Annex to the Statement of Management Responsibility Including Internal Control Over Financial Reporting of the Public Service Commission for Fiscal Year 2014-2015 (unaudited)

For the Year Ended March 31, 2015

Note to the reader

The Treasury Board Policy on Internal Control requires that organizations demonstrate the measures taken to maintain an effective system of internal control over financial reporting (ICFR).

As part of this policy, departments are expected to conduct annual assessments of their system of ICFR, establish an action plan to address any necessary adjustments, and to attach to their Statement of Management Responsibility a summary of their assessment results and action plan.

Effective systems of ICFR aim to achieve reliable financial statements and to provide reasonable assurance that:

• Transactions are appropriately authorized;
• Financial records are properly maintained;
• Assets are safeguarded from risks such as waste, abuse, loss, fraud and mismanagement; and
• Applicable laws, regulations and policies are complied with.

It is important to note that the system of ICFR is not designed to eliminate all risks, but rather to mitigate risks to a reasonable level with controls that are balanced with, and proportionate to, the risks they aim to mitigate.

The maintenance of an effective system of ICFR is an ongoing process designed to identify, assess and adjust as required key risks and associated key controls, as well as to monitor its performance in support of continuous improvement. As a result, the scope, pace and status of departmental assessments of the effectiveness of the system of ICFR will vary from one organization to the other based on risks and taking into account unique departmental circumstances.

In summary, 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 to make any necessary adjustments.

1. Introduction

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

Detailed information on the PSC's authority, mandate and program activities can be found in the 2014-15 Departmental Performance Report and the 2015-16 Report on Plans and Priorities.

2. PSC System of Internal Control over Financial Reporting

2.1 Internal control management

The Public Service Commission 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 President, is in place and includes:

• Organizational accountability structures as they relate to internal control management to support sound financial management, including roles and responsibilities of senior managers in their areas of responsibility for control management;
• Values and ethics;
• Ongoing communication and training on statutory requirements, and policies and procedures for sound financial management and control; and
• regular monitoring of and updates on internal control management, as well as the provision of related assessment results and action plans to the President, senior management and, the Internal Audit Committee.

The Internal Audit Committee provides advice to the President 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

The Public Service Commission 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 centrally administers the payments of salaries and the procurement of goods and services in accordance with the Public Service Commission’s Delegation of Authority, and provides accommodation services;
• The Treasury Board of Canada Secretariat provides the Public Service Commission with information used to calculate various accruals and allowances, such as the accrued severance liability;
• The Department of Justice Canada provides legal services to the Public Service Commission; and
• Shared Services Canada provides information technology (IT) infrastructure services to the Public Service Commission in the areas of data center and network services. The scope and responsibilities are addressed in the interdepartmental arrangement between Shared Services Canada and the Public Service Commission.

Specific Arrangements

• Veterans Affairs Canada, during 2014-15 continued to provide the PSC with Oracle’s PeopleSoft Human Capital Management platform to capture and report all human resources data.

3. PSC Assessment Results during Fiscal Year 2014-15

3.1 New or significantly amended key controls

As part of its continuous improvement to the system of ICFR, in November 2014 the PSC formally approved and implemented an Internal Control Management Framework. The Office of the Comptroller General identified this a Notable Practice when reviewing the PSC’s 2014-15 Management Accountability Framework.

In the current year the transfer of responsibility for compensation to the Public Service Pay Centre located in Miramichi, New Brunswick commenced. The transfer is scheduled for completion in August 2015. The control framework was updated for this change in responsibility and process. No significant deficiencies that may cause a material misstatement to summary financial information for 2014-15 were identified.

3.2 Core Control Audit

The PSC’s Internal Audit Division performed a Core Control Audit during the 2014-2015 fiscal year. This audit was performed to ensure that the PSC’s core controls over administration in financial management, contracting, travel and hospitality and human resources were effective and resulted in compliance with corresponding legislation, policies, and directives. The audit was to provide Senior Management with an independent assessment of the design and operating effectiveness of the PSC’s system of internal controls.

There were no significant control weaknesses identified and management action plans have been developed to address all identified minor deficiencies.

3.3 Ongoing monitoring program

As part of its rotational testing plan, the PSC reassesses its internal control performance on a risk based testing approach across all control areas. Payroll and all the high risk areas are tested annually. Additionally, in 2014-2015, the medium risk areas of Capital Assets and Expenses and Accounts Payable were assessed. Overall, the key controls that were tested performed as intended. The testing was carried out at mid-year and year-end.

4. PSC's Action Plan

4.1 Progress during fiscal year 2014-15

The PSC continued to conduct its ongoing monitoring according to the previous fiscal year’s rotational plan as shown in the following table.

4.2 Action Plan for the next fiscal year and subsequent years

The PSC’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.

In 2015-16, the PSC will test the design and operating effectiveness of the new or revised payroll and compensation controls remaining in its purview after the transfer of compensation responsibility to the Public Service Pay Centre in Miramichi, New Brunswick.