2014–15 Departmental Performance Report
Annex to the
Statement of Management Responsibility
Including Internal Control over Financial Reporting (unaudited)
For the year ended March 31, 2015
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:
- transactions are appropriately authorized;
- financial records are properly maintained;
- assets are safeguarded from risks such as waste, abuse, loss, fraud and mismanagement; and
- applicable laws, regulations and policies are complied with.
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
- 2. Description of Elections Canada's Entity-Level Controls Relevant to ICFR
- 3. Assessment of Elections Canada's System of ICFR
- 4. Elections Canada's Assessment Results
- 5. Elections Canada's Action Plan
This unaudited document is attached to the Office of the Chief Electoral Officer's Statement of Management Responsibility Including Internal Control over Financial Reporting for the fiscal year ended March 31, 2015. 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 (EC), 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:
- be prepared to conduct a federal general election (GE), by-election or referendum;
- administer the political financing provisions of the Canada Elections Act;
- monitor compliance with electoral legislation;
- conduct public information campaigns on voter registration, voting and becoming a candidate;
- conduct education programs for students on the electoral process;
- provide support to the independent commissions in charge of adjusting the boundaries of federal electoral districts following each decennial census;
- carry out studies on alternative voting methods and, with the approval of parliamentarians, test alternative voting processes for future use during electoral events; and
- provide assistance and co-operation in electoral matters to electoral agencies in other countries or to international organizations.
Elections Canada has a single strategic outcome supported by the following Program Alignment Architecture (PAA):
Please note that effective October 1, 2014, the Commissioner of Canada Elections, the independent officer whose duty is to ensure that the Canada Elections Act and the Referendum Act are complied with and enforced, has been transferred to the Public Prosecution Service of Canada. Elections Canada is amending its PAA to reflect this change.
Further details regarding Elections Canada's priorities, strategic outcome and PAA 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, 2015. More information can be found in Elections Canada's audited Financial Statements and Notes to Financial Statements.
- Total expenses were $148M
- Salaries and benefits comprise 44% of expenses ($65M)
- Professional services comprise 22% of expenses ($33M)
- Rental of equipment and accommodations comprise 11% of expenses ($16M)
- Political parties quarterly allowance and reimbursement of candidates' election expenses comprise 6% of expenses ($9M)
- Travel and communication comprises 6% of expenses ($8M)
- Advertising, publishing and printing comprise 4% of expenses ($6M)
- Other expenses of $11M were for repair and maintenance of equipment, small equipment and amortization of tangible capital assets.
- Total assets were $64M
- Tangible capital assets comprise 44% of total assets ($28M)
- Financial assets such as those due from the Consolidated Revenue Fund, and accounts receivable and advances, comprise 42% of total assets ($27M)
- Consumable supplies and prepaid expenses comprise 14% of total assets ($9M)
- Total liabilities were $31M
- Accounts payable and accrued liabilities represent the largest portion of liabilities at 78% ($24M)
- Other liabilities, such as employee severance benefits and provision for vacation leave, comprise 22% of liabilities ($7M)
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:
- Public Works and Government Services Canada centrally administers the payments of salaries and benefits of public service employees, the procurement of some goods and services and the provision of accommodations on behalf of Elections Canada.
- Treasury Board Secretariat, including the Office of the Comptroller General, provides Elections Canada with information used to calculate various accruals and obligations (e.g. severance pay liability; percentage for the insurance benefit plans received without charge; details regarding the employer's share of employee benefit plans).
1.5 Material Changes in Fiscal Year 2014–2015
Two major pieces of legislation were approved during fiscal year 2014-2015:
- Bill C-23, An Act to amend the Canada Elections Act and other Acts and to make consequential amendments to certain Acts (Fair Elections Act), received Royal Assent on June 19, 2014. The Fair Elections Act makes substantial amendments to the Canada Elections Act affecting most areas of Elections Canada's operations, including electoral operations and political financing. The Fair Elections Act moves the Commissioner of Canada Elections to the Public Prosecution Service of Canada.
- Bill C-37, An Act to change the names of certain electoral districts and to amend the Electoral Boundaries Readjustment Act (Riding Name Change Act, 2014), received Royal Assent on June 19, 2014. This enactment changes the names of 30 electoral districts (in Quebec, Ontario, Saskatchewan, Alberta and British Columbia) and amends the Electoral Boundaries Readjustment Act to change the name of the electoral district of the Northwest Territories.
During the reporting period, Elections Canada achieved essential readiness for the 2015 general election scheduled for October 19 and was prepared to conduct the next general election in 338 electoral districts. By March 31st, 2015, it has largely implemented the recent amendments to the Canada Elections Act and was on pace to complete key administrative changes aimed at improving services to electors by October 19.
In addition, Elections Canada finalized new processes and administrative measures to improve the performance of poll workers, including enhanced recruitment practices, modernized training and, when possible under the Act, simplified procedures and clearer instructions for election workers. To support returning officers in recruiting a competent work force, the agency was seeking Treasury Board approval to increase the fees paid to poll workers and other local office staff.
1.6 Key Organizational Changes in Fiscal Year 2014–2015
During the fiscal year, the Political Financing sector was amalgamated under the Deputy Chief Electoral Officer, Regulatory Affairs, a position held by Mr. Stéphane Perrault. Following the appointment of Ms. Lyne Morin as Senior Director, Electoral Integrity Project Office in December 2013, this important initiative was also moved under the Deputy Chief Electoral Officer, Regulatory Affairs to develop and implement an electoral quality assurance and compliance program.
The Office of the Commissioner of Canada Elections whose duty is to ensure that the Canada Elections Act and the Referendum Act are complied with and enforced was transferred to the Public Prosecution Service of Canada on October 1, 2014 following the enactment of the Fair Elections Act.
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.
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 as for the measures taken to maintain an effective system of internal control. In this role, the CEO meet as 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.
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 continued its operations 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:
- The establishment of an Elections Canada Code of Conduct.
- Clear guidelines on authorities and compliance with sections 32, 34 and 33 of the Financial Administration Act.
- The development and maintenance of a distinct and comprehensive financial stewardship regime including specific internal controls for the operations of the agency's local offices and the payment of field personnel and suppliers during events in accordance with the Canada Elections Act.
- Accountability by responsibility center managers for budgetary control and approvals of all expenditures.
- Annual performance agreements with senior managers, which clearly set out financial management responsibilities.
- A risk-based internal audit plan.
- An established governance structure and provision of strategic direction through EXCOM and the Audit Committee.
- The Senior Steering Committee (SSC) has been established to take critical decisions leading to the 2015 general election and to confirm accountabilities. It tasks decision execution to Deputy Chief Electoral Officers and standing committees where horizontal coordination is required. It ensures rapid and effective problem solving in the context of electoral reform implementation and readiness.
- The continued operations of the Election Readiness Committee to support agency preparations for the 42nd general election.
- The on-going activities of EC's Advisory Board (ECAB) to study and provide advice on matters related to Canada's electoral system, including the conduct of elections, electoral participation both by voters and political participants, regulatory compliance and electoral reform.
- The Corporate Strategy Office, which enables the CEO and EXCOM to make timely and evidence-based decisions / course adjustments on Elections Canada's 2013–2016 Business Plan and associated initiatives, investments and risks. The office also strengthens project management practices.
- Regular reporting and analysis of financial performance.
- A human resources management plan and policies that support learning and succession planning.
- 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:
- transactions are appropriately authorized;
- financial records are properly maintained;
- assets are safeguarded; and
- applicable laws, regulations and policies are complied with.
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:
- Gather information pertaining to existing business processes, risks and controls, including associated policies and procedures;
- Map key business processes with key risks and controls on the basis of materiality, volume, complexity, susceptibility to losses/fraud, areas subject to audit observations, past history, external attention and reliance on a third party; and
- Test the design and operating effectiveness of key business process controls.
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 2014-2015, Elections Canada has focused its attention on three main elements:
- Asset management lifecycle, in the context of the transition to new electoral boundaries in the field and the resulting decommissioning or transfer of material and assets between returning officers for former and newly created electoral districts.
- The management and control of information (data protection) and information technology; in particular the granting or renewal of licenses in the anticipation of legislative change and the ramping up of operations for the next general election.
- The strengthening and streamlining of financial processes for field personnel in the context of preparation for the conduct of the 42nd general election.
The findings presented below provide a summary of key developments during the period covered by the report.
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. EC also continued to ensure that the documented controls were in place and corresponded to actual practices, and that key control was adequately adapted to the risks in accordance with the risk management framework. The agency targeted 4 field accounting processes for modernization: the reconciliation of acquisition cards, the reconciliation of accountable advances, the leasing of poll sites and polling sites and other field payments. The design changes promote timely reconciliations, provide assurances of stewardship and reduce regulatory burden on field personnel.
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 2014-2015, Elections Canada conducted various statistical sampling exercises in accounting operations in the field services activities to assess the effectiveness of its key controls. In preparation for additional testing cycles, documented high-level material business processes, in particular the procurement of goods and services, were inventoried with the objective of identifying and focusing on key controls. During the period, the agency also commissioned a review to provide recommendations to strengthen management and oversight of contracts, in particular those using a task authorization process.
When completing operating effectiveness testing, Elections Canada ensures that key controls are functioning over time and that any necessary corrective actions are initiated and addressed.
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. Of particular interest in the context of the preparations for the next general election are the maintenance and testing of the financial system used at headquarters and in local offices to pay electoral personnel and local suppliers (the Returning Office Payment System – ROPS) and the conduct of an election simulation which will provide an opportunity to test both financial guidelines and instructions to field personnel and the operations of ROPS.
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, 2015
During 2014-2015, Elections Canada assessed the effectiveness of its key controls in the area of field services.
Below is a summary of the main progress made by the agency amidst the significant changes related to the decennial electoral boundaries redistribution and the implementation of the Fair Elections Act. Key accomplishments are:
- Enhanced budget framework;
- Revised delegation of authority (Field Services);
- Increased security screening of key field positions to safeguard assets, information, data and privacy;
- Improved application of Procurement and Contracting General Contracting Rules;
- Improved payment authorizations, reconciliations and timely clearing of suspense transactions;
- Established lapsing controls on non-sensitive and/or least material transactions;
- Conducted statistical sampling of material (e.g. travel, training, payroll and lease) and/or sensitive (e.g. Acquisition Cards and Petty Cash Usage) financial transactions to ensure policy compliance for Field Services; and
- Addressed required remediation identified during assessments.
5.2 Action Plan for Next Fiscal Year and Subsequent Years
Building on progress to date and moving toward future attestation letters, Elections Canada maintains and updates its multi-year action plan focusing its efforts using a risk-based approach. This ensures a better usage of its overall resources, namely, human, time and budgets. Using a model tailored to its context, Elections Canada looks at risks from two perspectives, namely, 1) potential impacts on internal control failures; and 2) current level of vulnerability.
The business processes are reviewed focusing on the impact and probability of exposure to risks. Transactions are 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:
- conducting additional environmental scans;
- compliance monitoring;
- assessing the maturity level of existing controls;
- assessing and documenting key business processes;
- clarifying roles and responsibilities and streamlining business processes and reducing administrative burden on its personnel;
- continuing to conduct statistical sampling of key accounts;
- finalizing the documentation and testing the design effectiveness of key Information Technology General Controls (ITGC);
- addressing required remediation identified during assessments, and testing their operating effectiveness;
- introducing efficiencies through reduction or elimination of overlapping controls;
- ensuring that ongoing monitoring of key controls occurs cyclically based on risk.
The following table illustrates where Elections Canada will focus its efforts in the 3-year action plan:
- Environmental Scan and Statutory Changes
- Electoral Boundaries
- Fair Elections Act (Bill C-23)
- Budget Management – Field Accounting
- IT General Controls
- Software Licensing
- Data Integrity
- Asset Management Lifecycle
- Finalize Statutory Changes and Adjustments for General Election
- Strengthening Goods and Services Processes and Tools
- Ongoing modernization of the Returning Officer Financial Management Framework
- Salary Management
- Salary Management
- Time and Leave Management
- Salary Management
- Supplementary Payments (e.g performance bonus, overtime)