2020–21 Departmental Results Report

Annex to the
Statement of Management Responsibility
Including Internal Controls over Financial Reporting

Office of the Chief Electoral Officer (The Office)

For fiscal year ended March 31, 2021

1. Introduction

This document summarizes the measures taken by the Office to maintain an effective system of internal control over financial reporting, including information on internal control management, assessment results and related action plans.

Detailed information on the Office's authority, mandate and program activities can be found in the 2020–2021 Departmental Results Report and the 2020-2021 Departmental Plan.

2. The Office system of internal control over financial reporting

2.1 Internal control management

The Office has a well-established governance and accountability structure to support agency assessment efforts and oversight of its internal control system. The Financial Management Framework establishes the accountability of all managers and employees in charge of financial management within the Office and provides additional reasonable assurance that:

• Public resources are used prudently and economically;
• Roles and responsibilities of senior managers in their areas of responsibility for financial management are communicated;
• Ongoing communication and training activities regarding delegation of financial authority, legislative requirements, policies and procedures aimed at ensuring sound financial management and effective expenditure control;
• Informed decision making and effective risk management;
• Financial management processes are effective and efficient;
• Compliance with relevant laws, regulations and financial policy instruments;
• Increased oversight of the Office expenditure compliance.
• Regular monitoring and reporting as well as action plans are presented to the Deputy Chief Financial Officer or Chief Financial Officer as required;
• The values and ethics code is communicated and respected.

The Office ensures the objectivity and integrity of the data in its financial statements.

Office's Financial Management Framework helps ensure that:

• Records that support and represent all financial transactions are maintained;
• Financial transactions are recorded in a manner that allows for the preparation of internal and external financial information;
• Reports and statements are in compliance with financial management policy instruments;
• Expenditures made are in accordance with delegated authorities, and unauthorized transactions that could have a material impact on the financial statements are avoided or detected in a timely manner;
• Financial resources are protected against material loss due to waste, abuse, mismanagement, errors, fraud, omissions and other irregularities.

The effective implementation of this Financial Management Framework attests to the level of accountability demonstrated by all delegated managers and employees involved in financial management across the Office and is reflected in executive performance agreements, when applicable.

The Financial Management Framework includes the following:

• Organizational accountability structures related to the management of internal controls to support sound financial advice and stewardship management;
• The roles and responsibilities of senior executives in the management of internal controls, as well as those of delegated managers and delegated financial officers;
• An integrated management approach, providing access to high-quality information enabling informed decision-making;
• Added value through the provision of better overall results in financial management, planning and programs;
• Providing support to the group responsible for the programs in order to achieve results effectively;
• Improved financial reporting, demonstrated accountability and effective policy implementation;
• Monitoring and regularly updating the management of internal controls and reporting the results of assessments and related action plans to the Chief Financial Officer, the Chief Electoral Officer and managers reporting directly to the Chief Electoral Officer, and where applicable, to the Agency Audit Committee.

The Audit Committee is comprised of three external, independent members and is chaired by the Chief Electoral Officer (CEO). The Committee is mandated with the oversight of the Office's governance, risk management, control, audit and reporting practices. In carrying out its mandate, the Committee ensures that the CEO receives objective advice and guidance on the adequacy of its stewardship, management and accountability practices.

2.2 Service arrangements relevant to financial statements

The Office relies on other organizations for the processing of certain transactions that are recorded in its financial statements as follows:

Common Arrangements:

• Public Services and Procurement Canada (PSPC), centrally administers the payments of salaries and benefits of public servants, fees and allowances for electoral workers, the purchase of certain goods and services as well as the allowance of accommodations on behalf of the Office;
• Treasury Board Secretariat, including the Office of the Comptroller General, provides the Office with information to calculate the various allowances and accrued liabilities (e.g., severance pay, percentage of group insurance plans free of charge and employer contributions to employee benefit plans);
• The Office of the Auditor General of Canada conducts an independent audit of the Office that promotes accountability to the government for the collection and use of public funds. It also provides objective information, assurances and advice to Parliament on the results achieved in the Office's financial reports, which maintain and enhance public confidence through data collected in accordance with government policies and professional verification standards. The Office of the Auditor General of Canada is funded directly by Parliament and their costs are paid through an annual appropriation.

Specific Arrangements:

• Agriculture and Agri-Food Canada (AAFC) provides the Office with integrated financial and material system (SAP) services to record and report on all financial transactions, and material transactions as of April 1st, 2021. Note that the development, configuration and implementation on SAP with AAFC had started in 2019-2020. As part of this arrangement, the Office relies on controls established by AAFC to manage certain information technology (IT) controls and procedures (e.g., security, segregation of duties and business continuity). AAFC also administers various master data functions in SAP on behalf of the Office. AAFC has reported the results of the design effectiveness and operational effectiveness testing of key controls and these were rated as strong by an external consulting firm. The Office relies on the automated SAP controls established by AAFC for all 7 departments served.

Readers of this appendix may consult the appendices of the above organizations to better understand the internal control systems over financial reporting relating to these specific services.

3. The Office assessment results during fiscal year 2020-2021

During 2020-2021 fiscal year, the Office extended the end date of a contract with a professional firm specialized in the assessment of internal financial controls to support the work of the Internal Controls team. The Office continued to carry out its monitoring activities.

Significant changes

Marc Limoges was appointed Chief Financial Officer on July 21, 2020.

Given the implementation of the Office's new SAP financial system at the beginning of fiscal year 2021- 2022, an assessment of internal controls over the previous financial system was not undertaken in the current fiscal year. In the context of the SAP implementation, the related business processes were documented and the internal controls related to the system were identified and validated during the configuration certification, access and master data conversions exercise.

During the current year, there were no significant changes to key controls within the existing processes requiring a reassessment.

The office plan below takes into consideration the change in the financial system.

3.1 Design Effectiveness testing of key controls

During the 2020-2021 fiscal year, the Office did not perform any design effectiveness tests of its key controls.

3.2 Operating effectiveness testing of key controls

In 2020-2021, the Office resumed work on the operating effectiveness testing for headquarters salaries and benefits that had been suspended in March 2020 due to the Covid-19. After analyzing the preliminary results of its tests and taking into consideration the fact of a transition to a new financial system, the Office decided not to implement an action plan, but rather to make general changes as a result of corrective measures raised. The external draft report was received on August 13, 2021 and is currently in revision. Design and Operating effectiveness testing for this business process will be conducted in 2021-2022.

3.3 Ongoing monitoring of key controls

In 2020-2021, as part of the transition to a new financial system, the Office has reviewed all of its current business processes and adapted them based on the controls of the SAP service provider. The new business processes have been communicated and are posted on the Office's intranet.

3.4 Adaptation and update of New or significantly changed key controls

In 2019-2020, following a double payment incident that occurred in November 2019, the Office hired an external firm to assess and recommend changes to the key controls of the existing process on the payment approval. The report was delivered in late fall 2020; upon reading the report it also states that the actions taken in 2019-2020 by the Office were justified and adapted to the event. The risk of a similar incident occurring again is almost nil according to the findings of the external consulting firm's report.

In 2020-2021, no key controls were significantly changed under existing processes requiring reassessment.

In the context of the implementation of the new financial system, certain measures were taken and validated during the implementation in order to reduce the risk of double payment through an automated interface implemented on April 1, 2021.

4. The Office action plan

4.1 Progress made during the 2020-2021 fiscal year

In 2020-2021, the Office continued to make progress in assessing and improving its key controls. The table below provides a summary of its progress based on the plans described in the previous fiscal year's annex.

Progress During Fiscal Year 2020-2021

Element in previous year's action plan	Status
Salaries and Benefit – Headquarters	The assessment of the operating effectiveness testing has started and will be completed in the second quarter of 2021-2022 Following the assessment, corrective measures will be taken if necessary
Financial Statement Close	Design effectiveness testing has been completed Following the assessment, no corrective action required
Accounts Receivable	The Office postponed the design effectiveness testing to a later date due to the transition to a new financial system in 2021- 2022.

Other progress made and not listed in the previous year's action plan:

Elements	Status
Conversion to SAP	The Office has: Reviewed, tested, refined and documented financial processes and procedures Tested the configuration of the system's financial business processes, interfaces and the master data integrity conversion into SAP. Acquired assurance of an effective implementation of control measures relating to purchases, payments, contract procurement, salary forecasting and delegation of financial signing authority Obtained an independent assessment from a consulting firm attesting to the soundness of the project and implementation methodology for the preparation of the SAP system deployment Obtained the necessary certificates and the authority to operate the new system as of April 1,
Business process	The Office has: Performed a review of all current business processes Documented and made changes to business processes to meet service provider's service controls Communicated and posted new business processes
SAP Users	The Office has: Reassessed the roles and responsibilities of future SAP users Ensured appropriate and limited access to user's functions in SAP Complied with the security parameters established by AAFC.
Training	The Office, with AAFC's help, has: Established a training schedule according to the roles of each user Ensured the follow-up of training by users Ensured access to the financial system, once the training has been completed
Delegation of financial signing authority	The Office has: Reviewed and updated the organizational hierarchy of the delegation of financial signing authorities Integrated the hierarchy into the SAP financial system
Data conversion	The Office has: Analyzed and reviewed each of the data conversion tables Cleaned master data before conversion Performed data transfer verification
Security	The Office has: Analyzed and mitigated the risks for the access of certain users in SAP and made necessary changes to user roles to ensure segregation of duties Implemented a periodic monitoring process Adapted and adopted the service provider's existing controls Implemented an action plan and milestones as of April 1st whereby security control elements were assessed and recommendations made by the security group and accepted by the Chief Financial Officer The Chief Financial Officer is committed to providing adequate oversight and ensuring that progress is made to meet the requirements for the development and/or corrective actions required This plan has been communicated to the Chief Electoral Officer, Departmental Audit and Financial Systems Replacement Project Committees

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

As part of the SAP implementation, the Office handled several changes associated with a new financial system, notably the data system and the adjustment of existing business processes. The design and operational effectiveness testing of all business processes will be reviewed over the next few years against the new SAP departmental financial management system once the data entry stabilization phase is reached. Delays in design and operational effectiveness testing assessment are possible in the event of a general election in a minority government context.

Status and Action Plan for the Next Fiscal Year and Subsequent Years*

Key control areas	Design effectiveness testing and remediation	Operating effectiveness testing and remediation	Ongoing monitoring rotation
Budgeting and Forecasting	2022-2023	Future years	Future years
Financial Statement Close	2023-2024(1)	Future years	Future years
Entity Level Controls	2022-2023(1)	Completed	Future years
IT General Controls	2022-2023(1)	Future years	Future years
Accounts Receivable	2022-2023	Future years	Future years
Accounts Payable and Operating Expenses	2022-2023(1)	Future years	Future years
Tangible Capital Assets	2023-2024(1)	Future years	Future years
Inventory	2023-2024(1)	Future years	Future years
Transfer Payments	2023-2024(1)	Future years	Future years
Salaries- Electoral Administrators and Workers	2025-2026(1)	Future years	Future years
Salaries and benefits – Headquarters	2021-2022	Future years	Future years

Note:

*: Planning for the next steps in internal control management assessment activities includes a risk-based approach given the Office's Departmental Financial Management System renewal initiative. It is possible that this new implementation will cause delays in assessments.

⁽¹⁾: New sequence in the Office's evaluation cycle.