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2016–17 Departmental Results Report

Annex to the
Statement of Management Responsibility
Including Internal Control over
Financial Reporting (unaudited)

For the year ended March 31, 2017

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, at a minimum, 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 continual 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, 2017. As required by the Treasury Board's 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 that reports directly to Parliament. Its mandate is to:

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

Program Alignment Architecture (PAA)

Text description of "Program Alignment Architecture (PAA)"

Further details regarding Elections Canada's priorities, strategic outcome and PAA are available in its Departmental Results Report and Departmental Plan.

In October 2014, the Commissioner of Canada Elections was transferred to the Public Prosecution Service of Canada, so the sub-program Compliance and Enforcement was reduced to Compliance. In November 2016, Bill C-33 proposed to relocate the Commissioner of Canada Elections back to the Office of the Chief Electoral Officer. As of July 2017, this bill is in second reading.

1.2 Financial Highlights

Below are key financial highlights for the fiscal year ended March 31, 2017. During this period, Elections Canada conducted six by-elections: one was on October 24, 2016 and the other five were on April 3, 2017. More financial information can be found in Elections Canada's audited Financial Statements and Notes to Financial Statements.

1.3 Audited Financial Statement

Elections Canada's Financial Statements have been audited by the Office of the Auditor General (OAG) since fiscal year 2003–2004 and, to date, the OAG has always expressed an unqualified opinion on the fair presentation of the financial statements.

1.4 Service Arrangements Relevant to Financial Statements

Elections Canada relies on other organizations to process certain transactions that are recorded in its financial statements:

1.5 Legislation Presented in Fiscal Year 2016–2017 and early 2017–2018

An important piece of legislation was presented during the 2016–2017 fiscal year:

In the first quarter of fiscal year 2017–2018, another piece of legislation was presented:

1.6 Key Organizational Changes in Fiscal Year 2016–2017

The Chief Electoral Officer (CEO), Marc Mayrand, retired in December 2016 and announced that Mr. Stéphane Perrault, Deputy Chief Electoral Officer (DCEO), Regulatory and Public Affairs, would be acting on an interim basis pending the appointment of a new CEO.

The DCEO, Integrated Services, Planning and Public Affairs (ISPPA), Belaineh Deguefé retired in June 2016. Hughes St-Pierre was appointed to this position in the fall of 2016. Following a reorganization in February 2017, this sector was renamed to the DCEO, Internal Services and CFO sector. Under the new structure, the following appointments took place:

The new structure also added Policy and Public Affairs under the DCEO, Regulatory and Public Affairs. The following appointments took place in this sector:

The responsibility for establishing and delivering on the agency's long-term electoral service innovation program was added to Michel Roussel's portfolio as DCEO, Electoral Events and Innovation.

The following organization chart provides a high-level overview of our core programs:

organization chart

Text description of "organization chart "

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 continual 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 as 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. The CFO is assisted by the DCFO, who also has a recognized professional accounting designation and who is responsible for supporting the CFO in its comptrollership functions.

Chief Audit Executive (CAE) –The CAE provides assurance through periodic internal audits, which are instrumental to the maintenance of an effective system of ICFR. The Senior Director, Electoral Integrity Office and CAE occupies a dual role: she reports to the CEO for audit functions as well as having access to the Agency Audit Committee as required; to the DCEO, Regulatory and Public Affairs for electoral integrity matters.

Agency Audit Committee (AAC) – The Agency 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. 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.

Senior Steering Committee (SSC) – This committee is composed of the CEO and DCEOs. As the ultimate body responsible for handling any issues that could have an impact on the right to vote or the integrity of elections or cause harm to the reputation of the agency, the SSC facilitates the timely identification, escalation and resolution of severe risks and incidents. Additonally, the SSC acts as a forum for the CEO and DCEOs to exchange ideas on a wide range of topics that require strategic direction.

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. EXCOM is composed of sector heads and senior directors and the CEO is the Chair.

Horizontal Review Committee (HRC) – This committee reviews matters referred to it by the CEO/EXCOM and portfolio committee chairs; it develops and executes the agency's integrated cadence and delivery plan for modernization and asset renewal initiatives. The committee also reviews new or proposed changes to existing corporate management policies before they are submitted for approval to EXCOM.

Elections Readiness Committee (ERC) – This committee was temporarily put on hold after the 42nd general election. The committee will resume activities in fall 2017 to prepare for the 43rd general election. In between general elections, a similar committee is set up to ensure by-elections readiness.

Contract Review Committee (CRC) – This committee assists Elections Canada in making sound investments in goods and services contracts and ensures adherence to the Government Contracting Regulations. This committee reviews procurement initiatives for approval and oversight.

Elections Canada's Advisory Board (ECAB) – This committee was established by the CEO to study and provide advice on matters relating to the Canada's electoral system, including the conduct of elections and the electoral process, electoral participation by both voters and political participants, regulatory compliance and electoral reforms.

Electoral Services Modernization Committee (ESM) – This portfolio committee, chaired by the DCEO, Electoral Events and Innovation, oversees the execution of modernization strategies and initiatives for voting services, data services, voter engagement and field offices.

Asset Renewal Committee (ARC) – This portfolio committee, chaired by the DCEO, Internal Services, oversees the execution of the multi-year investment plan to maintain, replace or upgrade critical assets.

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. The following lists some of the key measures taken to date by the agency:

Financial controls

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's 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 continual 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, IT and business process controls.

3.2 Assessment Method at Elections Canada

Elections Canada continued 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 considers both quantitative and qualitative factors. For each significant account, the agency completes the following steps:

Elections Canada is also committed to documenting and assessing its entity-level controls and its IT general controls (ITGCs).

Finally, Elections Canada takes into account key findings from recent audits or evaluations.

4. Elections Canada's Action Plan

4.1 Action Plan as of March 31, 2017

The three-year action plan as presented by Elections Canada included for the 2016–2017 fiscal year:

A number of changes in the agency's operating context impacted the original action plan, as internal control efforts also had to be directed over the period on:

4.2 Assessment Results and Progress as of March 31, 2017

This section provides a summary of key findings and accomplishments for the period.

Governance and entity-level controls

Elections Canada recognized a need to review its internal governance to provide adequate oversight for its transformation projects for the 43rd general election because they represent significant resource investments.

Other ongoing efforts included:

Procurement, contracting and asset management

Considering the volume of procurement activities required for its transformation agenda, the agency took a number of additional measures to optimize its procurement framework, processes, tools and practices.

With the Chief Information Officer Branch, it completed a full review and inventory of information technology assets and their valuation. Adjustments were made to the financial statement to reflect the revised position based on assets that were life-cycled out through the decommissioning process.

In light of the OAG observations during its 2015–2016 financial audit, the agency modernized its electoral material delivery model and adopted the use of electronic forms and electronic manuals where practical, resulting in reduced stagnant and depreciating inventory, storage space, distribution requirements and extensive asset tracking.

Salary management at headquarters

Given the difficulties encountered with the roll out of the Phoenix pay system across the federal public services, the agency tooks steps to ensure accurate payments to employees, such as conducting reconciliations of headquarters salary advances and overpayments stemming from technical issues in the payroll system and strengthening both the salary management and payroll controls and oversight.

In addition, the business process for headquarters salaries was documented and compensation advisors were added to our human resources group to facilitate problem solving with Phoenix and payroll processing.

The operating effectiveness assessment which was planned for the headquarters salary process was postponed to 2017–2018 to allow optimal accuracy and stability for the processing of salary payment with the Phoenix pay system. A decision was made at the end of the fiscal year to mandate an external firm that could do the work efficiently within a short timeline.

Field finance

Over the period, Elections Canada concluded field financial management activities related to the delivery of the 42nd general election. Activities included:

The agency completed a full inventory of election material at the distribution centre and an inventory of equipment in the field via a call-out exercise where all returning officers were asked to identify assets held locally. A sampling of equipment acquired during the 42nd general election is underway and being compared to the inventory, and adjustments are made accordingly.

5. Action Plan for Next Fiscal Year and Subsequent Years

5.1 Elections Canada's 2017–2018 Action Plan

Elections Canada's 2017–2018 action plan includes ongoing testing of its operational effectiveness and the following activities:

5.2 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 in identifying opportunities for further strengthening.

In the long term, Elections Canada will continue to 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 its workforce with the knowledge, skills and tools they need. To that end, a strategy is in place to conduct cyclical reviews of all internal financial policies and supporting material to uniformely apply core statements of internal controls applicable to effective program delivery both at headquarters and in the field.

The following table illustrates Elections Canada's triennial action plan and depicts where it will focus its efforts in the next three fiscal years:

Continual Improvement
2017–2018 2018–2019 2019–2020
Compliance Monitoring
  • Salary Management (HQ only)
    Documentation completed, assessment will be done.
    • Time and Leave Management
    • Supplementary Payments (e.g. perf. bonus, OT)
  • Salary Management (field only)
    • Election Administrators
    • RO/AARO office staff
    • Poll workers
  • Assessment of operating effectiveness of key controls
    • Tangible capital assets
    • Inventory
    Note: 2019 is a general election year. Assessment(s) to be performed as resources permit
Compliance Monitoring
  • Assessment of the entity-level controls or the “tone from the top”. Consisting of the organizations’ culture, values and ethics, governance and accountability mechanisms.
  • Assessment of operating effectiveness of key controls
    • Operating expenditures and accounts payables
  • Assessment of the Information Technology General Controls (ITGCs)
    • The objectives of ITGCs are to ensure the proper development and implementation of applications, as well as the integrity of programs, data files and computer operations
  • Budget management and forecasting
    • Strengthening of budget controls
    • Simplification of financial tools