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Annex to the Statement of Management Responsibility Including Internal Control Over Financial Reporting

Assessment of Internal Control Over Financial Reporting (Unaudited)

For the year ended March 31, 2013

1. Introduction

This document is an annex to the Public Service Labour Relations Board (PSLRB) Statement of Management Responsibility Including Internal Control Over Financial Reporting which prefaces the financial statements for the fiscal year 2012-13. As required by the Treasury Board Policy on Internal Control, this annex provides summary information on the measures taken by the PSLRB to maintain an effective system of internal control over financial reporting (ICFR). In particular, it provides summary information on the assessment conducted by the PSLRB as at March 31, 2013, including progress, results and related action plans, along with some financial highlights pertinent to understanding the control environment of the PSLRB.

It is important to note that the system of ICFR is not designed to eliminate every possible risk, rather to mitigate risk to a reasonable level with controls that are balanced with and proportionate to the risks they aim to mitigate. The maintenance of an effective ICFR is an ongoing process designed to identify and prioritize risks and the controls to mitigate those risks, as well as to monitor its performance in support of continuous improvement.

1.1 Authority, Mandate and Program Activities

The PSLRB is an independent quasi-judicial tribunal mandated by the Public Service Labour Relations Act (PSLRA) to administer the collective bargaining and grievance adjudication systems in the federal public service. It is also mandated by the Parliamentary Employment and Staff Relations Act (PESRA) to perform the same role for the institutions of Parliament.

The PSLRB has one strategic outcome: the resolution of labour relations issues in the federal public service and in Parliament in an impartial manner, and one program activity: adjudication, mediation, and compensation analysis and research. This contributes to a productive and efficient workplace that ultimately benefits Canadians through the smooth delivery of government programs and services.

Detailed information on the PSLRB's authority, mandate and program activities can be found in the Departmental Performance Report and in Section I of the Report on Plans and Priorities.

1.2 Financial Highlights

Key financial highlights from the 2012-13 financial statements are:

Additional departmental financial information for fiscal year 2012-13 can be found under Section III - Supplementary Information of the Departmental Performance Report and in the Public Accounts of Canada.

1.3 Service Arrangements Relevant to Financial Statements

The PSLRB relies on other organizations for the processing of certain transactions or the provision of information, which impacts its financial statements:

Further information is available in the financial statements under Note 8 - Related Party Transactions.

1.4 Material Changes in Fiscal Year 2012-13

The PSLRB financial statements have been prepared by management using the Government’s accounting policies, which are based on Canadian public sector accounting standards.

Effective April 1, 2012, and pursuant to section 29.2 of the Financial Administration Act, the PSLRB is authorized to provide internal support services to, and receive such services from, one or more other departments. In previous years, these costs for services provided were recovered from other departments and offset against the related expenses. Therefore, a separate line demonstrating the PSLRB revenues has been added to its Statement of Operations and Departmental Net Financial Position and comparative figures have been reclassified to conform to the current year’s presentation.

There were no other significant departmental changes in the year that impacted the department’s financial results.

2. PSLRB's Control Environment Relevant to ICFR

The PSLRB recognizes the importance of direction from senior management to help ensure that staff at all levels understand their roles in maintaining effective systems of ICFR and are well equipped to exercise these responsibilities effectively. The PSLRB's objective is to continually enhance its internal control environment to ensure risks are managed well through a responsive and risk-based approach that enables continuous improvement and innovation.

2.1 Key Positions, Roles and Responsibilities

Below are the PSLRB's key positions and committees with responsibilities for maintaining and reviewing the effectiveness of its system of ICFR.

Chairperson - The Chairperson, as Accounting Officer, assumes overall responsibility and leadership for the measures taken to maintain an effective system of internal control. This position is a Governor-in-Council appointment. In this role, the Chairperson chairs the Executive Committee.

Executive Director and Chief Financial Officer (CFO) – The Executive Director and CFO is the top level public servant within the PSLRB and is responsible for the leadership over all operational activities in the organization.

Deputy Chief Financial Officer (DCFO) - The DCFO reports directly to the CFO and provides leadership for the coordination, coherence and focus on the design and maintenance of an effective and integrated system of ICFR.

Executive Committee (EC) - Under the general direction of the Chairperson, the EC is responsible for the effective, efficient, integrated and coherent management of PSLRB’s resources and reviews, recommends and monitors the corporate risk profile and the departmental system of internal control, including the assessment and action plans relating to the system of ICFR. The EC is composed of the Chairperson, Vice-Chairpersons, the Executive Director, the General Counsel, and all directors of the Board, who are responsible for maintaining the effectiveness of the ICFR falling within their operations.

2.2 Risk Assessment over Financial Reporting

The key elements that increase the risk of error over financial reporting and by consequence the need for increased controls include:

Statement of Operations and Net Financial Position: The PSLRB’s most significant expense is salaries and employee benefits, which represents approximately 63% of its expenses. Hence controls surrounding payroll administration represent the most important controls over financial reporting in the Statement of Operations and Net Financial Position.

The following elements reduce PSLRB’s control risks over financial reporting:

The following elements increase PSLRB’s control risks over financial reporting:

2.3 Key Measures Taken by the PSLRB

The PSLRB's control environment includes a series of measures to equip its staff to manage risks well through raising awareness, providing appropriate knowledge and tools, as well as developing skills.

Key organization-wide measures include:

3. Assessment of the PSLRB's System of ICFR

3.1 Assessment objective and scope

The self-assessment is a systematic review conducted by management to provide assurance on internal control over financial reporting. Annual assessments are intended to be led and administered by the CFO and supported by the senior management team.

The assessment’s objective is to ensure that the ICFR are effective in preventing material misstatements or errors in the PSLRB’s financial statements. In this context, an error is considered to be material if its omission or misstatement could impact the decisions of the financial statement users.

To determine the scope of the undertaking, a scoping and planning exercise must be undertaken to identify business process controls, entity level controls, and general computer controls associated with key risks to financial reporting. Both quantitative and qualitative risk factors must be considered during the scoping and planning. These include, but not limited to: materiality, transactions requiring significant judgment or estimations (e.g. provisions), complexity of operations, susceptibility to fraud, and previous audit findings.

Whether it is to support its year-end financial statements or the requirements of the Policy on Internal Control, the objective of the PSLRB’s ICFR is to provide reasonable assurance that:

This assurance will be achieved through the assessment of the design and operating effectiveness of the system of ICFR, the creation of a management action plan to address significant gaps in design and operating effectiveness, and the on-going monitoring and continuous improvement of all key elements of this system.

3.2 Assessment Elements and Methodology

During fiscal year 2012-2013, the PSLRB reviewed its project plan to broaden the elements to be assessed. The preparation of the internal controls documentation and assessment of key internal controls consisted of conducting interviews, reviewing evidence and walking through the PSLRB processes with various stakeholders. Narrative descriptions and flowcharts were prepared based on the information gathered. A controls assessment matrix was prepared and compared with TBS policy and directive requirements as well as TBS Common Financial Management Business Process Guidelines. Finally, some design effectiveness testing was carried out in order to determine whether controls are properly designed to achieve control objectives if they operate as defined in the validated narrative descriptions.

4. Assessment Results and Action Plan

During the 2012-2013 fiscal year, the PSLRB initiated its action plan to comply with the Treasury Board Policy on Internal Control.

The following table outlines the PSLRB’s current status

  2012-2013 2013-2014 2014-2015
Entity level controls
Governance and Accountability; Public Service Values; Policy and Programs; People Management; Citizen Focused Service; Risk Management; Stewardship; Accountability; Learning, Innovation & Change Management; Results and Performance
Assessment and remediation I O  
Business processes controls
Pay Administration
Assess design & operations O O  
Remediation   P  
Manage Procure to Payment
Assess design & operations O O  
Remediation   P  
Asset Management
Assess design & operations I O  
Remediation   P  
Travel
Assess design & operations I O  
Remediation   P  
Hospitality
Assess design & operations I O  
Remediation   P  
Acquisitions Cards
Assess design & operations I O  
Remediation   P  
Financial Close
Assess design & operations I O  
Remediation   P  
Accountable Advances
Assess design & operations I O  
Remediation   P  
Interdepartmental Settlements
Assess design & operations I O  
Remediation   P  
General computer controls
Assess design and operations I O  
Remediation   P P
P=Planned; I=Iniated; O=Ongoing; C=Completed

In addition to the individual action items described above, in fiscal year 2013-14, the PSLRB will continue the ongoing monitoring of its ICFR and will report the results of this activity in this annex yearly. PSLRB senior management is committed to sustaining and continuously improving its sound framework of effective ICFR in the department, to ensure that the key controls meet the expectations of management and stakeholders and appropriately mitigate associated risks.