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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, 2014

1. Introduction

This document is an annex to the Public Service Labour Relations Board (Board) Statement of Management Responsibility Including Internal Control Over Financial Reporting which prefaces the financial statements for the fiscal year 2013-14. As required by the Treasury Board's Policy on Internal Control, this annex provides summary information on the measures taken by the Board to maintain an effective system of internal control over financial reporting (ICFR). In particular, it provides summary information on the assessment conducted by the Board as at March 31, 2014, including progress, results and related action plans, along with some financial highlights pertinent to understanding the control environment of the Board.

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 Board 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 Board 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 Board'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 2013-14 financial statements are:

Additional departmental financial information for fiscal year 2013-14 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 Board 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 2013-14

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

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

2. The Board's Control Environment Relevant to ICFR

The Board 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 Board'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 Board'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 Board and is responsible for the leadership over all operational activities in the organization.

Deputy Chief Financial Officer (DCFO) - The DCFO, through a shared services agreement with the Canada Industrial Relations Board (CIRB), 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 the Board'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 Board's most significant expense is salaries and employee benefits, which represents approximately 64% 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 the Board's control risks over financial reporting:

The following elements increase the Board's control risks over financial reporting:

2.3 Key Measures Taken by the Board

The Board'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 Board'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 Board'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 Board'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

The Board has taken measures to assess its system of ICFR starting by documenting and reviewing significant financial processes and controls in place. The following financial processes were documented and reviewed:

The preparation of the internal controls documentation consisted of conducting interviews and walking through the Board's financial processes with various stakeholders. Narrative descriptions and flowcharts of individual processes were prepared, and compared with TBS policy and directive requirements as well as TBS Common Financial Management Business Process Guidelines. For each control documented, the following activities were conducted:

For the design testing phase, one transaction for each business process was selected and reviewed to:

4. Assessment Results and Action Plan

During the review, it was found that most key financial controls were in place. However, opportunities for improvement were identified. The recommendations take into account the Board's size and available resources. The objective is to strengthen the effectiveness of the controls while ensuring that it is feasible to implement the proposed solutions. The Board's financial processes are integrated with Government of Canada common financial systems; financial controls and directives are aligned with the Financial Administration Act and TBS policies and directives; with the exception of policies and directives related to the Public Service Labour Relations Act.
The following table outlines the Board's current status:

  2013-14 2014-15 2015-16
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 C    
Business processes controls
Pay Administration
Assess design & operations C    
Remediation   O  
Manage Procure to Payment
Assess design & operations C    
Remediation   O  
Asset Management
Assess design & operations C    
Remediation   O  
Travel
Assess design & operations C    
Remediation   O  
Hospitality
Assess design & operations C    
Remediation   O  
Acquisitions Cards
Assess design & operations C    
Remediation   O  
Financial Close
Assess design & operations C    
Remediation   O  
Accountable Advances
Assess design & operations C    
Remediation   O  
Interdepartmental Settlements
Assess design & operations C    
Remediation   O  
General computer controls
Assess design and operations O    
Remediation   I  
P=Planned; I=Iniated; O=Ongoing; C=Completed

On December 12, 2013, the Economic Action Plan 2013 Act, No. 2 received Royal Assent. Included in that Act are provisions to merge the Board and the Public Service Staffing Tribunal (PSST) into an organization to be called the Public Service Labour Relations and Employment Board (PSLREB).

In Canada's Economic Action Plan 2014 Act, No. 1, the Government announced its intention to create the Administrative Tribunals Support Service of Canada (ATSSC). This new organization, which consolidates operations of several administrative tribunals, will provide support services to the PSLREB. The PSLREB will retain its adjudication powers and will transfer all human and financial resources to the ATSSC. Both the PSLREB and ATSSC are expected to come into force on November 3rd, 2014.

As a result of the upcoming mergers, the ATSSC will now be responsible for the internal control over financial reporting.