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Annex to the statement of management responsibility including internal control over financial reporting Treasury Board of Canada Secretariat Fiscal Year 2019–20

On this page

  1. Introduction
  2. Departmental system of internal control over financial reporting
  3. Departmental assessment results during fiscal year 2019–20
  4. Departmental action plan for the next fiscal year and subsequent fiscal years
  5. Common service providers’ annual assessment results for fiscal year 2019–20
  6. Common service providers’ action plan for the next fiscal year and subsequent fiscal years

1. Introduction

This document provides a summary of the measures taken by the Treasury Board of Canada Secretariat (the Secretariat) 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 the Secretariat’s authority, mandate and programs can be found in its most recent Departmental Plan and Departmental Results Report.

2. Departmental system of internal control over financial reporting

In this section

2.1 Internal control management

The Secretariat has a well‑established governance and accountability structure to support departmental assessment efforts and oversight of its system of internal control. This structure is formalized in the Secretariat’s Framework for Internal Controls Over Financial Management, approved by the Secretary, and includes the following:

  • organizational accountability structures as they relate to internal control management to support sound financial management, including the roles and responsibilities of senior managers in their areas of responsibility for internal control management
  • a Values and Ethics Office, which provides educational and awareness programs and has developed a departmental code of conduct
  • ongoing communication and training on statutory requirements, policies, and procedures for sound financial management and control
  • monitoring of, and regular updates on, internal control management, as well as the provision of related assessment results and action plans to departmental senior management and the Treasury Board Secretariat Audit Committee formerly the Government of Canada Audit Committee (GCAC)

The Audit Committee is an independent and objective advisory committee to the Secretary. It is responsible for providing advice to the Secretary on the adequacy and functioning of the Secretariat’s risk management, control and governance frameworks and processes.

2.2 Service arrangements relevant to financial statements

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

Common service arrangements
  • Public Services and Procurement Canada (PSPC) centrally administers the payment of salaries and the procurement of goods and services in accordance with the Secretariat’s Delegation of Authority and provides real property services.
  • The Department of Justice Canada provides legal services to the Secretariat.
  • Shared Services Canada provides information technology (IT) infrastructure services to the Secretariat, such as data centres and network services.
  • The Secretariat, a central agency, provides services related to insurance plans for federal public service employees and centrally administers payment of the employer’s share of contributions to statutory employee benefit plans (the Public Service Pension Plan, Employment Insurance (EI) Plan, Canada Pension Plan or Québec Pension Plan (CPP/QPP), and the Supplementary Death Benefit Plan) on behalf of other departments and agencies.

Readers of this Annex may refer to the annexes of the above-noted organizations for a greater understanding of the systems of ICFR related to these services.

The Secretariat relies on other external service providers and departments for the processing of certain transactions or information that are recorded in its financial statements as follows.

Specific arrangements
  • The Office of the Chief Actuary within the Office of the Superintendent of Financial Institutions Canada prepares a triennial actuarial valuation of the Public Service Pension Plan.
  • PSPC performs the day‑to‑day administration of the Public Service Pension Plan.
  • PSPC performs the day‑to‑day administration of some centrally funded expenses, such as the employer’s share of CPP/QPP contributions, EI premiums and provincial payroll taxes. These types of expenses are recorded on the Secretariat’s financial statements and reflect the Treasury Board’s role as the employer of the public service.
  • The Secretariat relies on the internal controls of a number of insurance companies (at present, Sun Life Assurance Company of Canada, Canada Life Assurance Company (formerly Great West Life Assurance Company), Industrial Alliance and Manulife), which provide services such as health care plan administration, dental plan administration and insurance services. As external service providers, pursuant to contracts with the Government of Canada, these insurance companies have the authority and responsibility to ensure that these services are managed in accordance with the terms and conditions set out by the Secretariat’s Pensions and Benefits Sector.

The Secretariat provides certain optional corporate services (for example, accounting services and financial systems) to several departments on a cost-recovery basis. These services are governed by memoranda of understanding between the Secretariat and other government departments.

3. Departmental assessment results during fiscal year 2019–20

In this section
Table 1. Progress during fiscal year 2019–20
Previous year’s rotational ongoing monitoring plan for current year Status
Payroll (assessed from 2017–18 through 2019–20): Fiscal year 2019–20 activities completed as planned, remedial actions started
Vote 20 (Provincial Health Insurance Premiums (PHIP), Quebec Parental Insurance Plan (QPIPI), Canada/Quebec Pension Plan (CPP/QPP) and Employment Insurance premiums (EI) Fiscal year 2019–20 activities completed as planned, remedial actions started
Delegation of Financial Signing Authorities Fiscal year 2019–20 activities completed as planned, remedial actions started
Financial Reporting & Closing Cycle and Travel Planned for 2019-20 (March/April 2020) postponed due to capacity issues during the COVID-19 pandemic
Budgeting & Forecasting Postponed due to capacity issues and on-going changes to the business process

The key findings and significant adjustments required from the current year’s assessment activities are summarized below.

3.1 New or significantly amended key controls

The COVID-19 pandemic has affected changes to key controls to TBS’ business processes. Management is currently evaluating whether COVID-19 has had an impact on the effectiveness of its key controls.

3.2 Ongoing monitoring program

As part of its rotational ongoing monitoring plan, the Secretariat completed its reassessment of the financial controls within the payroll, Vote 20 (PHIP, QPIPI, CPP/QPP and EI) and the Delegation of Financial Signing Authorities business processes. For the most part, the key controls that were tested performed as intended, with remediation required as follows:

Payroll

  • Enhancing the Account Verification Framework (AVF), to include a post-payment verification of a sample of pay transactions.
  • Ensuring regular review of salary actuals compared to forecasts to ensure employees are getting paid accurately and on time. 

Delegation of Financial Signing Authorities

  • Simplifying the delegation instrument format to ensure it isclear to all its users and providing specific training on the delegation instrument.
  • Ensuring specimen signatures are up-to-date and maintaining appropriate records.

An action plan addressing the remediation requirements above are being developed.

The Secretariat also completed a risk assessment in fiscal year 2019–20 using an environmental scan. The results of the risk assessment were used to update the Secretariat’s risk-based ongoing monitoring plan (see sections 4 and 6).

4. Departmental action plan for the next fiscal year and subsequent fiscal years

The Secretariat’s rotational ongoing monitoring plan for the next three years, presented in Table 2, is based on its annual risk assessment.

The Secretariat is assessing the impact of COVID-19 on the internal control environment, which may result in future changes to the ongoing monitoring plan as currently stated.

Table 2. Rotational ongoing monitoring plan
Key control areas Fiscal year
2020–21		 Fiscal year
2021–22		 Fiscal year
2022–23
Entity-level controls No No Yes
IT general controls (ITGCs)table 2 note 1 under departmental management No No Yes
Financial reporting and closing cycle Yes No No
Budgeting and forecasting Yes No No
CFO Attestations and Costing No No Yes
Investment Planning No Yes No
Payroll No Yes No
Operating expenses and accounts payable Yes Travel and Contractingtable 2 note 2   No No
Revenues No No No
Capital assets Yes No No

Table 2 Notes

Table 2 Note 1

ITGCs related to Central Agency Cluster Shared Systems (CAC‑SS) are out of scope for the Secretariat’s ongoing monitoring plan. The SAP system is audited annually by the Office of the Comptroller General based on client needs and service arrangements.

Return to table 2 note 1 referrer

Table 2 Note 2

Contracting – in light of COVID-19 pandemic, the scope of the assessment will involve both a pre-pandemic (prior to March 14, 2020) and a pandemic phase. The assessment of transactions that took place during the pandemic phase will include an assessment of the use of electronic signatures. 

Return to table 2 note 2 referrer

5. Common service providers’ annual assessment results for fiscal year 2019–20

The Secretariat provides common services related to the administration of public service insurance plans (TBS Vote 20) and the cost-recovery process for statutory employee benefit plans. Because the Secretariat manages government‑wide funds and public service employer payments, other government departments and agencies rely on the Secretariat to process transactions that impact their financial statements with respect to the insurance, employee benefits and statutory pay‑related transactions outlined in Table 3.

In delivering these common services, the Secretariat uses data produced by federal pay systems, including Phoenix, which is centrally administered by PSPC. Significant interdependencies exist between PSPC’s and the Secretariat’s pay administration processes because many of the key controls related to the processing of insurance premiums, employee benefits and other pay‑related transactions are automated in the pay system. Although the Secretariat carries out ongoing monitoring activities for controls that are under its responsibility, it must rely on the PSPC control environment for assurance as to the integrity of the data it uses in delivering common services.

In fiscal year 2019–20, the Secretariat, as a common service provider, completed an assessment of the operational effectiveness of financial controls for the Provincial Health Insurance Premiums (PHIP), Quebec Parental Insurance Plan (QPIPI), Canada/Quebec Pension Plan (CPP/QPP) and Employment Insurance premiums (EI) as part of its rotational ongoing monitoring plan. During the period examined, six control weaknesses were identified and assessed as low risk; mainly relating to lack of evidence.

It should be noted that the PHIP was only applicable to employees working in British Columbia (BC). BC has recently moved its PHIP into a Provincial Payroll Taxes (PPT), which has prompted TBS (PBS) to coordinate a reconciliation of accounts. This reconciliation is expected to be completed by the end of July 2020. It is recommended that an assessment of the British Columbia Medical Services Plan (BC MSP) wind-up process be included in TBS’ ongoing monitoring plan for assessment within the next 3 years.

6. Common service providers’ action plan for the next fiscal year and subsequent fiscal years

The Secretariat, as a common service provider of public service insurance and statutory employee benefit plans, has completed its annual risk-based assessment of the internal controls for these services, via an environmental scan. The results of this assessment are reflected in the rotational ongoing monitoring plan in Table 3.

Table 3. Rotational ongoing monitoring plan for common services
Key control areas Fiscal year
2020–21		 Fiscal year
2021–22		 Fiscal year
2022–23		 Fiscal year
2023–24		 Fiscal year
2024–25
Public Service Health Care Plan Yes No No No No
Public Service Dental Care Plan Yes No No No No
Pensioners’ Dental Care Plan No Yes No No No
Disability Insurance Plan No No Yes No No
Public Service Management Insurance Plan No No Yes No No
Provincial payroll taxes No No Yes No No
Provincial health insurance plan premiums Table 3 note * Yes N/A N/A N/A N/A
Québec Parental Insurance Plan No No No No Yes
Public Service Pension Plan No No No Yes No
Supplementary Death Benefit No No No Yes No
Canada Pension Plan or Québec Pension Plan (CPP/QPP) No No No No Yes
Employment Insurance (EI) premiums No No No No Yes
Program Administration costs (as it relates to TBS Vote 20 program) No Yes No No No

Table 3 Notes

Table 3 Note *

internal control assessment of the British Columbia Medical Services Plan (BC MSP) wind-up process. This program will not continue after the wind-process has been completed and will be removed from future ongoing monitoring plans.

Return to table 3 note * referrer

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