Departmental Performance Report 2011-12
Annex to the Statement of Management Responsibility including Internal Control over Financial Reporting - Fiscal Year 2011-2012
Note to the Reader
With the new Treasury Board Policy on Internal Control, effective April 1, 2009, organizations are now required to demonstrate the measures they are taking to maintain effective system of internal control over financial reporting (ICFR).
As part of this policy, organizations are expected to conduct annual assessments of their system of ICFR, establish action plan(s) to address any necessary adjustments, and to attach to their Statement of Management Responsibility in their annual financial statements a summary of their assessment results and action plan.
Effective systems of ICFR aim to achieve reliable financial statements and to provide assurances that:
- Transactions are appropriately authorized
- Financial records are properly maintained
- Assets are safeguarded from risks such as waste, abuse, loss, fraud and mismanagement
- Applicable laws, regulations and policies are followed
It is important to note that the system of ICFR is not designed to eliminate all risks, rather to mitigate risk to a reasonable level with controls that are balanced with and proportionate to the risks they aim to mitigate.
The system of ICFR is designed to mitigate risks to a reasonable level based on an on-going process to identify key risks, to assess effectiveness of associated key controls, and adjust as required, as well as to monitor its performance in support of continuous improvement. As a result, the scope, pace and status of those organizational assessments of the effectiveness of their system of ICFR reporting will vary from one organization to the other based on risks and taking into account their unique circumstances.
This annex is unaudited.
This unaudited document is attached to Parks Canada's Statement of Management Responsibility Including Internal Control Over Financial Reporting for the fiscal-year 2011-2012. As required by the new Treasury Board Policy on Internal Control, effective April 1st 2009, this document provides summary information on the measures taken by Parks Canada to maintain an effective system of internal control over financial reporting (ICFR). In particular, it provides summary information on the assessments conducted by Parks Canada as at March 31, 2012, including progress, results and related action plans along with some financial highlights pertinent to understanding the control environment unique to the Agency.
1.1 Authority, Mandate and Program Activities
1.2 Financial Highlights
The listing below provides key financial information for fiscal year 2011-2012. More information can be found in the attached Parks Canada's unaudited financial statements.
- Total revenues were $114,218,000 ($112,229,000 in 2011). Entrance fees were the largest revenue source, accounting for 49% (49% in 2011) or $56,292,000 ($55,308,000 in 2011).
- Total expenses were $725,777,000 ($688,480,000 in 2011). Excluding Salaries, Professional and Special Services and Amortization were the largest expenses, accounting for 7% or $53,679,000 (9% or 59,131,000 in 2011) and 14% or $101,924,000 (13% or $88,749,000 in 2011) respectively.
- Financial assets and non-financial assets each comprise about $76,798,000 ($117,153,000 in 2011) and $1,825,173,000 ($1,809,020,000 in 2011). Of the organization's total asset account, which stand at $1,901,971,000 ($1,926,623,000 in 2011), Tangible Capital Assets comprise the majority of the account (96% in 2012 and 93% in 2011).
- Total net liabilities were $182,862,000 ($192,499,000 in 2011). Accounts payable and accrued liabilities represent the majority of liabilities (45% in 2012 and 49% in 2011), followed by Employee future benefits (35% in 2012 and 32% in 2011).
- Net cash provided by the Government of Canada totalled $599,362,000 ($765,938,000 in 2011).
1.3 Service Arrangements Relevant to the Financial Statements
Parks Canada relies on other organizations for the processing of certain transactions that are recorded in its financial statements as follows:
- Public Works and Government Services Canada centrally administers the payments of salaries through its payroll system, the procurement of goods and services and the provision of accommodation.
- The Treasury Board Secretariat provides the Agency with contributions covering the employer's share of employees' medical and dental insurance premiums.
- The Treasury Board Secretariat provides the Agency with information used to calculate various accruals and allowances, such as the accrued severance liability.
- The Department of Justice provides legal services.
- Parks Canada's financial system related functional services are provided by Canadian Heritage. The services are delivered through an MOU whereby Parks Canada's share of the expenses during 2011/12 totalled $1,559,808 ($1,559,539 in 2011). The financial system's Information Technology (IT) related services are provided by Agriculture Canada to both Parks Canada and Canadian Heritage through a separate MOU.
1.4 Material Changes in Fiscal Year 2011-2012
The following significant departmental changes, relevant to the financial statements occurred during 2011/12:
- George Green was appointed Chief Administrative Officer (April 2012);
- Lianne Wright was appointed Acting Chief Financial Officer (January 2012);
- Rob Prosper was appointed Vice-President, Protected Areas Conservation and Establishment (October 2011);
- In Canada's Economic Action Plan 2012, the Government announced savings measures to be implemented by departments over the next three fiscal years starting in 2012-2013. As a result, the Agency will reduce its operating budget by approximately $29.2 million by achieving efficiencies, streamlining and consolidating operations, and ensuring that the Agency achieves its overall vision;
- Starting fiscal year 2011-2012, the Agency's financial statements are no longer to be audited by the Office of the Auditor General of Canada;
- Effective November 15, 2011, the Agency transferred its IT Infrastructure accountabilities for e-mail, data centres and networks to Shared Services Canada, including the stewardship responsibility for the assets and liabilities related to these services.
2 Control Environment of Parks Canada Relative to ICFR
Parks Canada 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 is well equipped to exercise these responsibilities effectively. Parks Canada's focus is to ensure that risks are well managed through a responsive and risk-based control environment that enables continuous improvement and innovation.
2.1 Key Positions, Roles and Responsibilities
Below are Parks Canada's key positions and committees with responsibilities for maintaining and reviewing the effectiveness of its system of ICFR.
Chief Executive Officer (CEO) - The CEO, 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 Head chairs the Executive Management Committee and is a member of the Audit Committee.
Chief Financial Officer (CFO) - Parks Canada's CFO reports directly to the CEO 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 Managers - Parks Canada's senior managers in charge of program delivery are responsible for maintaining and reviewing effectiveness of their system of ICFR falling within their mandate.
Chief Audit Executive (CAE) - Parks Canada's CAE reports directly to the CEO and provides assurance through periodic internal audits which are instrumental to the maintenance of an effective system of ICFR.
Audit Committee - The Audit Committee provides objective views on Parks Canada's risk management, control and governance frameworks. It is comprised of 3 external members and was established in 2008/09.
Executive Management Committee (EMC) - As Parks Canada's central decision-making body, the EMC 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.
Operations Committee - Parks Canada's Operations Committee is considered to be the recommending committee. They review, evaluate, recommend, coordinate and monitor implementation of initiatives and decisions that have significant operational and financial impacts.
2.2 Key Measures taken by Parks Canada
Parks Canada's control environment also 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:
- The Agency's Code of Ethics is a cornerstone of the Agency's organizational character. It enhances working conditions, employer/employee relations, interpersonal relationships and decision making at Parks Canada;
- An Ombudsman under the CEO whose mission is to promote and intervene in favour of an organizational culture based on the fundamental values of the Agency, as specified in the Agency's Code of Ethics. The Ombudsman is also the Agency's Senior Integrity Officer for internal disclosure and wrongdoing;
- A dedicated resource under the CFO on internal controls with the mandate to implement the Policy on Internal Control and Common Business Processes across the Agency;
- Annual performance agreements for all Executives with defined financial management responsibilities;
- Training program and communications in core areas of financial management;
- Link to TBS financial policies, along with Financial directives, guides and tools tailored to the Agency business and environmental requirements;
- Regularly updated delegated authorities matrix;
- IT processing systems to achieve greater security, data integrity, efficiency and effectiveness;
- An annual risk based audit plan which is instrumental to the assessment of ICFR;
- Implementation of Resolver as a repository and database tool to manage the Agency's information regarding internal controls and risk information;
- A Corporate Risk Profile, updated regularly to identify, assess and manage key areas of risk, including financial management;
- A detailed independent HR framework, policies and staffing rules reflecting the Agency's status as a separate employer within the Government of Canada;
- A strategic and operating forum for all PCXs, held at least annually, to discuss strategic, management and operations issues, promoting the community of management within the organization; and
- A focal point of expertise for Risk Management within the organization including experts in subject matter.
3 Assessment of the Parks Canada's system of ICFR
3.1 Assessment Baseline
In support of the Policy on Internal Control, organizations need to be able to maintain an effective system of ICFR with the objective of providing reasonable assurances that: a) transactions are appropriately authorized, b) financial records are properly maintained, c) assets are safeguarded and d) applicable laws, regulations and policies are complied with.
As a further step, and consistent with the Treasury Board Policy on Internal Control, Parks Canada has commenced in 2010/11 to implement a more systematic risk-based and multi-year assessment plan of the design and operating effectiveness of its system of ICFR.
Design effectiveness means that key controls relevant to ICFR have been properly identified, documented, in place and that they are aligned with the risks they aim to mitigate and that any remediation is addressed appropriately and in a timely manner. This includes ensuring appropriate mapping of key processes and IT systems to the main financial statement accounts or class of transactions.
Operating effectiveness means that the application of key controls over financial reporting has been tested over a defined period, they are working as intended and that any required remediation is addressed appropriately and in a timely manner.
Such testing covers all Agency level controls which include corporate or entity, general computer and business process controls.
Testing of the design and operating effectiveness of the key controls over financial reporting will lead to ensuring the on-going monitoring and continuous improvement of the departmental system of ICFR.
3.2 Scope of Agency Assessment as of March 31, 2012
Parks Canada has adopted an eight step process to facilitate a common and objective view of the robustness of controls across the organization, based on guidance provided by the Office of the Comptroller General to organizations implementing the Policy on Internal Control.
Based on the initial risk assessment and scoping step, Parks Canada will undertake measures to assess its system of ICFR, with a focus on the following control levels:
|Entity Level Controls||
|IT General Controls||
|Business Processes Controls||
In 2011-2012, the Agency reviewed its risk assessment and no changes occurred during the fiscal year that would impact the in-scope processes identified in the initial risk assessment.
For each control level and significant business process, Parks Canada will next undertake the following steps:
- Gather information pertaining to processes, risks and controls relevant to ICFR, including appropriate policies and procedures;
- Document the key processes with the identification and documentation of key risk and control points;
- Perform design testing e.g. conduct a walk-through of the documented processes and assess the alignment of controls to risks;
- Perform operational testing on the documented processes based upon the information gleaned from documentation and design testing;
- Implement remediation plans as required; and
- Develop and implement a monitoring approach and methodology.
4 Parks Canada's Assessment Results
The following summarizes the key assessment results from the documentation, design and operating effectiveness testing completed as of March 31st, 2012.
4.1 Documentation of Control Activities
Parks Canada focussed all its efforts on gathering all information pertaining to processes, risks and controls relevant to ICFR, including appropriate policies and procedures and on documenting control activities.
As a result of these assessments, the Agency identified the following significant adjustments that will need to be addressed through the implementation of the Policy on Internal Control:
- greater consistency in the quality, reliability and availability of documentation of controls and procedures across the Agency which must also be aligned with Office of the Comptroller General's common business requirements; and
- further supporting documentation in some areas, e.g. Manual of procedures for Capital Assets.
4.2 Design Effectiveness of Key Controls
During fiscal year 2011-2012, Parks Canada was not able to assess the design effectiveness of its in-scope processes. However, the Agency is committed to undertaking the design effectiveness of control activities to identify and strengthen key controls after completion of its documentation review. When completing design effectiveness testing, Parks Canada intends to ensure that key controls to ICFR are properly identified, documented, implemented and that they are aligned with the risks that they aim to mitigate and that any remediation is addressed appropriately and in a timely manner. The assessment activities will include identification of key risks and the internal controls implemented to mitigate these risks, and a walk through to assess the design effectiveness of the internal controls.
4.3 Operating Effectiveness of Key Controls
Parks Canada has not yet started the assessment of operating effectiveness of key controls. The Agency is committed to undertaking operating effectiveness testing of control activities after the completion of design effectiveness testing. When conducting operating effectiveness testing of key controls, Parks Canada will implement a risk-based testing approach and methodology that will identify key controls to be tested over a defined period of time, including the selection of a sample, the test period and the method and frequency of testing. Operating effectiveness for Entity Level Controls, and Business Process Controls will not commence until the associated remediation of design effectiveness have been implemented and a sufficient time has passed to allow the controls to function for a period of the financial year.
5 Parks Canada's Action Plan
5.1 Progress as of March 31, 2012
During 2011/2012, Parks Canada continued to document and assess its system of ICFR. Key progress was made over the year as follows:
Entity Level Controls:
- Internal audit conducted an audit on the Agency's Financial Management Framework. Final audit report expected to be issued in Winter 2013.
- Reviewed and updated the instrument of delegation to ensure the Agency's authorities are in compliance with Government policies.
- Reviewed and modified the Agency Chart of Accounts to ensure its compliance to the 2012-13 Government-wide Chart of Accounts.
IT General Controls:
- Followed up with Canadian Heritage on progress made on the OAG's financial system assessment. The majority of recommendations issued by the OAG have been addressed during the year 2011-2012.
Business Processes Controls:
- Commenced the documentation of the Procure to Pay process that will need to be standardized in the next year(s).
- Implementation of an electronic Specimen Signature Cards for delegated authorities.
- Partially implemented a new Point of Sale system which would allow financial resources to be recorded properly and in a timely manner, improve effectiveness and timeliness and improve quality and stewardship of financial information.
- Implementation of a new Directive on Revenue Comptrollership for User Fees and a Management of Revenue and Cash Standards were published. The Agency also completed the process documentation of this new system.
- Implementation of the Travel Expense Management Tool which became mandatory throughout Parks Canada on October 31, 2011. The tool was put in place to modernize and streamline the way the Agency processes its travel claims.
- Completed the documentation of the asset review and asset under construction processes. All accumulated adjustments related to capital assets were recorded in the financial system and risks identified to these errors were documented and identified as possible improvements to address in the financial system or procedures.
- Commenced the review of the Capital Asset Accounting Policy through documenting capital assets sub processes.
- Commenced the environmental liability process documentation through the updated contaminated site procedures and a guidance document published in February 2012.
- Completed the documentation on the preparation of the financial statements and public accounts processes identified under Financial reporting process (Include narrative description, flowchart and risk control matrix).
Other Relevant Progress made:
- Completed the annual risk assessment of the Agency's financial statements to ensure that all high accounts and high risk business processes are included in the scope of the Agency assessment.
- Commenced drafting a user guide for the Resolver software program which acts as a repository library and database tool to manage PCA's information regarding internal controls and risk management. In the future, control owners will use this software as part of the operational effectiveness assessment.
5.2 Action Plan for the Next Fiscal Year and Subsequent Years
Beginning in 2012-13, the action plan below highlights the progress that Parks Canada will be making in completing the assessment of its key controls. The work plan was developed based on an assessment of the highest risks to financial reporting and aligned with Parks Canada and the Government of Canada financial management initiatives.
|Documentation||Design Effectiveness||Operating Effectiveness||Ongoing Monitoring||Documentation||Design Effectiveness||Operating Effectiveness||Ongoing Monitoring|
|Entity Level Controls|
|Governance & Accountability||X||X|
|Chart of Accounts||X||X||X|
|IT General Controls|
|Parks Canada will rely on Canadian Heritage's assessment of ITGC's. Canadian Heritage has completed its documentation, design and operating effectiveness testing.|
|Business Processes Controls|