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2013–14 Departmental Performance Report

Annex to the
Statement of Management Responsibility
Including Internal Control over Financial Reporting (unaudited)
For the year ended March 31, 2014

Note to the Reader

Under the Treasury Board Policy on Internal Control (PIC), effective April 1, 2009, departments and agencies are required to demonstrate the measures they are taking to maintain an effective system of internal control over financial reporting (ICFR).

In compliance with this policy, departments and agencies are expected to conduct an annual assessment of their system of ICFR, establish an action plan to address any necessary adjustments, and attach to their Statement of Management Responsibility an unaudited summary of their assessment results and action plan.

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

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

It is important to note that the system of ICFR is not designed to eliminate all risks. Rather, it is designed to mitigate risk to a reasonable level with controls that are balanced with and proportionate to these risks.

Table of Contents

1. Introduction

This unaudited document is attached to Office of the Chief Electoral Officer's Statement of Management Responsibility Including Internal Control over Financial Reporting for the fiscal year ended March 31, 2014. As required by the Treasury Board Policy on Internal Control, this unaudited document provides summary information on the measures taken by management to maintain an effective system of ICFR.

1.1 Authority, Mandate and Programs

The Office of the Chief Electoral Officer, commonly known as Elections Canada, is an independent, non-partisan agency headed by the Chief Electoral Officer (CEO), who is appointed by resolution of the House of Commons and reports directly to Parliament.

Elections Canada is responsible for administering the provisions of the Canada Elections Act, the Referendum Act and the Electoral Boundaries Readjustment Act. Its mandate is to:

Elections Canada has a single strategic outcome supported by the following Program Alignment Architecture (PAA):

Program Activity Architecture (PAA)

Text version

Further details regarding Elections Canada's priorities, strategic outcome and program alignment architecture are available in its Departmental Performance Report and Report on Plans and Priorities.

1.2 Financial Highlights

Below are key financial highlights for fiscal year ending March 31, 2014. More information can be found in Elections Canada's audited Financial Statements and Notes to Financial Statements.

Elections Canada has a significant number of information systems that are critical to its operations and financial reporting.

1.3 Audited Financial Statements

Elections Canada's Financial Statements have been audited by the Office of the Auditor General (OAG) since fiscal year 2003–2004 and have always received an unmodified audit opinion.

1.4 Service Arrangements Relevant to Financial Statements

Elections Canada relies on other organizations for the processing of certain transactions that are recorded in its financial statements:

1.5 Material Changes in Fiscal Year 2013–2014

The following significant agency changes relevant to the financial statements started in 2012–2013 and continued to be applied in 2013-2014: the implementation of an IT evergreening policy resulting in increased decommissioning of hardware and software that had reached or exceeded their normal life cycle. In addition, Elections Canada conducted an extensive zero-based budgeting exercise that resulted in program realignments and the implementation of streamlined business delivery models and staff reductions. The agency also completed its primary relocation to 30 Victoria Street in Gatineau, Quebec in December 2013 by relocating personnel housed at six (6) different Ottawa locations into a single location. These moves resulted in the disposition of obsolete furnishings and leasehold improvements at these six (6) Ottawa locations.

1.6 Key Organizational Changes in Fiscal Year 2013–2014

The position of the Chief Audit Executive and the Internal Audit function were effectively transferred on April 1, 2013 from the CFO Sector to the Chief of Staff of the Chief Electoral Officer, Ms. Vivian Cousineau. Following Mr. Daniel Richer's departure to another government department, Ms. Vivian Cousineau commenced an acting assignment as Chief Human Resource Officer on August 6, 2013.

Midway through the fiscal year, an organizational change resulted in the creation of a new Sector: Integrated Services, Policy and Public Affairs, effective September 3, 2013. As a result, Mr. Belaineh Deguefé assumed the management responsibilities for the former Chief Information Officer Sector and the Chief Financial Officer Sector in addition to his current responsibilities. These sectors, now represented as Branches, are led by Mr. Jacques Mailloux who was appointed Chief Information Officer (CIO) on October 21, 2013 and Mr. Hughes St-Pierre, CPA, CMA who was appointed to the position of Chief Financial and Planning Officer (CFPO) on April 30, 2014. Both appointments are a result of competitive staffing processes.

Mr. Michel Roussel was appointed to the position of Deputy Chief Electoral Officer, Electoral Events on March 14, 2014 to replace Mr. Rennie Molnar who retired at the end of May 2014.

Ms. Lyne Morin was appointed Senior Director, Electoral Integrity Project Office in December 2013 to develop and implement an electoral assurance and compliance strategy to help assure fair elections.

2. Description of Elections Canada's Entity-Level Controls Relevant to ICFR

Elections Canada recognizes the importance of setting the tone from the top to help ensure that staff at all levels understand their role in maintaining effective systems of ICFR and are well equipped to exercise these responsibilities effectively. Elections Canada's focus is on ensuring that risks are well managed through a responsive and risk-based control environment that allows for continuous improvement and innovation.

Elections Canada's main entity-level controls currently in place and relevant to ICFR are set out below.

2.1 Governance

Chief Electoral Officer (CEO) – The CEO is appointed by a resolution of the House of Commons, so that all political parties represented there may contribute to the selection process. Once appointed, the incumbent reports directly to Parliament and is thus completely independent of government and political parties. Elections Canada's CEO has the duties of a Deputy Head. As such, the CEO is the Agency's Accounting Officer and assumes overall responsibility and leadership for the stewardship, management and oversight of agency resources, as well for the measures taken to maintain an effective system of internal control. In this role, the CEO meets regularly with the Audit Committee and the Executive Committee (EXCOM).

Chief Financial Officer (CFO) – Elections Canada has a CFO, with a recognized professional accounting designation, who reports directly to the CEO and provides leadership for the coordination, coherence and focus on the design and maintenance of an effective and integrated system of ICFR, including its annual assessment.

Chief Audit Executive (CAE) – Elections Canada's CAE reports directly to the CEO. The CAE provides assurance through periodic internal audits, which are instrumental to the maintenance of an effective ICFR.

Audit Committee – The Audit Committee is an advisory committee that provides objective views on the agency's risk management, control and governance frameworks. Elections Canada established its Audit Committee in December 2007. The Committee is comprised of the CEO and three external members. The CEO chairs the Committee, and at least one member is a financial expert with a recognized professional accounting designation. All members of the Committee are appointed by the CEO and selected in a manner whereby their collective abilities, knowledge and experience allow it to carry out its duties competently and effectively.

Executive Committee (EXCOM) – As Elections Canada's senior decision-making body, EXCOM is responsible for corporate management decision-making, setting internal policies and overseeing all aspects of management and operations. The CEO is the Chair of EXCOM and his direct reports (refer to organizational chart below) comprise its membership.

Commissioner of Canada Elections – The Commissioner of Canada Elections is the independent officer whose duty is to ensure that the Canada Elections Act and the Referendum Act are complied with and enforced. The CEO appoints the Commissioner under section 509 of the Canada Elections Act. Under new legislation, the Commissioner of Canada Elections will report to the Director of Public Prosecutions. This change is planned for Fall 2014 at the earliest.

Corporate Strategy Office and Corporate Strategy Committee – To ensure the successful delivery of Elections Canada 2015 business plan initiatives for the 2015 general election, the CEO established in 2012–2013 a corporate project oversight unit and associated governance: the Corporate Strategy Office and the Corporate Strategy Committee.

Election Readiness Committee – This committee was reinstated to ensure the successful planning and prioritizing of key program activities leading to a successful general election in 2015.

For a detailed view of Elections Canada, please refer to the following link:

www.elections.ca/images/ec-org-chart_el.gif.

2.2 Key Measures Taken by Elections Canada

The control environment is an important factor for ICFR. By raising awareness, providing appropriate knowledge and tools as well as developing skills, Elections Canada's control environment ensures that staff is well equipped to manage risks. Key measures taken to date include:

  1. The establishment of an Elections Canada Code of Conduct.
  2. Clear guidelines on authorities and compliance with sections 32, 34 and 33 of the Financial Administration Act.
  3. Accountability by responsibility centre managers for budgetary control and approvals of all expenditures.
  4. Annual performance agreements with senior managers, which clearly set out financial management responsibilities.
  5. A risk-based internal audit plan.
  6. An established governance structure and provision of strategic direction through the EXCOM and the Audit Committee.
  7. The establishment of the Corporate Strategy Office, which enables the CEO and EXCOM to make timely and evidence-based decisions / course adjustments on Elections Canada's 2012–2015 business plan and associated initiatives, investments and risks. The office also strengthens project management practices.
  8. Regular reporting and analysis of financial performance.
  9. A human resources management plan and policies that support learning and succession planning.
  10. A requirement for accounting designations in key financial management positions.

3. Assessment of Elections Canada's System of ICFR

3.1 Assessment Baseline

Whether it is to support controls-based financial statement audits or the requirements of the Treasury Board Policy on Internal Control, an effective system of ICFR must be in place to provide reasonable assurance that:

Over time, this includes assessment of design and operating effectiveness and an ongoing monitoring program leading to continuous improvement of the departmental/agency system of ICFR.

Design effectiveness means that key control points are identified, documented and in place; that they are aligned with the risks; and that any remediation is addressed. This includes mapping key processes and IT systems to the main accounts by location as applicable.

Operating effectiveness means that the application of key controls over financial reporting has been tested over a defined period, that they are working as intended and that any required remediation is addressed appropriately and in a timely manner.

The ongoing monitoring program means that a systematic integrated approach to monitoring is in place, including periodic risk-based assessments and timely remediation.

Such an assessment covers all departmental/agency control levels, including corporate or entity-level, general computer and business process controls.

3.2 Assessment Method at Elections Canada

In preparing for the review of its system of ICFR, the agency has taken measures to assess the system, starting with documenting and assessing its entity-level controls.

Elections Canada will continue its risk-based assessment based on the identification of key accounts in the financial statements that will be subject to the ICFR assessment process. This assessment will consider both quantitative and qualitative factors. For each significant account, the agency will complete the following steps:

Elections Canada is also committed to documenting and assessing its IT general controls, or ITGCs (IT infrastructure).

Finally, Elections Canada will take into account new information available from recent audits or evaluations.

4. Elections Canada's Assessment Results

In 2013-2014, Elections Canada built upon lessons learned and best practices from previous years to continue enhancing its system of ICFR. In the latter part of the fiscal year, Elections Canada focused on identifying key areas to be reviewed within the context of the decennial redistribution of electoral boundaries and upcoming legislative changes and adapted its design and strengthened its operational effectiveness accordingly. The findings below summarize key developments during this reporting period.

4.1 Design Effectiveness of Key Controls

Elections Canada adapted its detailed action plan to address the decennial redistribution of electoral boundaries and upcoming legislative changes and their impact on key controls. The agency continued to progress with documenting its entity-level controls and validation of key controls with internal stakeholders. It also continued verifying that the documented controls were in place and corresponded to actual practices, and ensured appropriate alignment of each key control with risks as defined in the Risk Management Framework.

Preliminary materiality and risk assessment ratings for key accounts were reviewed to identify key risks and associated business processes within the context of recent legislative changes. Mechanisms put in place to support qualitative and quantitative risk assessments of the financial statements' main accounts in accordance with established materiality thresholds were tested through statistical sampling of key accounts and adjusted as necessary. Finally, in the context of the office move to Gatineau, the additional controls introduced to strengthen the asset decommissioning process and the resource management process for professional services contracts were also tested and adjusted as necessary.

4.2 Operating Effectiveness of Key Controls

Elections Canada recognizes the need to modernize key business processes and promote efficiencies in a streamlined environment. Elections Canada is committed to ensuring the design effectiveness of control activities, to identify and strengthen key controls through statistical sampling and additional testing of specific controls to ensure operating effectiveness across all areas. In the last three (3) years, Elections Canada conducted various statistical sampling exercises in accounting operations, procurement and contracting and security and administration activities to assess the effectiveness of its key controls. In preparation for additional testing cycles, documented high-level material business processes were inventoried with the objective of identifying and focusing on key controls. When completing operating effectiveness testing, Elections Canada intends to ensure that key controls are functioning over time and that any necessary corrective actions are initiated and addressed. At the same time, the agency is elaborating on its IT General Controls. A preliminary step was achieved through a joint initiative between the CFPO and CIO Branches to solidify its asset valuation and depreciation abilities. Operational Level Agreements between key internal stakeholders are underway to further strengthen our asset management business processes and IT General Controls.

4.3 Ongoing Monitoring Program

As described in section 2, Elections Canada has a well-established governance model. In particular, the Audit Committee is instrumental in providing independent advice relating to the agency's system of internal control and to identify opportunities for strengthening internal controls. Throughout the reporting period, continuous monitoring and testing occurs to verify the effectiveness of key controls and ensure compliance. Looking ahead, as shown in section 5, the agency will seek opportunities to further strengthen its entity-level controls, taking into account results from annual assessments and audits. In the long term, Elections Canada will ensure that there is a well-integrated monitoring program in place to raise awareness and understanding of the agency's system of ICFR at all levels, and to equip people with the knowledge, skills, and tools they need.

5. Elections Canada's Action Plan

5.1 Progress as of March 31, 2014

During 2011–2012 and 2012-2013, Elections Canada assessed the effectiveness of its key controls. Elections Canada has since been building on this progress and lessons learned to improve its current internal controls. Below is a summary of the main progress made by the agency amidst the significant changes at the organizational level (zero-based budgeting and workforce management exercises), the decennial electoral boundaries redistribution, the introduction of the Fair Elections Act and the consolidation of six (6) of its Ottawa locations into a newly constructed headquarters in the downtown core of Gatineau, Quebec. As a result of these organizational and resource pressures, Elections Canada was precluded from fully implementing all the elements comprised in the original three-year plan.

Some of the key components from the original three-year plan that was analyzed and developed:

5.2 Action Plan for Next Fiscal Year and Subsequent Years

Building on progress to date and moving toward future attestation letters, Elections Canada revisited its multi-year action plan and is now concentrating its efforts using a risk-based approach which will ensure a better usage of its overall resources, namely, human, time and budgets. Using a model tailored to its context, Elections Canada will look at risks from two perspectives, namely, 1) potential impacts on internal control failures; and 2) current level of vulnerability.

The business processes will be reviewed focusing on the impact and probability of exposure to risks. Transactions will be assessed based on materiality and risk ratings which will range from negligible to severe. Risk exposure will be measured based on the significance (materiality), sensitivity (reputation) and structural (pervasiveness) to the organization.

Underpinning this risk-based approach leading to broader testing of its operating effectiveness of key controls and building upon lessons learned to date, Elections Canada will also focus on:

The following table illustrates where Elections Canada will focus its efforts in the next three years:

2014–2015 2015–2016 2016–2017
Context
  • Fair Elections Act (C-23) implementation
  • General e=lection readiness at Headquarters and in the field
Context
  • General election delivery
Context
  • Post-General election
Planned Activities
  • Field Budget Management/Accounting
  • Asset Management Lifecycle
  • Information Technology General Controls
    • Software Licensing
    • Data Integrity
Planned Activities
  • Strengthening of Goods and Services Processes and Tools
Planned Activities
  • Salary Management
    • Time and Leave Management
    • Supplementary Payments (e.g Performance Bonus, Overtime)