Internal Control Over Financial Reporting – Statement, Assessment Summary and Action Plan 2014-2015

Summary of the assessment of effectiveness of the systems of internal control over financial reporting and the action plan of Library and Archives Canada for the fiscal year 2014-2015

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 and related action plans.

Detailed information on LAC’s authority, mandate and program activities can be found in the Departmental Performance Report 2014-2015 and the Report on Plans and Priorities 2014-215.

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;
  • a code of 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 this, as well as presentation of the assessment results and action plans to the Deputy Head and the organization’s senior management.
For 2014-2015, the Small Departments Audit Committee (SDAC) acted as the Department 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 the processing of 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 used 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 2014-2015

LAC continued to make progress in assessing and improving its key controls. The key findings are summarized below.

3.1 Documentation and testing of design effectiveness of key controls

In 2014-2015, LAC documented the key controls over capital assets—work in progress processes as well as budgeting and forecasting processes, and started testing the design effectiveness of these two key processes.

3.2 Operating effectiveness testing of key controls

In 2014-2015, LAC completed the operating effectiveness testing of key controls in the financial reporting process.

The key controls are in place and functioning, but the following corrective measures were identified:

  • enhancing consistency in the conservation of audit trails produced during key controls;
  • using a checklist listing the major steps of the financial reporting process; and
  • improving the procedures relating to financial system access management, to manual journal entries, as well as to certain specific business processes.

An action plan with corrective measures was developed for implementation during the next financial reporting process (2014-2015) in order to remedy the opportunities for improvement noted in these controls within a reasonable timeframe.

3.3 Ongoing monitoring of key controls

In 2014-2015, LAC followed up on the corrective measures that resulted from recommendations made in previous years and revised its ongoing monitoring plan for the future.

More specifically, LAC completed the ongoing monitoring planned in terms of the value of the collection. The key controls of this process are being carried out effectively, and no corrective measures were required.

4. LAC action plan

[1]
4.1 Progress made during the 2014-2015 fiscal year

LAC continued to make progress in assessing and improving its key controls.  Below is a summary of the main progress made based on the plans identified in the previous year’s annex:
Element in previous year’s action plan Status
   
Operating process controls  
  Capital assets—work in progress Delay in the execution due to high staff turnover in the team responsible for assessing internal controls. Documentation of the process has been completed. Testing of design effectiveness was started in 2014-2015 and will continue in 2015-2016.
  Budgeting and forecasting Delay in the execution due to high staff turnover in the team responsible for assessing internal controls. Documentation of the process has been completed. Testing of design effectiveness was started in 2014-2015 and will continue in 2015-2016.
  Production of financial statements Executed as planned. Testing of operating effectiveness has been completed. The recommendations and the action plan for corrective measures will be implemented with the production of the 2014-2015 financial statements.
  Value of the collection Executed as planned. No corrective measures are required.
   
IT general controls Assessment of the work of evaluating IT general controls will continue in 2015-2016. However, LAC still leads the working groups on HRIS/PeopleSoft, FreeBalance and shared travel services (HRG), and is implementing the recommendations of these respective groups.

[Text version: Progress made during the 2014-2015 fiscal year]

[2]
4.2 Status and action plan for the next fiscal year and subsequent years

Under the Policy on Internal Control, departments and agencies need be able to maintain an effective ICFR system with the objective to provide reasonable assurances that transactions are appropriately authorized, financial records are properly maintained, assets are safeguarded and applicable laws, regulations and policies are complied with.

Building on the progress made to date, LAC foresees completing its assessment of all the processes in its ICFR system in 2015-2016. LAC applies an ongoing cyclical monitoring plan to reassess the performance of the controls on a risk basis. According to the plan, the controls of the entity as well as eight (8) of the eleven (11) operational processes are in the ongoing monitoring phase. The three (3) final operational processes will be covered in 2015-2016, and the IT general controls in three (3) years. The dates in the “ongoing cyclical monitoring” column represent the year in which the next monitoring process will be conducted, taking into account the risks associated with each type of control.

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 tests and corrections

Operating effectiveness tests and corrections

Ongoing cyclical monitoring*

Entity-level controls

Completed

Completed

2015-2016

IT general controls under departmental management

Future years

Future years

Future years

Payroll

Completed

Completed

2015-2016

Purchases

Completed

Completed

2015-2016

Payables

Completed

Completed

2015-2016

Capital assets

Completed

Completed

2016-2017

Sales

Completed

Completed

2016-2017

Accruals

Completed

Completed

2016-2017

Capital assets —
Work in progress

Ongoing
2015-2016

2015-2016

2017-2018

Value of the collection

Completed

Completed

2017-2018

Benefits

Completed

Completed

2015-2016

Budgets and forecasts

Ongoing
2015-2016

2015-2016

2017-2018

Transfer payments

N/A

N/A

N/A

Production of financial statements

Completed

Completed

2016-2017

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

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