Annex to the statement of management responsibility including internal control over financial reporting for the fiscal year ended March 31, 2016

Table of Contents

  1. Introduction
  2. Departmental system of internal control over financial reporting
  3. Canadian Heritage assessment results during fiscal year 2015-2016
  4. Departmental action plan

1. Introduction

This document provides summary information on the measures taken by Canadian Heritage to maintain an effective system of internal control over financial reporting (ICFR), including information on internal control management, assessment results and related action plans.

Detailed information on Canadian Heritage’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

Canadian Heritage 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 Head, is in place and includes:

  • 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 - Canadian Heritage’s department-wide Code of Conduct supported by management and by the Office of Values and Ethics which provides confidential, independent, impartial and informal assistance to employees and groups of employees who are experiencing conflicts affecting their work;
  • 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 plan to the Deputy Head and departmental senior management and, as applicable, the Departmental Audit Committee (DAC).

The DAC provides advice to the Deputy Head 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

Canadian Heritage relies on other organizations for the processing of certain transactions that are recorded in its financial statements as follows.

Common Arrangements:

  • Public Works and Government Services Canada (PWGSC) centrally administers the payment of salaries and the procurement of some goods and services in accordance with the Canadian Heritage’s Delegation of Authority, and provides accommodation services;
  • Treasury Board of Canada Secretariat provides Canadian Heritage with information used to calculate various accruals and allowances, such as the accrued severance liability;
  • The Department of Justice provides legal services to Canadian Heritage; and
  • Shared Services Canada (SSC) provides information technology (IT) infrastructure services to Canadian Heritage in the areas of data centre and network services.

Specific Arrangements:

  • Parks Canada Agency provides Canadian Heritage with a PeopleSoft system platform to capture and report human resources data.

3. Canadian Heritage assessment results during fiscal year 2015-16

Canadian Heritage being at the ongoing monitoring stage for all of its control areas presents its 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 significantly amended key controls in existing salary processes due to the implementation of a new pay system (Phoenix). A reassessment will be required once the pay system stabilizes and once the documentation is completed by PWGSC and guidance is received from the Office of the Comptroller General (TBS). This reassessment is now planned for fiscal year 2017-18.

On-going monitoring of key controls

As part of its rotational ongoing monitoring plan, Canadian Heritage completed its reassessment of Information Technology Applications Controls. The reassessment of the financial reporting process was started in 2015-16 but will only be completed in early 2016-17 as it was decided to use the most recent year-end financial information (2015-16) for the testing of controls in order to have the most current information possible. The reassessment of two salary sub-processes (hiring and termination) was also commenced in 2015-16 as scheduled; however, testing has been postponed to 2017-18 because the key controls have significantly been amended due to the implementation of the new pay system (Phoenix). Finally, the reassessment of the tangible capital assets has been extended to 2016-17 to take into account the tangible capital assets audit completed in 2015-16 by the Office of the Chief Audit Executive.

Key controls tested as part of Canadian Heritage’s ongoing risk-based monitoring plan in 2015-16 were found to be operating effectively with no significant deficiencies identified. However, opportunities for improvement were identified in the following areas:

  • Information Technology Application Controls
    1. SAP – Recommendations were made to review user access for key functionality to help ensure that access is restricted based on the least privilege principle. Further recommendations were made to examine the block and release configuration in the context of the entire purchase to payments business process control environment for certain purchase order document types. A management action plan addressing recommendations was developed by the process owners.
    2. AAPMIS – Recommendations were made to review user access for key functionality to help ensure that access is restricted based on the least privilege principle. Further recommendations were made to consider performing a secondary review over the accuracy of the calculation of deferred tuition amounts for each athlete impacted by the recent policy change. A management action plan addressing recommendations was developed by the process owners.

4. Departmental action plan

4.1 Progress during fiscal year 2015-16

Canadian Heritage continued to conduct its ongoing monitoring according to the updated annual fiscal year’s rotational plan as shown in the following table.

Previous year’s rotational ongoing monitoring plan for current year


Information Technology Application Controls

Completed as planned

Financial reporting

Extended into 2016-17


Postponed to 2017-18

Tangible Capital Assets

Extended into 2016-17

4.2 Action plan for the next fiscal year and subsequent years

Canadian Heritage’s rotational ongoing monitoring plan over the next three years, based on an annual validation of the high-risk processes and controls and related adjustments to the ongoing monitoring plan as required, is shown in the following table.

Rotational ongoing monitoring plan
The X indicates the year in which the monitoring for each key control area will take place.

Key control areas

Fiscal year 2016-17

Fiscal year 2017-18

Fiscal year 2018-19

Entity-level controls



IT general controls under departmental management




IT application controls



Grants and contributions

  • Generic process



Grants, Sports Canada

  • Athlete Assistance Program







Purchases and payables



Tangible capital assets



Financial reporting


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