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 Staffing Tribunal (Tribunal) 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 Tribunal to maintain an effective system of internal control over financial reporting (ICFR). In particular, it provides summary information on the assessment conducted by the Tribunal 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 Tribunal.

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 Tribunal is an independent, quasi-judicial body established under the Public Service Employment Act (PSEA) to address complaints related to internal appointments and lay-offs in the federal public service. The Tribunal conducts hearings, settlement conferences and mediation sessions in order to resolve complaints.

The Tribunal has one strategic outcome of fair and impartial resolution of disputes related to internal appointments and lay-offs in the Government of Canada, and one program activity: adjudication and mediation of complaints filed under the PSEA, and internal services. 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 Tribunal'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 Tribunal 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 Tribunal 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. Tribunal's Control Environment Relevant to ICFR

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

Deputy Chief Financial Officer (DCFO) - The DCFO, though a shared services agreement with the Public Service Labour Relations Board (PSRLB), reports 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) - As the central decision-making body, the EC reviews, approves 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 and the Executive Director and General Counsel of the Tribunal, 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 Tribunal's most significant expense is salaries and employee benefits, which represents approximately 80% 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 Tribunal's control risks over financial reporting:

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

2.3 Key Measures Taken by the Tribunal

The Tribunal'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 Tribunal'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 Tribunal'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 Tribunal'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 Tribunal 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 Tribunal 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 Tribunal initiated its action plan to comply with the Treasury Board Policy on Internal Control.

The following table outlines the Tribunal'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   P  
Remediation   P  
Assess design & operations   P  
Remediation   P  
Assess design & operations   P  
Remediation   P  
Acquisitions Cards
Assess design & operations   P  
Remediation   P  
Financial Close
Assess design & operations   P  
Remediation   P  
Accountable Advances
Assess design & operations   P  
Remediation   P  
Interdepartmental Settlements
Assess design & operations   P  
Remediation   P  
General computer controls
Assess design & operations I O  
Remediation   P P
P=Planned; I=Initiated; O=Ongoing; C=Completed

In addition to the individual action items described above, in fiscal year 2013-14, the Tribunal will continue the ongoing monitoring of its ICFR and will report the results of this activity in this annex yearly. The Tribunal's 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.