Annex - Assessment of Internal Control Over Financial Reporting
For the year ended March 31
This document provides summary information on the measures taken by the Department of Justice to maintain an effective system of internal control over financial reporting, including information on internal control management, assessment results and related action plans.
Detailed information on the Department of Justice’s authority, mandate, and program activities can be found in the 2015-16 Departmental Performance Report and the 2015-16 Report on Plans and Priorities.
2. Departmental system of internal control over financial reporting
2.1 Internal control management
The Department of Justice has a well-established governance and accountability structure to support departmental assessment efforts and oversight of its system of internal control. A departmental internal control management framework, approved by the Deputy Minister, is in place and includes:
- Organizational accountability structures as they relate to internal control management to support sound financial management, including roles and responsibilities of senior managers in their areas of responsibility for control management;
- Values and ethics;
- On-going communication and training on statutory requirements, and policies and procedures for sound financial management and control; and
- At least semi-annual monitoring of and regular updates on internal control management, as well as the provision of related assessment results and action plans to the Deputy Minister, departmental senior management, and the Departmental Audit Committee.
The Departmental Audit Committee provides advice to the Deputy Minister on the adequacy and functioning of the Department's risk management, control and governance frameworks and processes.
2.2 Service arrangements relevant to financial statements
The Department of Justice 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 Services and Procurement Canada centrally administers the payments of salaries and the procurement of goods and services in accordance with the Department of Justice’s Delegation of Authority, and provides accommodation services;
- Treasury Board of Canada Secretariat provides the Department of Justice with information used to calculate various accruals and allowances, such as the accrued severance liability;
- Shared Services Canada provides information technology (IT) infrastructure services to the Department of Justice in the areas of data centre and network services.
Specific Arrangement for the Department of Justice
- The Department of Justice 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 of Justice provides information on pending litigation cases in order to assist federal departments and agencies in the reporting of contingencies. The Department of Justice provides certain corporate (internal) services to the Public Prosecution Service of Canada.
The Department of Justice 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. Departmental assessment results during fiscal year 2015-16
The key findings and significant adjustments required from the current year’s assessment activities are summarized below.
New or significantly amended key controls
Building on progress made during 2014-15, the Department of Justice assessed the design of significant processes to be implemented in 2016-17, including those to be implemented as part of the Transformation of Pay Administration Initiative and the new legal services funding model.
Pertaining to the Transformation of Pay Administration Initiative, key control issues were noted and relate to the implementation of the new pay system administered by PSPC. These issues were presented to departmental senior management along with proposed mitigation strategies. The Department of Justice has already initiated the remedial actions.
There are no significant observations to report regarding the design of the internal controls of the Legal Services funding model. The implementation and operating effectiveness of these new key controls will be assessed in future years, as outlined in the Department’s rotational on-going monitoring plan.
On-going monitoring program
As part of its rotational on-going monitoring plan, the Department completed its 2015-16 planned assessment of the Entity level controls, IT general controls, and of the Key process level controls for the Family Law liability, Salaries and employee benefits expense, Professional and special services expense, Transfer payments, Travel and relocation expense, Tangible capital assets, and Accounts payable and accrued liabilities financial statement accounts.
The design and implementation of the key controls embedded within the business processes supporting the financial statement accounts had not been reviewed since the Department of Justice had been in on-going monitoring stage. As such, in 2015-16, the Department completed design effectiveness testing for the majority of the processes within the financial statement accounts to be assessed as per the rotational plan.
As a result of the on-going monitoring, the Department identified the following areas for improvement:
- Strengthen and communicate departmental financial management policies;
- Enhance performance of monitoring activities to mitigate key financial risks identified;
- Ensuring better segregation of duties for access granted to key systems within the Department or functions performed;
- Improving documentation to ensure the application of various key financial controls is evidenced; and
- Strengthen account verification practices.
Management action plans addressing the recommendations have been developed by the process owners and are actively monitored and reported to senior management.
4. Departmental action plan
4.1 Progress during fiscal year 2015-16
The Department of Justice continued to conduct its on-going monitoring according to the rotational plan as shown in the following table:
|Rotational on-going monitoring plan for current year||Status|
|Key process level controls for the following financial statement account: Travel and relocation expense||Completed as planned; no remedial actions required.|
IT General controls, and
Key process level controls for the following financial statement accounts: Salaries and employee benefits, Family Law liability, Professional and special services, Transfer payments, Tangible capital assets, and Accounts payable and accrued liabilities.
|Completed as planned; remedial actions started.|
|Entity level controls||
Work conducted on the update of the assessment methodology for ELCs.
These will be assessed in 2016-17 instead of initially planned for this fiscal year.
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||X||X||X|
|IT General controls - Includes controls under Justice’s responsibility only||X||X||X|
|Process level controls
The on-going monitoring schedule for specific financial statement accounts is outlined below.
|Family Law account (Liability)||X||X||X|
|Salaries and employee benefits (Expense)||X||X||X|
|Professional and special services (Expense)||X||X||X|
|Legal services revenue||X||X||X|
|Transfer payments (Expense and Payable)||X||X||X|
|Travel and relocation (Expense)||X|
|Tangible capital assets||X|
|Accounts payable and accrued liabilities||X|
|Receivables and advances||X||X|
|Family Law fees (Revenue)||X||X|
An X signifies that the level of control, or the key controls for a financial statement account, will be monitored in the specified fiscal year.
Please note that the Department of Justice is currently in the process of reviewing the rotational on-going monitoring plan for internal control over financial reporting. The revised rotational on-going monitoring plan will cover the period of 2016-17 to 2018-19 and the revised schedule will be reflected in the 2016-17 Annex.
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