Improving Public Sector
Financial Management
Capacity Building and Community
Development
Office of the Comptroller General
RDIMS #384903
February 2006
Financial Management Environment
• Canadians and Parliament are interested in the
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way public funds are managed
Instances of failure of financial management
control frameworks
Increasing complexity of transactions and
reporting requirements
Call from stakeholders for increased
transparency of financial and performance
information
Insufficient financial management expertise and
capacity (skills and numbers) to match
increasing demand
OCG Mandate
• Stronger financial & audit controls
• Financial standards
• Professional development
• Overseeing government spending
• Government wide financial systems
• Financial management advice & support
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Strengthening Internal Audit and Financial Management …
Minister
Chief
Audit
Executive
Deputy
Head
Independent
Audit
Committee
Chief
Financial
Officer
Accountability
Advice
Assurance Findings
Comptroller
General
Functional Direction
… to improve the fundamentals
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Strengthening Internal Audit
Context and Background Re Internal Audit
• Budget 2003 - intention to strengthen internal audit
• OAG and PAC – reports on internal audit
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performance
Budget 2004 – further strengthening
President’s November 2004 - bolster the internal
audit, government-wide “important element of the
Government’s agenda to improve public sector
management and ensure the rigorous stewardship
of public funds”
January 2005 – start of consultations and analysis
October 2005 - New internal audit policy approved
for April, 2006 fully implemented by April 2009
Vision for Internal Audit
• Provide fact based assurance to Deputy
Heads on the health of the internal
controls of their departments
• Refocus on the basics and ensure
adequate audit coverage each year
• Provide a base for balanced reporting
• Make the IA function credible to
Parliamentarians and Canadians
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Key Pillars of the Internal Audit Vision
• Reposition Internal Audit as a critical for effective and
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credible governance at dept’l and gov’t wide levels
Qualified Chief Audit Executives (CAEs), audit
committee members and audit professionals
Standardized approaches, tools, methodologies,
periodic practice inspections
Independence and effective governance arrangements,
within departments and centrally:
– Independent audit committees
– Independent audit function
– Deputy Head responsibilities
– Comptroller General responsibilities
Timely, effective reporting and oversight.
Scope of the Policy Change
Deputy heads of all departments are responsible for ensuring:
• Procedures for systematic review of control and accountability
processes in their departments.
• Audit committee receives all of the information needed to fulfill its
responsibilities
• Management action plans adequately address the
recommendations and findings arising from internal audits, and that
the action plans have been implemented.
• Timely audit reports, accessible, bilingual and on departmental web
sites.
• Minister is briefed periodically on significant items arising from the
work of internal audit and the audit committee. Minister to meet
annually in camera with the Internal Audit Committee.
• Full access to Office of the Comptroller General and its agents.
• Management representations needed to support the planning,
conduct, and reporting of audits by the Comptroller General.
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Scope of the Policy Change
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•
Deputy Heads of large organizations
– Appropriately resourced internal audit function.
– Independent departmental audit committee
– Qualified chief audit executive at a senior executive level, reporting to
the deputy head.
– Departmental internal audit plan addresses all areas of higher risk.
– Appropriate internal audit coverage for special operating agencies and
other entities within their departments and under their control.
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Comptroller General
– Small agencies and horizontal audits
– Oversee capacity of government-wide internal audit function
• Appointments and appraisals of Heads; stewardship of function
and reporting on performance
• Capacity building through recruitment and learning initiatives
– Overall assurance on internal controls government-wide; external
reporting on performance of function
– Review effectiveness of new policy
Strengthening Financial
Management
Context and Background – CFO Model
Budget 2004
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“Re-establish the Office of the Comptroller General of Canada to
rigorously oversee all government spending.
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Appoint professionally accredited comptrollers to sign off on all new
spending initiatives in every government department.
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“The appointment of departmental comptrollers will be subject to approval of the
Comptroller General” and, “Departmental Comptrollers will also have a functional reporting
relationship to the Comptroller General”;
Professional certification standards for departmental comptrollers will be established
before the end of the year and these standards are to be met by departmental senior
financial officers within three years.”
The Government is moving forward to audit all annual financial statements
of departments and agencies within five years.”
High level diagnostic
• Observations of Comptroller General :
– Senior Financial Officers (SFOs) in medium to large departments
• The role of the SFO has taken many different forms – “general
administrator“, “chief accountant” or “CFO”.
• Uneven focus on financial management. Potential conflict of interest
• Uneven qualifications and professional background in financial
management and reporting
• Uneven organizational positioning and authority vis-à-vis Program delivery
organization
• Lack of preparedness to deliver annual departmental audited financial
statements
• Lack of back up capacity and succession
• Over extended and stretched
– Senior Full-time Financial Officers (SFFOs) in medium to large departments and
SFOs in Small departments and Agencies
• Uneven qualifications and professional background in financial
management and reporting
• Uneven level of readiness for “executive table”
• Lack of back-up capacity and succession
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Overriding Principles for Proposed Solution
From
From
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Limited delegation of
authorities to departments by
TBS
Focusing on short and
medium term needs of the
organization
To
To
Performing a Corporate
To
Services / Administration role
and the breadth of related
activities (e.g. Finance, HR,
IM/IT Administration, etc,)
Greater delegation of authorities to
departments by TBS
Focusing on short and longer
term needs of the organization
from a strategic perspective.
Focusing on full spectrum of
financial management, and the
associated depth of knowledge and
understanding, as a full-time
“seasoned” business and financial
executive
Proposed Delivery Model
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Multi-tier, risk based approach for all organizations under functional
direction of Office of Comptroller General
Criteria for segmentation:
– Size of managed cash-flows (revenue, expenses and capital
expenditures)
– Accounting value of assets and liabilities under management
– Complexities of operations (e.g. geographic distribution, decentralized
management, stability of organization/operations)
– Inherent risks ( e.g. extensive use G&C)
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3-Tier model:
Tier 1
20-25 largest and most
complex organizations –
Initial target — 80-90% of
expenditures
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Tier 2
15 -20 medium size
departments
Tier 3
all others
Proposed Delivery Model (continued)
Responsibilities of departmental CFOs
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Full spectrum of financial management (short-term and long-term)
– Planning, budgeting and forecasting
– Accounting and reporting, internal and external ( financial and
performance)
– Financial Management policies and internal controls
– Financial analysis, monitoring and challenge
– Departmental financial systems
– Investments
• Analysis of business case of opportunities
• Sign-offs and recommendation for approval by Deputy Head
• Subsequent on-going monitoring of implementation
– Budget integrity
– Value for money monitoring (e.g. via program evaluations)
CFO = “In-House TBS”
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Tier 1 Departments
Agriculture and Agri-Food
Canada Revenue Agency
Canada Border Services Agency
Heritage
Citizenship and Immigration
Environment
Finance
Fisheries and Oceans
Foreign Affairs
CIDA
Health Canada
Human Resources and Skills
Development Canada
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Social Development Canada
Indian and Northern Affairs
Industry
Justice
Defence
National Resources
PWGSC
Correctional Services
RCMP
Service Canada
Transport
Treasury Board Secretariat
Veterans Affairs
Sign-offs
Comptroller General
• Signs off on new initiatives
above a given GoC materiality
and / or risk threshold (to be
determined – anticipate only 30
– 50 per year);
• Formally monitors the initiatives
he recommends, once approved
by the Secretary;
• Monitoring report by CG
(government-wide or multidepartmental) goes to Secretary;
• Periodically undertakes a risk
based horizontal audit of the
sign-off process in departments
Chief Financial Officers
• Exercise the same role as the
Comptroller General (CG) but
within departmental domain;
• Functionally reports to CG;
• In support of the Deputy Head,
as a minimum, sign-off on all
new initiatives;
• Monitor new initiatives, once
approved by their current
respective DM;
• Monitoring report by CFO
(departmental) goes to DM
Approval of new spending initiatives by Deputy Heads and Departmental
Ministers occur before submitted to TBS for sign off and
recommendation to Cabinet or TB Ministers.
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Sign-off: Outcomes
Reasonable assurance that new spending initiatives are “sound”
before being submitted for approval to the DM, Treasury Board or
Cabinet
• “Sound” includes but is NOT restricted to financial management
At the government-wide
level:
• Comptroller General provides
his assurance to the Secretary.
• Secretary takes the assurances
of Comptroller General into
account before submitting to
Treasury Board.
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At the departmental level:
• Chief Financial Officers
provides assurance to the
Deputy Head.
• Deputy Head takes the
assurances of Chief Financial
Officer into account before
seeking approval of the
Cabinet or Treasury Board..
Summary Statement of Qualifications
Professional & Experience Attributes of a CFO
1.
Professional Attributes
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PROFILE
Professional attributes
AND
- University
education
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- Accreditation
- Financial mgt
knowledge
Experience attributes
- “Seasoned”
financial expert
- Leadership
experience
- Business
knowledge
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University degree, preferably but not
exclusively, in financial management.
2.
Professional certification: CA, CMA or CGA
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Experience Attributes
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Experience, preferably but not exclusively, in
management of public sector organizations
Extensive experience, preferably but not
exclusively, in financial management of public
sector organizations
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Summary Statement of Qualifications
Executive and Personal Attributes of CFO
3. Executive Attributes
PROFILE
Executive attributes
– Meets linguistic and
competency
requirements for
public service
executives
Personal attributes of
CFO
– Meets the specific
personal attributes
for a CFO
– As defined for the Public Service
with special emphasis for:
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Leadership
Strategic thinking
Attention to details
Communication (upwards,
downwards, internal and external)
• Strong organizational compass
A fully qualified CFO must meet ALL 3 attributes
and CFO Specific Competencies
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Other Initiatives
• Grants and Contributions
• Audited Departmental Financial
Statements
• Policy Suite Renewal
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Capacity Building
and Community
Development
Office of the Comptroller General – new
organization
Office of the Comptroller General
Comptroller General
Financial Management
Sector
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Capacity Building &
Community Development
Sector
Internal Audit
Sector
Financial Management
Policy Renewal
Shared Systems
Capacity Building and Community
Development Sector
Assistant Comptroller General
Senior Director
Financial Management
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Senior Director
Community Recruitment and
Development Division.
Senior Director
Internal Audit
CBCD Mission
• To strengthen & nurture the HR capacity
of the internal audit & financial
management communities by providing
client focused initiatives & programs in
partnership with those communities &
others.
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Capacity Building
• Demographics
• Recruitment
– FORD/IARD
– Pre-qualified pools
– Interchange
– Staffing and recruitment protocols (work
descriptions, statements of qualification,
competency profiles
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Capacity Building
• Professional Development and learning
– Support to the functional community at all levels
– FI-03/04 development program
– CAP, AEXDP
– Special development pools for targeted needs
– Orientation and training for external recruits
– Required learning for functional community and for
non-financial managers at all levels
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Capacity Building
• Accreditation/Certification
– Working with professional associations (CMA,
CGA, CA, IIA )
– CMA/CIPFA – new joint certification program
– CICA working on initiative to have certain
Government of Canada departments be
recognized for work placements
– CGA exploring avenues for collaboration
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Community Development
• Liaison and outreach – federal/provincial/
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international
Professional institutes and associations
Conference Board – new Council for Public
Sector CFOs
SFO/SFFO communities
Move to community-based approaches to allow
greater flexibility and opportunity for the
community
Questions?
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Contact info:
Dena Palamedes
613-952-6255
Palamedes.Dena@tbs-sct.gc.ca
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