Internal Control Over Financial Reporting - Statement, Assessment Summary and Action Plan 2013–2014

Summary of the assessment of effectiveness of the internal control systems over financial reporting and the action plan of Library and Archives Canada for fiscal year 2013–2014

Annex to the Statement of Management Responsibility Including Internal Control Over Financial Reporting

1. Introduction

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

Detailed information on LAC's authority, mandate and program activities can be found in the Departmental Performance Report and the Report on Plans and Priorities.

2. Departmental system of internal control over financial reporting

2.1 Internal control management

LAC 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;
  • ongoing communication and training on statutory requirements, policies and procedures for sound financial management and control; and
  • oversight of internal management and periodic updates to internal control systems. It also includes a presentation of the assessment results and action plans to the Deputy Head and the organization's senior management.

For 2013–2014, the Small Departments Audit Committee (SDAC) acted as the Departmental Audit Committee (DAC) for LAC, and thus provided independent governance.

2.2 Service arrangements relevant to financial statements

LAC relies on the following organizations for processing certain transactions that are recorded in its financial statements:

Common arrangements

  • Public Works and Government Services Canada centrally administers the payment of salaries and the procurement of goods and services as per LAC's delegation of authority, and provides accommodation services;
  • Treasury Board Secretariat provides LAC with information to calculate various accruals and allowances, such as the accrued severance liability;
  • The Department of Justice provides legal services to LAC;
  • Employment and Social Development Canada provides services regarding the employer's share of workers' compensation; and
  • Shared Services Canada provides information technology (IT) infrastructure services to LAC in the areas of data centre and network services. The scope and responsibilities are addressed in the interdepartmental arrangement between Shared Services Canada and LAC.

3. Departmental assessment results during fiscal year 2013–2014

LAC continued to make progress in assessing and improving its key controls.

3.1 Documentation and design effectiveness testing of key controls

In 2013–2014, LAC documented and tested the design effectiveness of key controls over the accruals, benefits, and the production of financial statements. Ten processes out of twelve were assessed and those that involve controls at the entity-wide level.

The tests showed that in general, LAC continues to have sound controls in these areas.

The collection's market value is priceless; however, accounting standards only allow for a symbolic value to be entered on financial statements. Therefore, the key controls cannot be tested for design effectiveness. The accounting standards are reviewed annually to ensure that the accounting method is still appropriate.

When the situation calls for it, specific corrective measures are implemented. Otherwise, action plans have been developed or are being developed to fully remedy, within a reasonable timeframe, any weaknesses noted in these controls. These measures will be monitored in the upcoming fiscal years to ensure that they are implemented as planned.

Several of the corrective measures recommended sought to increase the quality and quantity of the evidence and audit trails left during key internal controls.

3.2 Operating effectiveness testing of key controls

In 2013–2014, LAC completed testing the operating effectiveness of key controls in the accruals, benefits and the production of financial statements.

For the reasons stated earlier, an operating effectiveness test to establish a process that would determine the collection's value was not done.

Some minor isolated control problems were noted in these processes and an action plan with corrective measures was developed for implementation in 2014–2015 to remedy these weaknesses within a reasonable timeframe.

3.3 Ongoing monitoring of key controls

In 2013–2014, LAC followed up on the corrective measures that resulted from recommendations made in previous years and developed an ongoing monitoring plan for the future.


4. LAC action plan

4.1 Progress during fiscal year 2013–2014

LAC continued to make progress in assessing and improving its key controls. The following table summarizes LAC's progress based on plans identified in the previous year's annex.

Element in previous year's action plan

Status

Entity-level controls

Not applicable. Cyclical monitoring will resume in 2015–2016.

Operating process controls

  • Accruals


  • Value of the collection


  • Benefits


  • Production of financial statements


Documenting the process and testing operational and design effectiveness has been completed. The recommendations and corrective measures action plan will be implemented in 2015–2016.

Documenting the process has been completed and accounting principles will continue to be reviewed for accuracy.

Documenting the process and testing operational and design effectiveness has been completed. The recommendations and corrective measures action plan will be implemented in 2015–2016.

Documenting the process and testing design effectiveness has been completed. Testing of operating effectiveness has started and will be completed with the production of the 2013–2014 financial statements. The recommendations and corrective measures action plan will be implemented in 2014–2015 and 2015–2016.

IT general controls

Assessment and evaluation of IT general controls will start in 2014–2015. However, LAC still leads the working groups on HRIS/PeopleSoft, FreeBalance and HRG for shared travel services, and it is implementing the recommendations of these respective groups.

[Text version: Progress during fiscal year 2013–2014]

4.2 Status and action plan for the next fiscal year and subsequent years

As stated in the annex for the previous fiscal year, given the progress made to date, LAC foresees completing its assessment of all the processes in its ICFR system in 2015–2016. LAC will apply an ongoing cyclical monitoring plan to reassess the performance of the controls on a risk basis. The status and the action plan for completing the identified control areas for the next fiscal year and subsequent years are as follows.

Key control areas

Design effectiveness testing and remediation

Operating effectiveness testing and remediation

Ongoing monitoring rotation *

Entity-level controls

Complete

Complete

2015–2016

IT general controls under departmental management

Future years

Future years

Future years

Payroll

Complete

Complete

2015–2016

Purchases

Complete

Complete

2015–2016

Payables

Complete

Complete

2015–2016

Capital assets

Complete

Complete

2015–2016

Sales

Complete

Complete

2015–2016

Accruals

Complete

Complete

Future years

Capital assets—
Work in progress

2014–2015

2015–2016

Future years

Value of the collection

Complete

Complete

2014–2015

Benefits

Complete

Complete

2015–2016

Budgets and forecasts

2014–2015

2014–2015

Future years

Transfer payments

N/A

N/A

N/A

Production of financial statements

Complete

Ongoing
2014–2015

Future years











[Text version: Status and action plan for the next fiscal year and subsequent years]

* The frequency of ongoing monitoring for key control sectors is based on risk. The monitoring follows a cycle of several years.

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