Annex - Assessment of Internal Control Over Financial Reporting
For the year ended March 31, 2013
This document provides summary information on the measures taken by the Department of Justice (the Department) to maintain an effective system of internal control over financial reporting (ICFR), including information on internal control management and assessment results and related action plans.
Detailed information on the Department of Justice’s authority, mandate, and program activities can be found in the Departmental Performance Report and the Report on Plans and Priorities.
2. Department of Justice system of internal control over financial reporting
2.1 Control environment of the Department of Justice relative to ICFR
The Department recognizes the importance of setting the tone from the top to help ensure that staff at all levels understand their roles in maintaining effective systems of ICFR and are well equipped to exercise these responsibilities effectively. The Department’s objective is to continually enhance its internal control environment to ensure risks are managed well through a responsive and risk-based approach that enables continuous improvement and innovation.
Key positions, roles and responsibilities
Below are the Department’s key positions and committees with responsibilities for maintaining and reviewing the effectiveness of its system of ICFR.
- Deputy Minister
- The Deputy Minister, as Accounting Officer, assumes overall responsibility and leadership for the measures taken to maintain an effective system of internal control. In this role, the Deputy Minister chairs the Executive Committee and the Audit Management Response and Evaluation Committee.
- Chief Financial Officer (CFO)
- The CFO reports directly to the Deputy Minister and provides leadership for the coordination, coherence and focus on the design and maintenance of an effective and integrated system of ICFR, including its annual assessment.
- Senior Departmental Managers
- Senior Departmental Managers in charge of services and program delivery are responsible for maintaining and reviewing the effectiveness of their system of ICFR falling within their mandate.
- Chief Audit Executive (CAE)
- The CAE reports directly to the Deputy Minister and provides assurance through periodic internal audits which are instrumental to the maintenance of an effective system of ICFR.
- Departmental Audit Committee (DAC)
- The DAC is an advisory committee that provides objective views on the Department’s risk management, control and governance frameworks. It is comprised of three external members, the Deputy Minister and the Associate Deputy Minister, and is chaired by an external member. The DAC reviews the corporate risk profile and the system of internal control, including the assessment and action plans relating to the system of ICFR.
- Executive Committee (EC)
- As the central decision-making body, the EC reviews, approves and monitors the corporate risk profile and the departmental system of internal control, including the assessment and action plans relating to the system of ICFR.
- Audit Management Response and Evaluation Committee (AMREC)
- This internally based advisory committee assists the Deputy Minister in discharging his responsibilities with respect to internal audit and evaluation.
Key measures taken by the Department
The Department’s control environment includes a series of measures to equip its staff to manage risks well through raising awareness, providing appropriate knowledge and tools, as well as developing skills. Key measures include:
- An established governance structure and provision of strategic direction through the Executive Committee and standing committees to the EC;
- A departmental Centre for Ethics, Conflict Management and Wellness responsible for values and ethics, the code of conduct, informal conflict management, and disclosure protection;
- A Strategic Planning, Risks and Scans division that coordinates and supports department-wide planning, including integrated business planning, risk management, environmental scanning, and preparation of the corporate risk profile approved by the Executive Committee;
- Regular reporting of financial performance;
- Annual performance agreements with clearly set out financial management responsibilities;
- Human resources management plan and policies that support learning and succession planning;
- Regularly updated delegation of financial authorities instruments;
- Policies and procedures tailored to the Department’s control environment;
- Training and communications in areas of financial management;
- Information technology (IT) processing systems to achieve greater security, integrity, efficiency and effectiveness;
- Documentation of main business processes and related risk and control points to support the management and oversight of the system of ICFR;
- An internal control division that reports directly to the CFO; and
- A risk-based internal audit plan.
2.2 Service arrangements relevant to financial statements
The Department relies on other organizations for the processing of certain transactions that are recorded in its financial statements as follows:
Common Arrangements within the Government of Canada:
- Public Works and Government Services Canada centrally administers the payments of salaries and the procurement of goods and services, as per that department’s Delegation of Authority and provides accommodation services.
- Treasury Board Secretariat (TBS) provides the Department with information used to calculate various accruals and allowances, such as the accrued severance liability.
- Shared Services Canada (SSC) provides IT infrastructure services to the Department in the areas of data centre and network services. The scope and responsibilities are addressed in the interdepartmental arrangement between SSC and the Department.
Specific Arrangement for the Department of Justice:
- Public Prosecution Service of Canada provides certain corporate (internal) services for the Department’s Northern Region.
- Other organizations also rely on the Department of Justice as follows:
- The Department is the common service provider of legal services to federal departments and agencies, and as such, the Department charges these organizations with the cost of providing legal services pursuant to legal services agreements, and provides an annual dollar figure for those legal services it provides without charge.
- The Department provides information on pending litigation cases in order to assist federal departments and agencies in the reporting of contingencies.
- The Department provides certain corporate (internal) services to the Public Prosecution Service of Canada.
- The Department assists provinces and territories in the enforcement of family support orders and agreements by providing garnishment assistance through the interception of designated federal moneys payable to individuals owing family financial support.
3. Department of Justice’s assessment results during fiscal year 2012-13
The key findings and significant adjustments required from the current year’s assessment activities are summarized below.
- New or significantly amended key controls
- In the current year, the controls and processes for legal services revenues were significantly amended. An assessment of the design effectiveness of the re-engineered end-to-end processes was conducted on the key controls and will continue into 2013-14 as enhancements and new functionalities are added.
- On-going monitoring program
- As part of its rotational on-going monitoring plan, the Department completed its 2012-13 planned assessment of entity level controls and of the key financial controls for the Family Law liability, salaries and employee benefits expense, professional and special services expense, legal services revenue, and transfer payments expense financial statement accounts. A testing plan for IT general controls was developed and key controls were tested. All of the key controls tested performed as intended.
4. Department of Justice's action plan
4.1 Progress during fiscal year 2012-13
The Department continued to conduct its on-going monitoring according to the previous fiscal year’s rotational plan as follows:
|Previous year’s rotational on-going monitoring plan for current year||Status|
||Completed as planned and no remedial actions required|
In 2012-13, the Department also performed the following additional work on the list of action items reported in the prior year’s 2011-12 Annex.
Completed action items:
- Business process and procedural documents for the Family Law program’s new IT system.
- Re-engineered end-to-end processes related to legal service revenues.
- Revised and new contracting policies, procedures, guidelines, and monitoring program.
- New procedures under Section 32 of the Financial Administration Act.
Continuing management action items to enhance existing controls and processes:
- The Procure to Payment at Justice project includes: an enterprise asset management module that will assist in substantiating capital assets; the implementation of Solution Manager in the Integrated Financial and Materiel System (IFMS) that will enhance IT general controls; and IFMS enhancements that will provide a statistical sampling functionality for lower/medium-risk transactions so that verification efforts can focus on high-risk transactions.
- The impact of organizational restructuring in the Department is being considered in the further strengthening of the financial management advisory function and in establishing a balanced scorecard for the finance function across the Department.
- The Department’s pay administration processes and verification policy related to pay actions are being reviewed to align to the TBS common business model.
4.2 Action plan for the next fiscal year and subsequent years
The Department’s rotational on-going monitoring plan over the next three years, based on an annual validation of the high risk processes and controls and related adjustments to the on-going monitoring plan as required, is shown in the following table.
|Key control area||Operating effectiveness testing rotation|
|Entity level controls||Table note X||Table note X||Table note X|
|IT General controls under departmental management||Table note X||Table note X||Table note X|
|Process level controls
The on-going monitoring schedule for specific financial statement accounts is outlined below.
|Family Law account (Liability)||Table note X||Table note X||Table note X|
|Salaries and employee benefits (Expense)||Table note X||Table note X||Table note X|
|Professional and special services (Expense)||Table note X||Table note X||Table note X|
|Legal services revenue||Table note X||Table note X||Table note X|
|Transfer payments||Table note X||Table note X||Table note X|
|Travel and relocation (Expense)||Table note X||Table note X|
|Tangible capital assets||Table note X||Table note X|
|Accounts payable and accrued liabilities||Table note X||Table note X|
|Receivables and advances||Table note X|
|Family Law fees (Revenue)||Table note X|
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