Summary of the Assessment of Effectiveness of the Systems of Internal Control over Financial Reporting and the Action Plan of the Canadian Institutes of Health Research for the Fiscal Year 2015‑16 (Unaudited)
Annex to the Statement of Management Responsibility Including Internal Control over Financial Reporting
This document provides summary information on the measures taken by the Canadian Institutes of Health Research (CIHR) to maintain an effective system of internal control over financial reporting, including information on internal control management, assessment results and related action plans. In particular, it provides summary information on the internal control assessments conducted by CIHR as of March 31, 2016, including progress, results and related action plans, along with some financial highlights pertinent to understanding the control environment of CIHR.
Detailed information on the CIHR authority, mandate and program activities can be found in the 2014‑15 Departmental Performance Report and the 2016‑17 Report on Plans and Priorities.
2. CIHR system of internal control over financial reporting
2.1 Internal control management
CIHR has a well-established governance and accountability structure to support agency assessment efforts and oversight of its system of internal control. An agency internal control management framework, approved by the President, is in place, including:
- Organizational accountability structures as they relate to internal control management to support sound financial management, including roles and responsibilities for senior managers in their areas of responsibility for control management;
- Values and ethics;
- Ongoing communication and training on statutory requirements, policies and procedures for sound financial management and control; and
- Monitoring and regular updates, at least semi-annually, on internal control management plus assessment results and action plan to the President and CIHR senior management, and (as applicable) the Audit Committee.
The Audit Committee provides advice to the President on the adequacy and functioning of CIHR’s risk management, control and governance frameworks and processes.
2.2 Service arrangements relevant to financial statements
- CIHR relies on other organizations for the processing of certain transactions or the provision of information which impact its financial statements as follows:
- Public Services and Procurement Canada centrally administers the payments of salaries and benefits, the procurement of some goods and services in accordance with CIHR’s Delegation of Authority, as well as the provision of accommodation services;
- Treasury Board Secretariat provides CIHR with information used to calculate various accruals and allowances, such as the employer’s contributions to the health and dental insurance plans, which are funded centrally;
- Shared Services Canada provides information technology (IT) infrastructure services to CIHR in the areas of data centre and network services. The scope and responsibilities are addressed in the interdepartmental arrangement between Shared Services Canada and CIHR; and
- Canada School of Public Service provides access to a large selection of learning publications and training, covering a wide variety of subjects such as management techniques, policy development, planning, leadership and governance.
- The Tri-Council Secretariat administers the Networks of Centres of Excellence, Business-Led Networks of Centres of Excellence, College and Community Innovation Program, Canada Excellence Research Chairs, Canada Graduate Scholarships, and the Canada Research Chairs on behalf of CIHR’s Research, Knowledge Translation and Ethics Portfolio. The Secretariat has the authority and responsibility to ensure that funding decisions are fair, due process is followed, and payments are made in accordance with the terms and conditions set out by CIHR’s programs. As a result, reliance is placed on the control procedures of the Secretariat, which CIHR reviews at arm’s length by obtaining key control documentation.
- Other government departments rely on CIHR for the processing of certain transactions or the provision of information that affects their financial statements. Operating effectiveness testing has been implemented for the key controls and no issues were identified.
3. CIHR 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: In the current year, there were no significantly amended key controls in existing processes which required a reassessment and there were no new processes to test for design and operating effectiveness.
Ongoing monitoring plan: As a result of updates to the Management Accountability Framework (MAF) and the Committee of Sponsoring Organizations of the Treadway Commission Methodology (COSO), the ongoing rotational monitoring plan was updated to incorporate entity-level control testing into this year’s assessment to best reflect professional practice.
In 2015-2016, CIHR completed its reassessment of IT general computer controls, entity-level controls, and financial controls, including grants and awards, grants and awards payments, financial statement closing (including payables at year end and accruals), hospitality, travel and travel cards, Canada Research Chairs, and Financial management and budgeting. For the most part, the key controls that were tested performed as intended, with remediation required as follows:
- Ensure that Section 34 of the Financial Administration Act related to event and travel expenditures are approved by the correct authority;
- Enhance the Journal Vouchers process to verify the appropriate level of authority is obtained before they are recorded in the financial system;
- Ensure that all peer review committee recommendation sheets are properly validated and documented;
- Refine the process to ensure all event, hospitality and travel expenditures are committed in the financial system in a timely manner; and
- Complete the implementation of defined and documented data retention periods for remaining key information systems.
4. CIHR’s action plan
4.1 Progress during fiscal year 2015‑16
CIHR continued to conduct its ongoing monitoring according to the previous fiscal year’s rotational plan, as shown in the following table.
|Previous year's rotational ongoing monitoring plan for current year||Status|
|Entity-level controls, grants and awards payments process, and Canada Research Chairs – operating effectiveness testing and remediation of deficiencies||Completed as planned; no remedial actions required.|
|Financial statement closing (including payables at year end and accruals), travel and travel cards, hospitality, Grants and awards, financial management and budgeting, and IT General Controls – operating effectiveness testing and remediation of deficiencies||Completed as planned; remedial actions in progress.|
4.2 Action plan for the next fiscal year and subsequent years
CIHR has implemented an ongoing rotational monitoring plan over the next three years based on a risk-based annual validation of high risk processes and controls. The plan takes into consideration any substantial changes to key controls in significant processes as well as addresses training to enhance the awareness and knowledge of internal controls over financial reporting and associated responsibilities across CIHR. CIHR’s rotational ongoing monitoring plan over the next three years is shown in the following table.
|Key control areas||Fiscal year 2016-17||Fiscal year 2017-18||Fiscal year 2018-19|
|Financial statements closing process (including payables at year end and accruals)||Yes||Yes||Yes|
|Grants and awards||Yes||Yes||Yes|
|Grants and awards payment process||Yes||Yes||Yes|
|IT general controls||Yes||Yes||Yes|
|Travel and travel cards||Yes||Yes||Yes|
|Institute Support Grants||No||Yes||No|
|Salary and payroll||No||Yes||No|
|Canada Research Chairs||No||No||Yes|
|Financial management and budgeting||No||No||Yes|
|Deferred revenue and revenue||Yes||No||No|
|Networks of Centres of Excellence||Yes||No||No|
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