Audit of Financial Resource Management
| Criteria Title | Audit Criteria |
|---|---|
| Line of Enquiry 1: Governance | |
| 1.1 Governance structure | An effective governance structure related to the financial allocation of resources is established, communicated and monitored. |
| 1.2 Authority and accountability | Authority, accountability and responsibilities with regards to budgeting and forecasting, as well as financial resource allocation decision-making are clear, communicated and understood. |
| Line of Enquiry 2: Risk Management | |
| 2.1 Operational plans and objectives | The financial impact of decisions and plans aimed at achieving the Agency’s priorities, have been reflected in the level of resources allocated. The activities, schedules and resources required to achieve objectives have been integrated into the budget. |
| 2.2 Risk identification and mitigation | Mechanisms exist to identify and report on risks, allowing management to monitor and respond to such risks by allocating/reallocating financial resources in a timely manner, to facilitate the achievement of objectives/results in line with the Agency’s priorities. |
| Line of Enquiry 3: Internal Control | |
| 3.1 Guidance, tools and training | The organization provides employees with the necessary training, guidelines, tools, resources and information to support the discharge of responsibilities in the area of resources management, that is to say planning, budgeting and forecasting. |
| 3.2 Plans and forecasts | Effective processes exist at the appropriate level of detail for the preparation of timely budgets and for the analysis of financial information regarding actual and forecasted expenditures. |
| 3.3 Challenge and monitoring functions | Effective and timely processes exists to monitor results against plans and challenge assumptions related to forecasted expenditures, including the review of on-going commitments in support of the decision-making for resource allocations. |
| 3.4 Reporting financial information | Effective processes exist to inform senior management of the Agency’s financial position, including information regarding budget/resource transfers approved within branches. Reviews of results achieved against expectations are conducted by senior management in a timely manner. |
Appendix B – Scorecard
The ratings and supporting explanations summarize the current status for each audit criterion.
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| Criterion | Rating | Conclusion | Rec |
|---|---|---|---|
| Governance | |||
| 1.1 Governance structure | S | An effective governance structure related to the financial allocation of resources is established, communicated and monitored. | - |
| 1.2 Authority and accountability | NMO | Authority, accountability and responsibilities with regards to budgeting and forecasting, as well as financial resource allocation decision-making are clear, communicated and understood. | 1 |
| Risk Management | |||
| 2.1 Operational plans and objectives | NI | There are no Agency-wide guidelines and tools for the preparation of internal operational plans. Branches are developing internal operational plans that vary in the level of detail and the type of information presented. The internal operational plans reviewed do not ensure that activities and resources required to achieve objectives are documented and aligned with branch Agency Operational Planning (AOP) submissions and budgets. In the absence of guidance, there is an increased risk that plans may not effectively support the achievement of the Agency’s priorities. | 2 |
| 2.2 Risk identification and mitigation | S | Subject to the preparation of sound internal operational plans, the Agency’s mechanisms to identify and report on risks allow management to monitor and respond to such risks. | - |
| Internal Controls | |||
| 3.1 Guidance, tools and training | NMO | Training is occurring; however this is taking place in a piecemeal fashion due to the absence of an Agency-wide formal training plan for financial management. There is no continuous integrated learning strategy for the Agency managers and staff in the area of planning, budgeting and forecasting. | 3 |
| 3.2 Plans and forecasts | NMO | Branches are conducting monthly financial situation reviews using various tools during periods between formal management variance reports (MVRs) (only two in 2011-12). Financial situation reports presented to EC in 2011-12 were often incomplete, that it to say that they did not include forecasting. Financial information on grants and contributions (G&C) is tracked through parallel systems that are not integrated; G&C forecast information is difficult to derive and is not consistently monitored through the MVR process. In 2012-13, many new initiatives are under way:
Management must ensure that G&Cs and all expenditures by fund types are included in each MVR planned for 2012-13. The “Budget Transfer Request form” used to document and authorize budget transfers is not effective. |
4, 5 |
| 3.3 Challenge and monitoring functions | NMI | The challenge function is performed at many levels in the organization. Subject to Recommendation 1 related to the role and use of FMAs, the processes in place with regards to challenge and monitoring functions meet the audit criteria. | 1 |
| 3.4 Reporting financial information | NMO | In the past, not all financial position reports presented to EC included anticipated expenditures and forecasted surpluses/deficits. Therefore, financial situation decks presented to EC were not complete. | 6 |
Appendix C – Initial resource allocation process
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Appendix C – Initial Resource Allocation Process
The diagram illustrates and explains the steps for the Initial Resource Allocation Process, for the 2012-13 fiscal year. The diagram uses text boxes and arrows to indicate the next steps.
There are five rows in this diagram. The first row represents the steps taken by the Executive Committee (EC). The second row represents the steps taken by the Resource Planning Management Committee (RPMC). The third row represents the steps taken by the Business Transformation Office (BTO). The fourth row represents the steps taken by the Office of the Chief Financial Officer (OCFO) and the fifth and last row represents the steps taken by the branches.
The first row in the diagram (Executive Committee) illustrates that its first step is to develop its Deficit Reduction Action Plan (DRAP). The next step illustrates the DRAP is endorsed and the third step illustrates that a Record of Decision (Treasury Board Submission) is signed by the Chief Public Health Officer.
The second row in the diagram (Resource Planning Management Committee) illustrates that its first step is to get guidance and direction for the development of its DRAP. The next step is the approval step, followed by the Record of Decision. The final step is the go to its in-year process.
The third row in the diagram (Business Transformation Office) illustrates its first step as also being the development of its DRAP along with developing its business transformation initiatives. The proposal of the DRAP is the second and final step in this row.
The fourth row in the diagram (Office of the Chief Financial Officer) illustrates that its first step is to consult with the Business Transformation Office (third row) and the branches (branches are the fifth row in diagram). The OCFO then develops, as a second step, its DRAP. The third step is showing that once EC approves their DRAP, their next and fourth step is the recommendation for initial allocation of financial resources. Following this, the diagram illustrates that initial budgets at the branch level, are now inputted into SAP. Once budgets have been inputted into SAP, the next step is to go to its in-year process.
The fifth and final row, (branches), illustrates their first step as also being the development of DRAP. The next step is the assistant deputy minister decision to allocate the initial budgets for directorates and divisions. Following this, their thirds step is the initial allocation of financial resources and their final and fourth step is to go to their in-year process.
Appendix D – In-year financial resource management cycle
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Appendix D - In-Year Financial Resource Allocation Process
The diagram illustrates and explains the steps for the 2012-13 In-Year Financial Resource Management Cycle (in a circular motion going clockwise). The diagram uses text boxes and arrows to indicate next the next steps.
There is a text box on the left hand side which entitled “Initial Resource Allocation”. From that text box, an arrow is pointing to the right into the main illustration (circular motion going clockwise) where there is the first text box for the cycle entitled “Branch Program Operations”. From this first text box, the arrow goes upwards and then to the right, into the second text box entitled “In-Year Resource Allocation Branch Monthly Variance Review (MVR) – Analysis of variances from plan. Forecasting and identification of risks, financial pressures, surpluses and shortfalls”. From this second text box, the arrow continues pointing to the right and then points down and into a third text box entitled “MVR Review by senior branch management”. From it, the arrow again pointing downwards goes into the fourth text box that says “Branch resource re-allocation decisions”. From this fourth text box, the arrow continues pointing downward and then to the left, to the fifth text box which is entitled “Report results and pressures to Agency senior management”. From it, the arrow, pointing to the left goes into a text box entitled “Review of pressures and resource re-allocation decisions by RPMC” and finally, from this last text box, the arrow returns to the first step which is “Branch Program Operations”.
Appendix E – Management variance reporting process
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Appendix E – Management variance reporting process
The diagram illustrates and explains the Management variance reporting (MVR) process. This process is composed of six levels: The Office of the Chief Financial Officer (OCFO), Financial Management Advisor (FMA), assistant deputy ministers (ADMs), director generals (DGs), directors and managers and administrative officers (AOs).
The illustration indicates that the Office of the Chief Financial Officer issues the MVR Call Letter to the FMAs. They then forward the Call Letter to their respective administrative officers who then coordinate the MVR process with client branches. Following that step, the analysis of actual expenditures and commitments by the AOs takes place. The analysis of actual expenditures and commitments is also given, by the AOs, to their respective director and managers. Once the directors and managers have reviewed it, this information is returned to the AOs who then prepare the MVR templates.
The illustration then indicates that after the MVR templates are prepared by the AOs, they then forward the anticipated expenditure salaries and operations and maintenance to their respective directors and managers who justify this information. Once justified, this information is sent back to the AOs who then request that the director and manager prepare a divisional MVR. The directors and managers now send their divisional MVR up to their respective director generals for review and for challenge. Once the director generals have reviewed, a directorate MVR is created and sent up to the FMAs for review and for challenge. The directorate MVR is also sent to the OCFO for feedback. Feedback from the FMAs is then sent to the ADMs who now create their branch MVR. The last step of this process is that the branch MVR is sent to the OCFO where a monthly financial situation report is created and presented to the Executive Committee.
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