mitigate risk
through the management of controls appropriate to their authority and duties.
Include comments on guidance provided to them and the manner in which you
seek to learn from good practices.]
The risk and control framework
[Describe the key elements of the risk management strategy within your purview of
responsibility, including the way in which risk (or change in risk) is identified, evaluated, and
controlled. Include mention of how risk priorities are determined and how suitable internal
controls are applied.
Describe the manner in which control is implemented in your area of responsibility, including
mention of the system of internal control over financial reporting.
Describe the manner (if applicable), and any limitations, in which risk management is
implemented when relying upon external service entities or participating in horizontal initiatives.
Describe as well how credible assurance of the effectiveness of internal control over financial
reporting is obtained for such arrangements.
Only those programs/functions/policy areas to which this section is relevant should insert it:
Describe the key elements of how public stakeholders are involved in the
management of risks that have an impact on them, including any reference to
systems of internal control over financial reporting.
When required: I have also received appropriate assurances from external service providers or
horizontal government initiative departments associated with my areas of responsibility.]
Review of effectiveness
To assist you, the Chief Financial Officer, and the Departmental Audit Committee in the SIC
review process, I can confirm that upon guidance from the Chief Financial Officer and the
Directive on Internal Control, I have a process in place to review the effectiveness of the system
of internal control over financial reporting within my area of responsibility.
[Following text to be modified as appropriate]Having undertaken that review, I can confirm the
system of internal control over financial reporting across the department has been, and is
effective. There are, in my opinion, no significant issues or deficiencies arising that would
require to be raised specifically in your Deputy Head Statement on Internal Control;
OR
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I would draw your attention to the following matters, which you may wish to consider when
preparing the assurance you are required to give in your Deputy Head Statement on Internal
Control:
[Include an outline of the actions taken, or proposed to deal with any significant internal
control over financial reporting issues or deficiencies, if applicable.]
ADMs or Equivalents will need to exercise judgement in deciding whether a particular issue
should be regarded as falling into this category. Factors that may be helpful in exercising that
judgement include:
The issue prevented achievement of a Performance Agreement target;
The issue has resulted in a need to seek additional funding from Treasury Board
to allow it to be resolved, or has resulted in significant diversion of resources
from another aspect of the department;
The external auditor regards this issue as having a material impact on the financial
statements and Public Accounts;
The Departmental Audit Committee advises the issue should be considered
significant;
The Chief Audit Executive reports the issue as significant in the annual holistic
opinion on the departmental risk management, control and governance processes;
The Chief Financial Officer reports the issue as significant in the CFO Statement
on Internal Control; and
the issue has harmed the reputation of the department.
When material changes have been made in the course of the year, they should be reflected in the
ADM SIC, to reflect changes to risk mitigation. If an element of internal control over financial
reporting within your area of responsibility has been not been in place for a significant amount
of time during the year, it should be reported as such in the ADM SIC.
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Establishment of new programs/branches/functions, and machinery of government
changes (if applicable)
When new departments/agencies/programs/branches/functions/policy areas are established or
restructured as part of a machinery change, there will be an impact on the Assistant deputy
minister or Equivalent Statement on Internal Control for the areas concerned. The ADM SIC
should identify how internal controls over financial reporting have been maintained.
In circumstances when all the elements of risk management and the system of internal control
over financial reporting have not been in place for the whole of the first accounting period:
The ADM SIC should give a brief explanation of how the department/agency/
program/function/policy area has come into existence, including reference to any
responsibilities inherited from other bodies, and set out a timetable to implement
key elements of the risk management and the system of internal control over
financial reporting; and
subsequent ADM SICs should refer to progress against that timetable, particularly
explaining any material delays against plan.
________________________________________
Assistant Deputy Minister of Equivalent
________________________
Date
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Appendix C – Types of Evidence for the Annual Statement on Internal
Control
An ongoing process exists for identifying, evaluating and managing significant risks
based upon evidence;
Responsibility for the system of internal control over financial reporting and reviewing
its effectiveness;
Summarize the process applied in reviewing the effectiveness of internal controls over
financial reporting; and
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Other Appropriate Evidence and
Documentation, such as evaluations, special
audits and/or assessments, etc.
Assistant Deputy Minister or Equivalent –
SIC for internal control over financial
reporting within their area of responsibility
Chief Financial Officer – SIC for internal
control over financial reporting
Chief Audit Executive – Various audits and
annual holistic opinion on effectiveness and
adequacy of risk management and control
Departmental Audit Committee – Review of
risk management and management
frameworks matters
Confirm actions taken to remedy significant failings or weaknesses.
Types of Evidence and Documentation
Deputy head Statements
The following represents appropriate types of evidence gathered from the review of the
effectiveness of the system of internal control over financial reporting, to inform the deputy head
and the Departmental Audit Committee for disclosures in the Annual Statement on Internal
Control (SIC).
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Policy on Financial Resource Management
DRAFT
E-4: Policy on Financial Resource Management
(Publié aussi en français sous le titre Politique sur la gestion financière des
ressources)
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Contents
1.
Effective date................................................................................................. 114
2.
Application..................................................................................................... 114
3.
Context........................................................................................................... 114
4.
Policy statement............................................................................................ 115
5.
Policy requirements ...................................................................................... 115
6.
Monitoring and Reporting ............................................................................ 119
7.
Consequences............................................................................................... 120
8.
Enquiries........................................................................................................ 120
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Policy on Financial Resource Management
1.
DRAFT
Effective date
This policy takes effect on April 1, 20XX. Upon approval of the Financial Management
Policy Framework and the related suite of financial management policies, an
implementation schedule, including full compliance instructions, will be issued.
2.
Application
This policy applies to all departments and organizations defined as departments within
the meaning of section 2 of the Financial Administration Act. Throughout this policy, the
terms “government-wide” and “across government” refer to these organizations.
3.
Context
3.1
The financial management policy suite is summarized in the Financial Management
Policy Framework (FMPF), which includes five financial management core policies, and
a series of directives and standards supporting the policies. The FMPF establishes the
Treasury Board financial management policy structure and provides an overview of the
financial management roles and responsibilities of deputy heads and key officials for
each policy.
3.2
The financial management policy suite, along with the FAA and its regulations, convey
an integrated approach to the discipline of public sector management. Applied
consistently across government, this framework fosters public service values such as
probity, prudence, equity and transparency and provides clear direction to senior
departmental managers on how to be good stewards of public resources and assets, and
assist Ministers in their accountability to Parliament.
3.3
The Policy on Financial Resource Management is one of the five core policies of the
Financial Management Policy Framework (FMPF). This policy outlines the
responsibilities of deputy heads, the Comptroller General of Canada, Chief Financial
Officers, and senior departmental managers for prudent and effective resource
management stewardship.
3.4
This policy reaffirms the importance of sound financial management as an integral part of
the strategic and operational management of every department, with its support of the use
and stewardship of public resources in a prudent, efficient and economic manner. Sound
financial management, which brings rigorous attention to revenue, expenditure, asset and
liability management, is essential for achieving optimum value from public resources.
3.5
At the departmental level, this policy requires that deputy heads be provided with
assurance that effective, efficient, and economical processes are in place to manage
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departmental resources. This policy also requires that all managers have the information
and analyses they need to make sound decisions.
3.6
Government-wide, the clarification of the role of Chief Financial Officer (CFO) and
senior departmental managers in resource management should contribute to strengthened
accountability for the management of public resources and better decision-making.
3.7
This policy is consistent with existing related TB policies. It is also consistent with the
resource management stewardship practices advocated by professional associations and
bodies from both the private and public sectors.
3.8
This policy should be read in conjunction with the Policy on Internal Audit and the other
four core policies under the FMPF. Further contextual information is included in the
FMPF and in the Foundation Framework for Treasury Board Policies.
3.9
This policy is issued pursuant to section 7 of the Financial Administration Act.
4.
Policy statement
4.1
Objective
The objective of this policy is to define the roles and responsibilities for resource
management that deputy heads, the Comptroller General of Canada, Chief Financial
Officers, and senior departmental managers must exercise and be accountable for in the
stewardship, management and oversight of public resources.
4.2
Result
The expected result of this policy is a clear understanding by all key stakeholders of their
stewardship responsibilities for resource management, strengthened resource
management across the government and better decision-making at all levels.
5.
Policy requirements
5.1
Deputy head – The deputy head:
5.1.1
Sets the tone from the top and is responsible for effective resource management
consistent with the expectations set out in the Management Accountability
Framework (MAF), and in accordance with legal authorities and Treasury Board
direction;
5.1.2
Provides strategic direction through an effective resource management
governance structure for the alignment of resources, program activities and results
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as articulated in the departmental Management, Resources and Results Structure
(MRRS) and Program Activity Architecture (PAA);
5.2
5.1.3
Obtains assurance from the Chief Financial Officer that the system of budget
allocation and control is effective and timely, and that operational budgets are
aligned with the departmental plans and strategy;
5.1.4
Monitors financial and resource utilization and performance, and ensures that
resource allocation or reallocation decisions are implemented on a timely basis;
5.1.5
Reviews and approves, on the recommendation of the Chief Financial Officer,
departmental resource funding plans and any major allocation and reallocation
decisions.
Comptroller General – The Comptroller General of Canada:
5.2.1
Provides functional leadership and support to Chief Financial Officers in carrying
out their financial resource management and stewardship responsibilities;
5.2.2
Upon request of the Clerk of the Privy Council, or the Secretary of Treasury
Board, provides advice on the proposed use of financial resources for government
initiatives and other strategic transactions, and confirms that:
5.2.3
x
Financial strategies are aligned with the strategic direction of the
government;
x
Relevant laws, regulations, Treasury Board policies, directives and
standards are adhered to with respect to financial management;
x
Significant management risks are identified and risk mitigation strategies
are reasonable in the circumstances;
x
Stewardship measures and processes are in place to achieve results, and
sustain capacities;
x
Assumptions are clear, reasonable and relevant, and financial projections
and costs are reasonable in the circumstances; and
x
Financial and non-financial performance measurement strategies, and
related measures are appropriate to monitor progress in achieving planned
results;
Develops and communicates recommended practices for financial resource
management and stewardship.
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5.3
DRAFT
Chief Financial Officer – The Chief Financial Officer:
5.3.1
Supports the deputy head in the resource management and stewardship, with
specific responsibilities for department-wide financial resource and risk
management;
5.3.2
Contributes to, or leads at the request of the deputy head, the resource allocation
or reallocation process, including the monitoring of decisions and implementation
progress;
5.3.3
Provides assurance to the deputy head on all departmental funding initiatives and
submissions requiring his or her approval, and confirms that:
x
Financial strategies are aligned with the strategic direction of the
department;
x
Significant management risks are identified and risk mitigation strategies
are reasonable in the circumstances; and
x
Assumptions are clear, reasonable and relevant, and financial projections
and costs are reasonable in the circumstances;
in addition, for funding proposals submitted for Treasury Board approval,
confirms that:
x
Relevant laws, regulations, Treasury Board policies, directives and
standards are adhered to with respect to financial management;
x
Stewardship measures and processes are in place to achieve results and
sustain capacities; and
x
Financial and related non-financial performance measurement strategy,
and related measures, are appropriate to monitor progress in achieving
planned results;
5.3.4
Ensures that financial transactions, including contingent liabilities, are recorded
and tracked in accordance with the departmental Program Activity Architecture
and applicable legislative and policy requirements;
5.3.5
Ensures that departmental financial resource utilization information, and related
reports and disclosures are prepared in a timely manner, are fair and reviewed
regularly with the deputy head and senior departmental managers;
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5.4
DRAFT
5.3.6
Ensures that departmental financial agreements and arrangements are supported
by a clear definition of the cost of resource inputs and outputs, consistent with
relevant laws, regulations, and Treasury Board policy, directives and guidance;
5.3.7
Advises the deputy head on the financial risks and implications associated with
proposals and submissions from assistant deputy ministers or equivalents for
major initiatives, expansions or contractions of programs, operations, or both
across the department;
5.3.8
Provides advice to managers across the department in the development of new
funding or program initiatives, significant reallocation of financial resources,
financial reporting disclosures, financial risk mitigation approaches, internal
controls, and financial performance monitoring.
Assistant deputy minister or Equivalent – Assistant deputy minister or Equivalent:
5.4.1
Is responsible for the management and stewardship of resources for which he or
she is accountable and ensures that financial resource planning, budgeting and
related decisions are supported by sound analyses and information, based upon a
fair assessment of financial risk, costing and variances;
5.4.2
Provides assurance to the deputy head that the funding initiatives and submissions
for which he or she is responsible meet the following:
x
Financial strategies are aligned with departmental strategic direction,
stakeholder expectations and sustainable financial conditions;
x
Financial risks inherent in the strategic plan and resource allocation
mechanisms are identified and controlled, and appropriate financial
aspects of the business continuity plan are in place; and
x
Assumptions are valid and relevant, financial projections and costs are
reasonable, and appropriate resource management information is timely
and available to the deputy head and managers to monitor progress against
the strategic plan;
in addition, for funding proposals submitted for Treasury Board approval,
confirms that:
x
Relevant laws, regulations, Treasury Board policies, directives and
standards are adhered to with respect to financial management;
x
Sound financial strategies are in place to reach the business strategy
objective as are stewardship processes to achieve results; and
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x
DRAFT
Specific financial performance measures and targets are appropriate to
judge progress in achieving the strategy and planned results;
5.4.3
Ensures that operational plans and budgets are aligned with the departmental
strategic plan, and that rigorous financial management and budgetary controls are
exercised;
5.4.4
Ensures that costs involved in achieving program objectives are determined, that
financial and related non financial information is used to carry out his or her
managerial responsibilities, and that measures are taken, on a best effort basis, to
ensure that his or her program activities are properly resourced;
5.4.5
Seeks advice, on a timely basis, from the Chief Financial Officer in the
development of new funding or program initiatives, significant reallocation of
financial resources, financial reporting disclosures, financial risks mitigation
approaches, internal controls, costing and financial performance monitoring;
5.4.6
Approves all funding initiatives and submissions for which he or she is
responsible prior to submission to the Chief Financial Officer for recommendation
and to the deputy head for approval;
5.4.7
Monitors, safeguards and accounts for all resources used in his or her operations
and programs, using the approved departmental financial system.
6.
Monitoring and Reporting
6.1
At the departmental level, monitoring of this policy will be carried out through the:
Management Accountability Framework (MAF) process;
Review of recommendations prepared by the Departmental Audit Committee;
Review of internal and external auditor reports; and
Review of the reports and management representations issued by the department.
6.2
In addition, the Comptroller General will have measures in place to monitor the adequacy
and skill capacity and capability of the financial management community across
government for all aspects of financial management.
6.3
The Comptroller General will report periodically to Treasury Board on the state of
financial management, control, and reporting across government.
6.4
The Comptroller General will establish a framework to guide the evaluation of the Policy.
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7.
Consequences
7.1
Consequences of non-compliance of this policy can include any measure allowed by the
Financial Administration Act that the Treasury Board would determine as appropriate
and acceptable in the circumstances, such as the establishment and freezing of an
allotment under section 31 of the Financial Administration Act.
7.2
Two types of consequences are applicable, institutional or personal. Institutional
consequences may involve withdrawal of delegated authorities, imposition of various
conditions, additional reporting, special audits or reviews, and a request that corrective
action be taken and reported to Treasury Board. Personal consequences may involve a
range of disciplinary measures, including the withdrawal of financial authorities
delegated to Managers and Executives.
7.3
When corrective action is not implemented satisfactorily, the Secretary of Treasury Board
may recommend to Treasury Board the withdrawal of spending authority or other
measures as appropriate.
8.
Enquiries
Please send any questions about this policy to:
Assistant Comptroller General
Financial Management and Analysis Sector
Office of the Comptroller General
300 Laurier Avenue West
Ottawa ON K1A 0R5
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Policy on Financial Information and Reporting
DRAFT
E-5: Policy on Financial Information and
Reporting
(Publié aussi en français sous le titre Politique sur l’information et les rapports
financiers)
2007-03-21
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Contents
1.
Effective date................................................................................................. 123
2.
Application..................................................................................................... 123
3.
Context........................................................................................................... 123
4.
Policy statement............................................................................................ 125
5.
Policy requirements ...................................................................................... 125
6.
Monitoring and reporting.............................................................................. 129
7.
Consequences............................................................................................... 130
8.
Enquiries........................................................................................................ 130
Appendix – Definitions ......................................................................................... 131
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1.
Effective date
1.1
This policy takes effect on XXX 1, 20XX. Upon approval of the Financial Management
Policy Framework and the related suite of financial management policies, an
implementation schedule, including full compliance instructions, will be issued.
1.2
The Policy on Financial Information and Reporting supersedes Treasury Board
Accounting Standard (TBAS) 1.1 - Policy and Principles (dated September 21, 1999).
1.3
For year-end occurring after April 1, 20XX, unless an exemption has been granted by the
President of the Treasury Board, the annual departmental financial statements will be
audited and accompanied by an independent audit opinion report.
2.
Application
This policy applies to all departments and organizations defined as departments within
the meaning of section 2 of the Financial Administration Act. Throughout this policy, the
terms “government-wide” and “across government” refer to these organizations.
3.
Context
3.1
The financial management policy suite is summarized in the Financial Management
Policy Framework (FMPF), which includes five financial management core policies and
a series of directives and standards supporting the policies. The FMPF establishes the
Treasury Board financial management policy structure and provides an overview of the
financial management roles and responsibilities of deputy heads and key officials for
each policy.
3.2
The financial management policy suite, along with the FAA and its regulations, convey
an integrated approach to the discipline of public sector management. Applied
consistently across government, this framework fosters public service values such as
probity, prudence, equity and transparency and provides clear direction to senior
departmental managers on how to be good stewards of public resources and assets, and
assist ministers in their accountability to Parliament.
3.3
The Policy on Financial Information and Reporting is one of the five core policies of the
Financial Management Policy Framework. This policy outlines the responsibilities of
deputy heads, the Comptroller General of Canada, Chief Financial Officers, and senior
departmental managers with respect to the management of integrated financial and
related non-financial information, and the production of departmental financial
statements and public accounts disclosures.
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3.4
This policy ensures that departmental decision-making and reporting is supported by
integrated financial and related non-financial information that is fairly presented in all
material respects, and is timely, relevant, reliable, and complete.
3.5
This policy sets out the requirements for use of Treasury Board Accounting Standards
(TBAS) of the Government of Canada in relation to generally accepted accounting
principles and reporting standards for financial statements and reporting disclosures.
3.6
At the departmental level, this policy ensures that deputy heads are provided with
assurance that departmental accounting processes meet the government’s accounting
standards and that departmental managers have access to reliable financial and related
non-financial information they need to manage effectively.
3.7
The preparation and publication of departmental audited financial statements will result
in more reliable financial information for managers government-wide, Parliamentarians,
and Canadians in general. Stronger support for the development of common data and
financial information infrastructure improves information management across all
departments and agencies.
3.8
This policy is consistent with the Policy Framework for Information and Technology,
which states that information is a strategic business resource to support decision-making
and management activities, policy development, program and service delivery, evidential
needs, and for historical purposes.
3.9
For purposes of this policy, all references to the expression “financial information”
include both financial and related non-financial information. “Financial information” is
any data, information and knowledge used in understanding, managing, and reporting
upon the monetary aspects of any activity. “Related non-financial information” is any
data, information and knowledge contributing to the understanding, managing and
reporting upon, of financial information.
3.10
This policy should be read in conjunction with the Policy on Internal Audit and the other
four core policies under the FMPF. Further contextual information is included in the
FMPF and in the Foundation Framework for Treasury Board Policies.
3.11
This policy is issued pursuant to section 7 and subsection 9(1) of the Financial
Administration Act.
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4.
Policy statement
4.1
Objective
DRAFT
The objective of this policy is to define the roles and responsibilities for financial
information management and reporting that deputy heads, the Comptroller General of
Canada, Chief Financial Officers, and senior departmental managers must exercise and
be accountable for in the stewardship, management and oversight of public resources.
4.2
Results
The expected results of this policy is a clear understanding by all key stakeholders of
their financial information management and reporting responsibilities across government,
and fair and timely presentation of financial information.
5.
Policy requirements
5.1
General
Accounting standards – Treasury Board Accounting Standards:
5.1.1
Treasury Board Accounting Standards (TBAS) apply to all departments. They
are issued under authority of the Financial Administration Act subsection 9(1) and
based on Canadian generally accepted accounting principles and public sector
guidelines as defined in the Canadian Institute of Chartered Accountants Public
Sector Accounting (PSA) Handbook, unless otherwise directed by Treasury
Board;
5.1.2
When a specific financial statement item is not found in TBAS, the Chief
Financial Officer will exercise professional judgement to adopt accounting
policies and disclosures that are consistent with TBAS and the public sector
generally accepted accounting principles hierarchy enunciated in the PSA
Handbook. When the issue is material, the Chief Financial Officer will obtain
advice from the Comptroller General of Canada prior to adoption.
Financial reporting and disclosures – Published financial statements and disclosures:
5.1.3
Every deputy head will provide annually to his or her responsible Minister or
oversight body, the Secretary of Treasury Board, and the Comptroller General of
Canada, a complete set of financial statements that:
x
Provides an accounting of the nature and extent of the activities of the
department, describes the department’s financial position and the results of
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operations, changes in cash flow and equity of Canada, and discloses
whether the resources entrusted in the department were administered in
accordance with legislative authorities;
5.1.4
5.2
x
Fairly presents in all material respects the financial position, results of
operations and changes in cash flows of the department prepared in
accordance with Treasury Board accounting standards;
x
For fiscal years beginning on or after April 1, 20XX, unless an exemption
has been granted by the President of the Treasury Board, is audited and
accompanied by the report of the independent external auditor on the
departmental financial statements;
x
Includes a Statement of Management Responsibility, accompanied by a
Financial Statements Discussion and Analyses (FSD&A);
x
Will be delivered within 90 days after the end of the fiscal year and will be
published annually in the respective Departmental Performance Report;
Where it could reasonably be expected that the accounting treatment of a
transaction could lead to a material misstatement, an inappropriate application of
authorities or a qualification in the external audit report, the Chief Financial
Officer must seek advice in writing from the Comptroller General of Canada;
x
when the Comptroller General does not agree with the proposed
accounting treatment of material transactions, the Comptroller General
must inform in writing the deputy head of the disagreement, as well as the
President and the Secretary of Treasury Board Secretariat;
x
in exceptional circumstances, the Comptroller General may request an
advance audit opinion from the Auditor General of Canada.
Deputy head – The deputy head:
5.2.1
Is responsible for the fair presentation in all material respects of departmental
financial information, reporting and disclosures, in accordance with Treasury
Board policy and standards, as well as statutory requirements;
5.2.2
Reviews and approves the departmental financial information and reporting
strategy developed by the Chief Financial Officer, in accordance with Treasury
Board Secretariat and Comptroller General of Canada guidance, and the
Management Resources and Results Structure (MRRS) policy;
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5.2.3
Obtains assurance from the Chief Financial Officer that the financial information
included in Memoranda to Cabinet and Treasury Board submissions is fairly
presented in all material respects to enable informed decisions by ministers;
5.2.4
Causes a set of accounts to be maintained and managed effectively to provide a
centralized record of the department’s financial transactions, in accordance with
Treasury Board policy and standards, and the department’s approved Program
Activity Architecture (PAA);
5.2.5
Approves, on the recommendation of the Chief Financial Officer and the
Departmental Audit Committee, the departmental annual financial statements.
Comptroller General – The Comptroller General:
5.3.1
Provides functional support to Treasury Board, deputy heads, and Chief Financial
Officers for financial information management, reporting and disclosure matters;
the design and development of departmental financial information and reporting
strategy; and financial reporting integrity across government;
5.3.2
Issues Treasury Board Accounting Standards (TBAS), under authority of the
Financial Administration Act subsection 9(1), to be followed by departments
across the Government of Canada, based on Canadian generally accepted
accounting principles for the public sector as defined in the Canadian Institute of
Chartered Accountants Public Sector Accounting (PSA) Handbook;
5.3.3 Approves the government-wide Chart of Accounts, including government-wide
coding block structures and classifications, to support financial information
reporting and disclosures, including those in the Public Accounts of Canada and
Canada’s Performance Report;
5.3.4
5.4
Supports Treasury Board Secretariat and departments government-wide in the
design, development and maintenance of standards for the common departmental
chart of accounts, common enterprise financial data principles and departmental
financial information architectures.
Chief Financial Officer – The Chief Financial Officer:
5.4.1
Provides assurance to the deputy head that departmental financial information
reporting and disclosures fairly present in all material respects the department’s
resource utilization, financial position, results of operations, changes in cash flow,
equity of Canada, and program activity cost allocations, consistent with the
Management Resources and Results Structure (MRRS) policy;
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5.4.2
Leads the design, establishment and maintenance of the departmental financial
information and reporting strategy that outlines the departmental financial
information architecture and controls;
5.4.3
Leads, in collaboration with assistant deputy ministers or equivalents, the
integration of financial information and related non-financial information across
the department, unless the deputy head designates another member of the
management team to lead this activity;
5.4.4
Provides assurance to the deputy head, that the financial information provided to
central agencies fairly presents in all material respects the costs of proposed
activities, capital investments, actual and forecasted resource requirements and
utilizations, revenues, and when appropriate, the impact on departmental
appropriations and government-wide costs;
5.4.5
Ensures the deputy head and departmental managers have access, throughout the
year and on a timely basis, to financial information and reports, including:
x
Budget, forecasts and variance reporting showing the department’s
budgetary position;
x
Allocations of costs to program activities, consistent with the Management
Resources and Results Structure (MRRS) policy;
x
Analyses of high-risk areas in relation to reference levels by program
activity and major funding approvals (actual and projected), including
anticipated funding pressures and resource reallocation requirements;
x
Integrated financial and related non-financial information linked to results
and that meet the needs of managers for decision-making;
5.4.6
Maintains a set of accounts of the department’s financial transactions and ensures
that the common departmental chart of accounts, and related financial information
and reporting, are aligned with the department’s Treasury Board approved
Program Activity Architecture, government-wide Chart of Accounts, and
classifications;
5.4.7
Prepares the complete set of annual (audited) financial statements in a timely
manner and provides assurance to the deputy head that these financial statements
comply with subsections 5.1.1 and 5.1.2 of this policy;
5.4.8
Provides to the Receiver General for Canada financial information and related
disclosures in accordance with Receiver General direction.
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DRAFT
Assistant deputy minister or Equivalent – The assistant deputy minister or equivalent:
5.5.1
Is responsible for the integrity of all financial information, reporting and
disclosures within his or her area of responsibilities;
5.5.2
Supports the Chief Financial Officer in the design, implementation, and
maintenance of the departmental financial information and reporting strategy for
the financial information within his or her area of responsibility;
5.5.3
Ensures that financial records and related non-financial data, within his or her
purview of responsibilities, are managed and controlled effectively;
5.5.4
Provides assurance to the deputy head and the Chief Financial Officer that
financial information within his or her area of responsibilities provided to central
agencies fairly presents in all material respects the costs of proposed activities,
capital investments, actual and forecasted resource requirements and utilizations,
revenues, and where appropriate, the impact on departmental appropriations and
government-wide costs;
5.5.5
Supports the Chief Financial Officer in providing complete financial information
for his or her area of responsibilities for Memoranda to Cabinet and Treasury
Board submissions, the departmental planning process, and the assessment of
significant business risks, program delivery and policy options, and their impact
on resource allocation.
6.
Monitoring and reporting
6.1
At the departmental level, monitoring of this policy will be carried out through the:
Management Accountability Framework (MAF) process;
Review of recommendations prepared by the Departmental Audit Committee;
Review of internal and external auditor reports; and
Review of the reports and management representations issued by the department.
6.2
In addition, the Comptroller General will have measures in place to monitor the adequacy
and skill capacity and capability of the financial management community across
government for all aspects of financial management.
6.3
The Comptroller General will report periodically to Treasury Board on the state of
financial management, control and reporting across government.
6.4
The Comptroller General will establish an evaluation framework for this policy.
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7.
Consequences
7.1
Consequences of non-compliance of this policy can include any measure allowed by the
Financial Administration Act that the Treasury Board would determine as appropriate
and acceptable in the circumstances, such as the establishment and freezing of an
allotment under section 31 of the Financial Administration Act.
7.2
Two types of consequences are applicable, institutional or personal. Institutional
consequences may involve withdrawal of delegated authorities, imposition of various
conditions, additional reporting, special audits or reviews, and a request that corrective
action be taken and reported to Treasury Board. Personal consequences may involve a
range of disciplinary measures, including the withdrawal of financial authorities
delegated to managers and executives.
7.3
When corrective action is not implemented satisfactorily, the Secretary of Treasury Board
may recommend to Treasury Board the withdrawal of spending authority or other
measures as appropriate.
8.
Enquiries
Please send any questions about this policy to:
Assistant Comptroller General
Financial Management and Analysis Sector
Office of the Comptroller General
300 Laurier Avenue West
Ottawa ON K1A 0R5
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Policy on Financial Information and Reporting
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Appendix – Definitions
Financial information (information financière) – Is any data, information and knowledge used
in understanding, managing, and reporting upon the monetary aspects of any activity and
includes both financial and related non-financial information. Financial information is not
limited to accounting data, but includes aggregated information and knowledge developed and
used to understand, manage and report on the monetary aspects of any activity.
Related non-financial information (information non financière connexe) – Is any data,
information and knowledge contributing to the understanding, managing and reporting upon of
financial information.
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Policy on Financial Systems
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E-6: Policy on Financial Systems
(Publié aussi en français sous le titre Politique sur les systèmes financiers)
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Policy on Financial Systems
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Contents
1.
Effective date................................................................................................. 134
2.
Application..................................................................................................... 134
3.
Context........................................................................................................... 134
4.
Policy statement............................................................................................ 135
5.
Policy requirements ...................................................................................... 136
6.
Monitoring and reporting.............................................................................. 138
7.
Consequences............................................................................................... 138
8.
Enquiries........................................................................................................ 139
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Policy on Financial Systems
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1.
Effective date
1.1
This policy takes effect on XX, 20XX. Upon approval of the Financial Management
Policy Framework and the related suite of financial management policies, an
implementation schedule, including full compliance instructions, will be issued.
1.2
The Policy on Financial Systems supersedes the Treasury Board Policy on Systems and
Controls dated October 15, 1996.
1.3
Treasury Board Financial Systems Standards will be developed following the approval of
the Policy on Financial Systems.
2.
Application
This policy applies to all departments and organizations defined as departments within
the meaning of section 2 of the Financial Administration Act. Throughout this policy, the
terms “government-wide” and “across government” refer to these organisations.
3.
Context
3.1
The financial management policy suite is summarized in the Financial Management
Policy Framework (FMPF), which includes five financial management core policies and
a series of directives and standards supporting the policies. The FMPF establishes the
Treasury Board financial management policy structure and provides an overview of the
financial management roles and responsibilities of deputy heads and key officials for
each policy.
3.2
The financial management policy suite, along with the FAA and its regulations, convey
an integrated approach to the discipline of public sector management. Applied
consistently across government, this framework fosters public service values such as
probity, prudence, equity and transparency and provides clear direction to senior
departmental managers on how to be good stewards of public resources and assets, and
assist Ministers in their accountability to Parliament.
3.3
The Policy on Financial Systems is one of the five core policies of the Financial
Management Policy Framework (FMPF). This policy defines the responsibilities of
deputy heads, the Comptroller General of Canada, Chief Financial Officers, and senior
departmental managers for the implementation and maintenance of reliable financial
systems that comply with government-wide standards and protocols.
3.4
This policy fosters the integration of financial information between operational and
functional systems and the use of government-wide financial systems standards and
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Policy on Financial Systems
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protocols. It also defines the role of the Comptroller General of Canada for approval of
changes to Government of Canada financial systems.
3.5
At the departmental level, this policy ensures that deputy heads are provided with the
assurance that their financial systems meet government financial systems standards and
the needs of their organization. This policy also aims at ensuring on-going improvement
of the management and governance of financial systems in every department and agency,
and better guidance government-wide.
3.6
Effective information management/information technology (IM/IT) systems are essential
to the management of all government operations and, given the size and complexity of
these systems and operations, a high degree of uniformity and standardization is essential
to maximize efficiency, integrity and interoperability. The Chief Information Officer of
Treasury Board Secretariat is responsible for the overall information management and
information technology policies for the Government of Canada.
3.7
This policy should be read in conjunction with the Privacy Act, the Policy on
Management of Information Technology, and the Government Security Policy.
3.8
This policy should be read in conjunction with the Policy on Internal Audit and the other
four core policies under the FMPF. Further contextual information is included in the
FMPF and in the Foundation Framework for Treasury Board Policies.
3.9
This policy is issued pursuant to section 7 of the Financial Administration Act.
4.
Policy statement
4.1
Objective
The objective of this policy is to define the roles and responsibilities that deputy heads,
the Comptroller General of Canada, Chief Financial Officers, and senior departmental
managers must exercise and be accountable for with respect to financial systems and
Treasury Board Financial Systems Standards (TBFSS).
4.2
Results
The expected result of this policy is a clear understanding by all key stakeholders across
government of their financial systems management responsibilities.
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Policy on Financial Systems
5.
Policy requirements
5.1
General requirements
DRAFT
Financial Systems Standards – Treasury Board Financial Systems Standards:
5.1.1 Treasury Board Financial Systems Standards (TBFSS) apply to all departments;
5.2
5.3
5.1.2
TBFSS are issued under authority of section 7 of the Financial Administration
Act, and are set and maintained by the Comptroller General of Canada, based on
generally accepted control objectives for information and related technology;
5.1.3
TBFSS are developed in collaboration with the Chief Information Officer of the
Government of Canada when they relate to information management (IM) or
information technology (IT) standards.
Deputy head – The deputy head:
5.2.1
Is responsible for the governance and strategic direction of the investment in the
development and implementation of departmental financial systems required to
meet the financial and operational needs of the department, within the context of
the government’s direction and priorities;
5.2.2
Obtains assurance from the Chief Financial Officer and the departmental senior
manager or managers responsible for information management (IM) or
information technology (IT) that departmental financial systems comply with
Treasury Board policy and standards.
Comptroller General of Canada – The Comptroller General:
5.3.1
Issues Treasury Board Financial Systems Standards (TBFSS) to set the
mandatory minimum requirements for the functioning of government financial
systems, including:
x
The business requirements for the interoperability of financial and related
non-financial information between and among departmental financial systems,
program or functional business systems, and central financial systems;
x
Definitions and management of common data elements and data
classification;
x
Definitions and management of common financial business processes and
transaction processing;
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Policy on Financial Systems
x
5.4
Internal controls over data entry, transaction processing and reporting
processes embedded in the financial systems;
5.3.2
Identifies the required functionality and capability of designated government
financial systems and establishes the criteria for the acceptance of financial
systems across government;
5.3.3
Provides support to Chief Financial Officers with respect to their role as business
stewards of departmental financial systems.
Chief Financial Officer – The Chief Financial Officer:
5.4.1
Provides assurance to the deputy head that investments in departmental financial
systems are consistent with the departmental financial information and reporting
strategy, and appropriate for the breadth and level of complexity of departmental
operations;
5.4.2
Assumes stewardship responsibilities for departmental financial systems, and
provides assurance to the deputy head that departmental financial systems:
5.4.3
5.5
DRAFT
x
Are compliant with TBFSS;
x
Have data and business process implementations that reflect common data
principles, common business processes, common departmental chart of
accounts, and the departmental financial information architecture;
x
Have data and business process implementations that meet departmental and
government-wide requirements for interoperability of financial and related
non-financial information between departmental financial systems, program or
functional business systems and central financial systems; and
x
Utilize approved Treasury Board functionality and that all aspects of financial
systems development, configuration and implementation are managed with
due consideration to Treasury Board policies, directives, standards and
guidance;
Takes appropriate measures to ensure that departmental financial systems have
the capacity to meet the financial management and operational needs of the
department on a sustainable basis, and corrects deficiencies in a timely manner.
Assistant deputy minister or Equivalent – The assistant deputy minister or equivalent:
5.5.1
Uses approved departmental financial systems in accordance with departmental
practices and controls;
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5.5.2 Provides assurance, in collaboration with the departmental senior manager or
managers responsible for IM and IT, to the deputy head and the Chief Financial
Officer that the business systems within his or her area interface effectively with
departmental financial systems and central financial systems where applicable.
6.
Monitoring and reporting
6.1
Monitoring of this policy by the deputy head will be carried out through the:
6.2
Management Accountability Framework (MAF) process;
Review of recommendations prepared by the Departmental Audit Committee;
Review of internal and external auditor reports; and
Review of the resource management reports and representations issued by the
department;
The Comptroller General will also monitor and review:
The effectiveness of financial systems, controls, resource management and
reporting;
The interoperability of departmental financial systems with financial system
requirements of the Receiver General for Canada; and
The communication of recommended Government of Canada financial controls
and financial systems standards.
6.3
The Comptroller General will report periodically to Treasury Board on the state of
financial management, control and reporting across government.
6.4
The Comptroller General will establish an evaluation framework for this policy.
7.
Consequences
7.1
Consequences of non-compliance of this policy can include any measure allowed by the
Financial Administration Act that the Treasury Board would determine as appropriate
and acceptable in the circumstances, such as the establishment and freezing of an
allotment under section 31 of the Financial Administration Act.
7.2
Two types of consequences are applicable, institutional or personal. Institutional
consequences may involve withdrawal of delegated authorities, imposition of various
conditions, additional reporting, special audits or reviews, and a request that corrective
action be taken and reported to Treasury Board. Personal consequences may involve a
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range of disciplinary measures, including the withdrawal of financial authorities
delegated to managers and executives.
7.3
When corrective action is not implemented satisfactorily, the Secretary of the Treasury
Board may recommend to Treasury Board the withdrawal of spending authority or other
measures as appropriate.
8.
Enquiries
Please send any questions about this policy to:
Assistant Comptroller General
Financial Management and Analysis Sector
Office of the Comptroller General
300 Laurier Avenue West
Ottawa ON K1A 0R5
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