Financial statements, March 31, 2014
Unaudited annex to the statement of management responsibility including internal control over financial reporting
This document provides unaudited summary information on the measures taken by the Canadian Grain Commission to maintain an effective system of internal control over financial reporting including assessment results and related action plans.
2. Departmental system of internal control over financial reporting
2.1 Internal Control Management
The Canadian Grain Commission has an established governance and accountability structure which sets the “tone from the top” for effectively managing and supporting departmental assessment efforts and oversight of internal control over financial reporting. A departmental internal control management framework, approved by the Deputy Head, is in place and includes:
- Organizational roles and responsibilities as they relate to internal control over financial reporting to support sound financial management;
- Activities to ensure that key internal controls are assessed and periodically reassessed using a risk-based approached and that corrective action is taken where necessary; and
- Regular monitoring of and updates on internal control management, including assessment results and action plans, to the Deputy Head, the Executive Management Committee and the Departmental Audit Committee.
2.2 Service Arrangements Relevant to Financial Statements
The Canadian Grain Commission relies on other organizations for the processing of certain transactions that are recorded in its financial statements as follows.
- Public Works and Government Services Canada centrally administers the payments of salaries and the procurement of some goods and services in accordance with the Canadian Grain Commission’s Delegation of Authority, as well as provides accommodation services;
- The Treasury Board of Canada Secretariat provides the Canadian Grain Commission with information used to calculate various accruals and allowances;
- The Department of Justice provides legal counsel on litigation and advisory services relating to the Canadian Grain Commission’s legal requirements; and
- Shared Services Canada provides the Canadian Grain Commission with data centre and network services infrastructure related to SAP and Peoplesoft.
Agriculture and Agri-Food Canada provides the Canadian Grain Commission with a SAP financial platform to capture and report financial transactions and with a Peoplesoft platform to capture and report leave and pay related transactions. Agriculture and Agri-Food Canada also provides, pursuant to a Memorandum of Understanding, some compensation services to the Canadian Grain Commission. As a result, reliance is placed on the control procedures of Agriculture and Agri-Food Canada.
3. Departmental assessment results during fiscal year 2013-14
The key findings and significant adjustments required from the current year’s assessment activities are summarized below.
New or significantly amended key controls:
Of the existing processes tested in the current year, new or significantly amended key controls which required reassessment were as follows:
- Elimination of key revenue controls and sub-processes relating to inward inspection and weighing as a result of changes to the Canada Grain Act and the Canada Grain Regulations.
- Changes to key revenue controls relating to outward weighing and inspection as a result of Canadian Grain Commission’s transition to its new role under the Weighing Oversight and Certification Program; and
- New key revenue controls related to the transition to a new system for the recording of grain volumes and subsequent terminal invoicing.
- Changes to key financial reporting controls relating to the preparation and monitoring of financial statements to enhance evidence of documentation and review.
Design and operating effectiveness testing was conducted on key controls relating to Optional Revenue and Recoverable Overtime as these processes became in-scope as a result of changes to Canadian Grain Commission’s user fees effective August 1, 2013.
Ongoing monitoring program:
As part of its rotational ongoing monitoring plan, the Canadian Grain Commission completed its reassessment of IT general controls and the financial controls within the Financial Reporting business process. Due to changes in the Canadian Grain Commission’s role resulting from significant amendments to the Canada Grain Act and the Canada Grain Regulations, the decision was made to test design and operating effectiveness of financial controls within the Revenue business process rather than the Purchase to Pay business process as originally identified in the 2012-13 monitoring plan. This decision was made to mitigate the potential risks impacting revenue as a result of the changes described above.
In most cases, the key process controls that were tested were in place and being performed as intended; however, adherence to certain policies and procedures, documented evidence of reviews and reconciliations, consistency amongst the regions, and timeliness of performing the controls could be improved. Controls were also found to be primarily manual. The control environment could be enhanced by implementing more preventative automated controls.
Testing of IT general controls identified the need to document a System Development Life Cycle, update the Departmental Disaster Recovery Plan, enhance infrastructure change management procedures and testing strategies, as well as tighten system access controls and back-up procedures.
Overall, no significant weaknesses were found. On-going follow-up has confirmed that required remediation plans for process controls and IT general controls relating to the current and previous testing periods have been implemented or are in the process of being developed. Remediation strategies to address control deficiencies relating to Entity Level Controls also continue to be at varying stages of completion.
4. Departmental Action Plan
4.1 Progress during fiscal year 2013-14
During 2013-14, the Canadian Grain Commission continued to conduct ongoing monitoring with some minor changes to the previous fiscal year’s rotational plan. The table below is a summary of the progress made by the Department based on the plans identified in the previous fiscal year’s annex:
|Previous year’s rotational ongoing monitoring plan for current year||Status|
|IT general controls under departmental management||Design and operating effectiveness testing were completed as planned. Remediation strategies have been developed to address deficiencies and are in varying stages of completion.|
|Purchase to Pay||No testing was performed relating to Purchase to Pay. The decision was made to test Revenue in lieu of Purchase to Pay in 2013-14 due to system related changes as well as changes to the Canada Grain Act impacting the revenue process control environment.|
|Financial Reporting||Design and operating effectiveness testing were completed as planned. Remediation strategies have been developed to address deficiencies and are in varying stages of completion.|
In 2013-14, the Canadian Grain Commission conducted the following work in addition to the progress made in ongoing monitoring:
- Testing of the design and operating effectiveness of the Revenue business process.
4.2 Status and action plan for the next fiscal year and subsequent years
The Canadian Grain Commission’s rotational on-going 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.
|Key control areas||Fiscal 2014-15||Fiscal 2015-16||Fiscal 2016-17|
|Entity level controls||No||Yes||No|
|Information Technology general controls under departmental management||No||No||Yes|
|Purchase to Pay||Yes||No||No|
In accordance with Canadian Grain Commission’s On-Going Monitoring Plan, processes and sub-processes will be assessed over a three-year cycle, with high and medium ranked processes being assessed more frequently than low ranked processes. An exception has been made for capital assets wherein testing will be deferred until 2015-16 as significant process improvements are expected to occur.
In addition to planned on-going monitoring activities, regular follow-up on past remediation plans for all key control areas will be performed.
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