Financial Statements for the year ended March 31, 2017

Annex to the Statement of Management Responsibility Including Internal Control over Financial Reporting – Fiscal year 2016-2017

1. Introduction

This document provides summary information on the measures taken by Immigration, Refugees and Citizenship Canada (“IRCC” or “the Department”) to maintain an effective system of internal control over financial reporting (ICFR), including information on internal control management, assessment results and related action plans.

Detailed information on IRCC’s authority, mandate, and program activities can be found in its latest Departmental Results Report and in its most recent Departmental Plan.

2. Departmental System of Internal Control over Financial Reporting

2.1 Internal Control Management

The department has a well-established governance and accountability structure to support departmental assessment efforts and oversight of its system of internal control. A departmental internal financial control management framework, approved by the Deputy Head, is in place and includes:

• organizational accountability structures as they relate to internal financial control management to support sound financial management and reporting, including roles and responsibilities for senior managers in their areas of responsibility for control management;
• values and ethics, including a departmental code of conduct and a values and ethics champions network led by the Deputy Minister;
• on-going communication and training on statutory requirements, policies, and procedures for sound financial management and control; and,
• at least semi-annual monitoring and regular updates on internal financial control management as well as the reporting of annual assessment results and related action plans to the Deputy Head, departmental senior management and the Departmental Audit Committee.

The Departmental Audit Committee provides advice to the Deputy Head on the adequacy and functioning of the department’s risk management, control and governance frameworks and processes.

IRCC’s senior management recognizes the importance of setting the tone from the top to help ensure that staff at all levels understand their roles in maintaining effective systems of ICFR and are equipped to exercise these responsibilities effectively. The Department’s focus is on ensuring that risks are managed well through a responsive and risk‑based control environment that enables continuous improvement and innovation.

2.2 Service Arrangements Relevant to Financial Statements

The Department 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 the procurement of goods and services, as per the Department’s Delegation of Spending and Financial Authority Instrument, and also provides accommodation services;
• Treasury Board Secretariat provides the Department with information used to calculate various accruals and allowances, such as the accrued severance liability;
• The Department of Justice provides legal services to IRCC; and,
• Shared Services Canada (SSC) provides IT infrastructure services to the Department in the areas of data centre and network services. The scope and responsibilities are addressed in the interdepartmental arrangement between SSC and IRCC.

Specific arrangements:

• The Department of Global Affairs Canada (GAC) provides common administrative services and support for the Immigration Program outside Canada, under a memorandum of understanding with IRCC. Common administrative services include accommodations, revenues and payments processing, accounting and telecommunications. Program support is offered by both Canada-based officers and locally engaged staff in missions abroad. GAC also prepares periodic financial reports for IRCC staff on the revenues collected and the expenses incurred directly in the field;
• The Department of Employment and Social Development Canada (ESDC) provides passport delivery and processing services to IRCC. These services are governed by a service level agreement with IRCC which ensures optimal and sound financial management of the Passport Program and the recovery of costs associated with Passport Service Delivery and Operations, Receiving Agent Services, Transition and Modernization costs and Internal Services provided by Service Canada, an initiative operating within ESDC;
• VFS Global and Computer Sciences Canada Inc. manage visa application centres that deliver visa application intake services and the collection of related application fees abroad. As a result, reliance is placed on the control procedures of these external service providers; and,
• Medavie-Blue Cross provides claims administration for the Interim Federal Health Program (IFHP). The IFHP reimburses service providers for emergency and essential health‑care services in cases where eligible clients, such as refugees, do not qualify for provincial, territorial or private health coverage. As a result, reliance is placed on the control procedures of Medavie Blue-Cross.

3. Departmental Assessment Results during Fiscal Year 2016-2017

The key findings and significant adjustments required from the current year’s assessment activities are summarized below.

New or significantly amended key controls: In the current year, IRCC continued to expand its network of on-line application and fee collection services. It also performed an in-depth analysis and rationalization of its fee refund business process, in order to gain operational efficiencies while maintaining an adequate level of control. As well, IRCC modified its business process pertaining to operating expenses that are settled through acquisition cards, again to benefit from enhanced payment processing efficiencies. Furthermore, the organization reviewed its pre and post payment account verification strategies to improve their alignment with current risks and thus render them more effective. The design of any new or amended key controls within these business processes was thoroughly analyzed prior to their implementation, and their operating effectiveness will be assessed over the next two fiscal years, according to IRCC`s ongoing monitoring program. The Department also continued to adjust following implementation of the Treasury Board Pay Transformation Initiative and, in accordance with its planned monitoring activities, will be assessing any modified key controls within the salaries and benefits business process in 2017-18. There were no significantly amended key controls in all other existing business processes that required a reassessment in 2016-17.

Ongoing monitoring program: As part of its rotational ongoing monitoring program, the Department completed its reassessment of entity-level controls and of the financial controls embedded within the following business processes: adjusting journal entries, salaries and benefits (prior to completion of the Pay Transformation Initiative), revenue processes at NHQ, non-salary operating expense processes at NHQ, immigrant loans, and all significant business processes at a Canadian case processing centre and an international mission. For the most part, the key controls that were tested performed as intended, with remediation required in the following areas:

• existence of documentary evidence of the application of certain key controls, such as significant reviews, reconciliations and approvals;
• performance of review of certain documents, transactions and reconciliations; and,
• documentation of significant financial procedures and controls.

Management action plans addressing the remediation requirements were developed by the business process owners and several have already been implemented. The remaining action plans will be operationalized within a reasonable timeframe.

Furthermore, in 2016-17, the Department substantially advanced its reassessment of information technology general controls under departmental management and of the financial controls embedded within the following business processes: Interim Federal Health Program expenses, and all significant business processes at two Canadian case processing locations and two international missions. This reassessment work will be completed in 2017-18, and its results will be disclosed in next year’s annex.

Given other management priorities, the planned reassessment of the financial controls embedded within the following business processes was deferred to the 2017-18 fiscal year: transfer payments to service provider organizations, grants to individuals – Resettlement Assistance Program, and all significant revenue and expense business processes at a Canadian regional office.

4. Departmental Action Plan

4.1 Progress during Fiscal Year 2016-17

IRCC continued to conduct its ongoing monitoring according to the previous fiscal year’s rotational plan as shown in the following table.

In 2016-17, IRCC assessed the design of any new or amended key controls while rationalizing the following business processes: fee refunds, acquisition card settlement mechanism, as well as the pre and post-payment verification of operating expenses. It also followed-up on all financial controls that required enhancements as a result of prior year monitoring, and determined that these controls were being duly strengthened within appropriate timelines.

4.2 Action Plan for the Next Fiscal Year and Subsequent Years

IRCC’s rotational ongoing monitoring plan over the next three years, subject to an annual revalidation of the high risk processes and controls and related adjustments to the plan as required, is shown in the following table:

In addition to the ongoing monitoring rotational plan, IRCC plans to continue addressing any outstanding remediation resulting from its reassessments of the financial controls in place.