Financial Statements for the year ended March 31, 2014

Annex to the Statement of Management Responsibility Including Internal Control over Financial Reporting – Fiscal year 2013-2014

1. Introduction

This document provides summary information on the measures taken by Citizenship and Immigration Canada ("CIC" or "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 CIC's authority, mandate, and program activities can be found in its latest Departmental Performance Report and in its most recent Report on Plans and Priorities.

2. Departmental System of Internal Control over Financial Reporting

2.1 Internal Control Management

The department has a well established governance and accountability structure to support departmental assessment efforts and oversight of its system of internal control. A departmental internal financial control management framework, approved by the Deputy Head, is in place which includes:

• organizational accountability structures as they relate to internal financial control management to support sound financial management and reporting, including roles and responsibilities for senior managers in their areas of responsibility for control management;
• a code of conduct, including values and ethics;
• on-going communication and training on statutory requirements, policies, and procedures for sound financial management and control; and
• monitoring and regular updates on internal financial control management as well as the reporting of annual assessment results and related action plans to the Deputy Head and the Departmental Audit Committee.

CIC's senior management 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 equipped to exercise these responsibilities effectively. The Department's focus is on ensuring that risks are managed well through a responsive and risk based control environment that enables continuous improvement and innovation.

2.1.1 Key positions, roles and responsibilities

The key positions and committees responsible for maintaining and reviewing the effectiveness of the Department's system of ICFR are outlined below.

Deputy Minister: As Deputy Head, the Deputy Minister is the Department's accounting officer and 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 Department’s Executive Committee, and she is a member of the Audit 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 program delivery or corporate branches are responsible for maintaining and reviewing effectiveness of the portions of the system of ICFR falling within their area of responsibility.

Chief Audit Executive (CAE): The CAE reports directly to the Deputy Minister and provides an independent assurance through periodic internal audits on the effectiveness of risk management, control and governance processes, which are instrumental to the maintenance of an effective system of ICFR.

Audit Committee: The Audit Committee is an advisory committee that provides objective advice and recommendations to the Deputy Minister on the Department's risk management, control and governance frameworks and processes. The Audit Committee is comprised of five members, including three external members. It reviews CIC's Corporate Risk Profile and its system of internal control, including the risk based assessment plan, annual assessment results and progress on implementation of remediation action plans related to the system of ICFR.

Executive Committee (ExCom): As CIC's senior decision making body, ExCom reviews, approves and monitors the Corporate Risk Profile and the departmental system of internal control. ExCom is supported, among others, by the following committees: the Policy Committee, which develops policy; the Business Operations Committee, which oversees operational delivery and the innovation agenda; and the Management Accountability Committee, which focuses on a strategic agenda to strengthen departmental accountability.

Departmental Management Committee (DMC): The DMC is a regular information sharing forum for senior managers to connect on key management and business developments.

Working committees: A number of working committees inform and advise senior management on key segments of the Department's business.

2.1.2 Key measures taken by CIC

CIC's control environment also includes a series of measures to equip staff to manage risks effectively by raising awareness, providing appropriate knowledge and tools, and developing skills.

Key measures include the following:

• a Values and Ethics Champions Network, aiming to solidify linkages between values and ethics regional and sector champions across the organization;
• a departmental Code of Conduct supported by the Deputy Minister as Values and Ethics champion;
• the Office of Conflict Resolution under the Deputy Minister;
• a Financial Policies and Internal Controls Division reporting to the Deputy CFO;
• annual performance agreements with clear financial management responsibilities for all executives;
• training programs, communications and tools in core areas of financial management;
• departmental directives, procedures and guidelines tailored to CIC's business and control environment;
• a periodically updated Delegation of Spending and Financial Authority Instrument;
• the documentation of main business processes and of the related key financial risks and control points to support the management and oversight of its system of ICFR;
• secure financial information technology systems to achieve greater security, integrity, efficiency and effectiveness;
• internal client service standards for the Department; and
• formal internal quarterly reporting on achievements by senior management to the Executive Committee, as well as the tracking of the use of budgetary authorizations and spending limits effective at the Department.

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:

• Public Works and Government Services Canada (PWGSC) centrally administers the payments of salaries and the procurement of goods and services, as per the Department's Delegation of Spending and Financial Authority Instrument, and also provides accommodation services;
• Treasury Board Secretariat provides the Department with information used to calculate various accruals and allowances, such as the accrued severance liability;
• The Department of Justice provides legal services to CIC; and
• Shared Services Canada (SSC) provides IT infrastructure services to the Department in the areas of data centre and network services. 

Specific arrangements:

• The Department of Foreign Affairs, Trade and Development (DFATD) provides common administrative services and support for the Immigration Program outside Canada, under a memorandum of understanding with CIC. Common administrative services include accommodations, revenues and payments processing, accounting and telecommunications. Program support is offered by both Canada based officers and locally engaged staff in missions abroad. DFATD also prepares periodic financial reports for CIC staff on the revenues collected and the expenses incurred directly in the field; and
• Medavie Blue Cross provides claims administration for the Interim Federal Health Program (IFHP). The IFHP reimburses service providers for emergency and essential health care services in cases where eligible clients, such as refugees, do not qualify for provincial, territorial or private health coverage.

3. Departmental Assessment Results During Fiscal Year 2013-2014

During 2013-2014, the Department progressed substantially in all design effectiveness testing and operating effectiveness testing of key financial control areas.  On-going monitoring was performed as per plan.

3.1 Design Effectiveness Testing of Key Controls

In the current year, the department completed design effectiveness testing of the financial controls that are embedded within the following business processes:

• non-salary operating expenses (at Headquarters);
• revenue collection, salaries and operating expenses (at one Canadian case processing location);
• revenue and operating expenses from abroad (at three international locations);
• services provided without charge by other government departments;
• due from Consolidated Revenue Fund;
• immigrant loans;
• deferred revenue; and,
• adjusting journal entries.

The existence of relevant and strong financial controls was confirmed through the documentation and design assessment of the above significant accounts or business processes. The main control objectives pertaining to each account or business process were generally well supported by appropriate key control activities. Despite this overall positive assessment, control design remediation requirements were identified in the following areas:

• documentation of procedures and controls to perform key financial duties;
• performance of review of certain documents, transactions and reconciliations; and,
• existence of documentary evidence of the application of certain key controls, such as significant reviews, reconciliations and approvals.

Remediation of key financial control deficiencies has substantially advanced in these control areas for the above significant accounts or business processes, and they will all have been remediated for the 2014-2015 fiscal year-end.

As well, in 2013-2014, CIC prepared system descriptions and substantially advanced its design effectiveness testing of the key financial controls embedded within the following business processes:

• revenue collection, salaries and operating expenses (at another Canadian case processing location);
• revenue and operating expenses from abroad (at another international location);
• grants to individuals – Resettlement Assistance Program; and,
• accounts payable, accrued liabilities and payments.

The design effectiveness testing of these processes’ key financial controls will be completed in 2014-2015, and the results of this work will be disclosed in next year’s annex. 

3.2 Operating Effectiveness Testing of Key Controls

In 2013-2014, the Department completed operating effectiveness testing of the key financial controls that are embedded within the following business processes:

• revenue processing and accounting in Canada (at Headquarters);
• non-salary operating expenses (at Headquarters);
• revenue collection, salaries and operating expenses (at one Canadian case processing location);
• revenue and operating expenses from abroad (at three international locations);
• services provided without charge by other government departments;
• due from Consolidated Revenue Fund;
• deferred revenue; and,
• adjusting journal entries.

Several of these processes’ key financial controls operated effectively throughout the periods that were tested. However, some of them were not fully effective and the Department identified remediation requirements in the following areas:

• existence of documentary evidence of the application of certain key controls, such as significant reviews, reconciliations and approvals;
• full compliance of transactions with the approved delegated financial authorities within the Department; and,
• coding of certain data elements in the financial and accounting system.

Remediation of key financial control deficiencies has substantially advanced in these control areas for the above significant accounts or business processes and they will all have been remediated by the end of fiscal year 2014-2015.

As well, in 2013-2014, CIC substantially advanced its operating effectiveness testing of the key financial controls embedded within the following business processes:

• revenue collection, salaries and operating expenses (at another Canadian case processing location);
• revenue and operating expenses from abroad (at another international location);
• immigrant loans; and,
• accounts payable, accrued liabilities and payments.

The operating effectiveness testing of these processes’ key financial controls will be completed in 2014-2015, and the results of this work will be disclosed in next year’s annex.

3.3 On-going Monitoring of Key Controls

As part of its ICFR Framework, CIC has pursued ongoing monitoring of the key financial controls that are embedded within the main business processes existing at Canadian case processing locations and international locations.

In the current year, the Department completed its planned on-going monitoring by either substantially advancing or completing the assessment of key financial controls exercised at two Canadian case processing locations and four international locations.

As a result of on-going monitoring, the Department identified remediation required in the following areas:

• existence of documentary evidence of the application of certain key controls, such as significant reviews, reconciliations and approvals;
• full compliance of transactions with the approved delegated  financial authorities within the Department; and,
• coding of certain data elements in the financial and accounting system.

Remediation of key financial control deficiencies is substantially advanced in these control areas at the locations where assessments were completed during the year, and they will all have been remediated by the end of fiscal year 2014-2015

4. Departmental Action Plan

4.1 Progress During Fiscal Year 2013-2014

During 2013-2014, CIC has continued to make significant progress in assessing and improving its key financial controls. Below is a summary of the main progress made by the Department based on the plans identified in the previous fiscal year’s annex:

4.2 Status and Action Plan for the 2014-2015 Fiscal Year and Subsequent Years

Building on progress to date, CIC is positioned to complete the full assessment of its system of ICFR in 2014-2015.  Following that year, the Department will be fully applying its rotational on-going monitoring plan to reassess control performance on a risk basis across all control areas.  The status and action plan for the completion of the identified control areas for the 2014-2015 fiscal year and subsequent years is as follows:

* The Budgeting and Forecasting business process does not have a significant impact on the departmental annual financial statements. Therefore, although CIC will continue to monitor the design effectiveness of the key controls embedded within this business process, it will not test their operating effectiveness.