Bernie Geiger TBS/OCG/FMAS #629462

1. Financial Management Policy Framework and the Office of the Comptroller General of Canada FMI-Vancouver, February 20th, 2008FMI-Edmonton, February 21st, 2008FMI-Regina, February 22nd, 2008 Bernie Geiger TBS/OCG/FMAS #629462

2. Policy Renewal: Context • TB Policy Renewal Initiative - introduced in Jan. 2005 as one of Secretary's key Management initiatives • Supports enhanced accountability and excellence in management of the public service • Directly linked to Federal Accountability Action Plan • Commitment to reduce number of policies by at least 50%

4. Structure of TB Policy Instruments

6. Policy Renewal: Strengthening Accountabilities Renewed policies embody four principles of effective accountability as defined in the Foundation Framework for Treasury Board Policies • Clear roles, responsibilities and performance expectations; • Balancing expectations with capacity to deliver; • Reporting; and • Oversight and consequences.

7. Political Direction to Change • Bill C-2 – Federal Accountability Act • Creates “Accounting Officer” role for DH • Sets out requirements for Internal Audit • Some changes to Transfer Payments • Strengthens Parliamentary oversight • Federal Accountability Action Plan set a timetable for review of Financial management framework • Bill S-201 – quarterly departmental financial statements (was S-217) • Ongoing interest by Public Accounts Committee

8. Interim Comptroller General’s Priorities: 2008

9. Results of CG’s Conversations • Principles based practices commensurate with risks • Stronger FM/IA community and systems • Better use of management resources • More explainable and defendable practices • More long term stability

10. Go Forward Strategy: Priorities • Risk and principle based frameworks • Responsible/phased implementation • Audited financial statements • Tasks of audit committees • Financial management policy suite • Continue focus on HR/community development • Improve systems integration/interfaces • Basic FAA compliance and internal controls • Stable reforms and corporate memory • Communications and stakeholder conversations

11. Overview of Internal Audit Policy

12. IA Policy, Objectives and Key Features • New policy (2006):Not a technical upgrade, but a transformation • Policy objectives • Enhance the role of internal audit • Standardize IA across government, at a high level of quality • Strengthen and further professionalize the function • Increase the independence of internal audit • Key features • Deputy head responsibility • Independent departmental audit committee • Chief audit executive • Broader assurance responsibility for audit – a holistic view • Tailored response for small departments and agencies • Integrated responsibilities between deputy heads and Comptroller General

13. How Internal Audit Is Organized • Decentralized – functional leadership, monitoring, and operations at OCG • Large departments and agencies (LDAs) • Deputy head • Chief audit executive • Departmental audit committee • Internal audit charter and risk-based internal audit plan • Reporting • Small departments and agencies (SDAs) • Office of the Comptroller General-SDA horizontal/sectoral/thematic audits • Deputy head responsibility for additional internal audit, as necessary • Office of the Comptroller General • Internal Audit Sector―policy and operations • Assurance operations―horizontal audit (LDA/SDA), IT audit, forensic audit • Business intelligence, analysis, liaison • Professional practices―audit committees, standards and guidance, practice inspection • Capacity Building and Community Development Sector • Audit committees―recruitment and development • Audit practitioners―capacity building and community development

14. Policy on Internal Audit – The Benefits • Breaks with the past (i.e., more than 10 years of issues) • Deals with issue of centralization (Public Accounts Committee expectations) • Adds a horizontal dimension (interdependencies) • Brings a holistic view (context and relevance) • Deals with issues of critical mass (for audit capacity in smaller organizations) • Gets back to basics (assurance, rigour, support to accountability, information for better decision-making) • Recognizes internal audit not simply a job (a career, a profession)

15. Support to IA Policy Implementation • Maturity model (practical progression; fundamentals in place by 2009) • Financial support (increases to departmental reference levels in 2008-10 and thereafter; new OCG/IAS Field Audit Directorate for small departments) • Supply arrangement for professional services (facilitate access to expert audit services) • Human resource strategy (reconfiguration of IA community – planning, classification, recruitment, development, etc.) • Integrated IA business & technology strategy (audit management software is a priority) • Audit standards & practices manual (mandatory elements, practice guidance; links to IIA Professional Practices Framework)

16. Support to IA Policy Implementation (cont’d) • Practice inspection manual (linked directly to Standards and Practices; inspect departmental internal audit operations every 4 years) • Guidance on core controls (linked to federal government’s Management Accountability Framework-MAF) • Government-wide risk analysis and internal audit plan(in progress) • Forensic audit advice and support (ongoing) • Audit committee secretariat (support to recruitment, selection and development of members – approved by Treasury Board) • Audit committee guidebook (reference, diagnostic tools)

17. The Horizon―IA Plans and Priorities • Independent audit committees • Reconfiguration of IA community • Performance management strategy • Monitoring and business intelligence • Annual assessments • Cyclical practice inspections • Government of Canada audit plan • Reporting requirements and strategy―holistic assurance • Review of internal audit policy implementation by end of 2008, full evaluation by 2011

18. Conclusions on IA • Focus on transformational solution―enablers, monitoring, championing • Support realistic implementation • Promote and preserve a balance in requirements of deputy heads (accounting officers) and of the Centre • Professionalize the internal audit function―reconfigure • Ensure independence of internal audit

19. Draft Financial Management Policies

20. Draft Financial Management Policies • Clarifies and personalizes FM responsibilities • Create five new core policies aligned with priorities • Improves transparency through new reporting requirements • Specifies consequences • Sets stronger base for TB strategic oversight

21. Draft FM Policy Framework Four Key Players: • Deputy Head (DH) – as Accounting Officer: • Ensure resources are aligned to objectives • Ensure that there are effective systems of internal control • Sign departmental accounts • ADMs – responsible for FM of areas for which they are accountable and provide DH assurances to this effect • Chief Financial Officers (CFO) – department’s senior FM executive providing FM leadership, assurances, services and challenge function • Comptroller General (CG) –GoC’s FM leader, setting policy and monitoring performance

22. Draft Policy on FM Governance • Defines financial management capabilities and governance responsibilities that: • DHs, CG, CFOs, and ADMs must exercise and be accountable for management of public resources • Defines clear governance responsibilities for DH and ADMs for financial management and reinforces principles of probity and prudence, and thus supports GoC policy that: • financial management of all public resources be subject to an effective accountability and governance regime, and that roles and responsibilities be clearly communicated. DISCUSSIONDRAFT DM must appoint CFO as part of Management Team

23. Draft Policy on Internal Control • The Policy on Internal Control defines responsibilities of Deputy Heads for an effective and integrated system of internal control. • Aims at ensuring that government-wide system of internal controls is effective, where it: • facilitates effectiveness and efficiency of departmental programs and operations; • ensures reliability of internal and external financial reporting and disclosures; and • supports compliance with laws, regulations and policies. DISCUSSIONDRAFT Sign-off on Statements of internal control will be big change!

24. Draft Policy on Financial Resource Management • Defines financial management responsibilities of DHs etc. for strategic planning and budgeting, resource acquisition, allocation, and utilization, performance management, and departmental funding of programs and activities through appropriations and authorities. • Reaffirms importance of application of sound financial management and control as an integral part of strategic and operational management governance regime of every department. DISCUSSIONDRAFT Sets out relative roles of DH, CFO and ADMs in resource management

25. Draft Policy on Financial Information and Reporting • Financial and related non-financial information must be fairly presented in all material respects and managed as a strategic business resource • Strive to obtain unqualified audit opinions on all its financial statements • Requirement for departments to obtain annually an independent audit opinion of departmental financial statements, unless exemption has been granted by President of TB DISCUSSIONDRAFT Annual Audited Financial Statements

26. Draft Policy on Financial Systems • Defines responsibilities of DHs for implementation and maintenance of reliable financial systems in compliance with government-wide standards and protocols. • Fosters integration of operational and functional systems and use of government-wide standards and protocols. Defines role of CG for approval of changes to departmental financial systems and interoperability. DISCUSSIONDRAFT CIO and Head of IM/IT must comply with TB Standards for Financial Systems

27. Draft FM Financial Management Directives • 28 Directives will replace some 100 policies, bulletins, circulars, directives, standards, guides • Clearly and consistently outline the (CFO’s) requirements • While mandatory, there is room for implementation flexibility • In general, they simplify and consolidate existing requirements • Some “new” requirements, usually flowing from new policies • Have been consulted with departments and comments considered Will be approved and implemented at same time as new FM policies

28. Draft Implementation Plans • TB Approval 2008 anticipated, further impact analysis/review underway • Further engagement of communities, communications, guidance, presentations • Implementation (tbc) of Policies and FM Directives start in late 2008 • Certain key elements (CFO appointment, Audited statements, Statements of internal control) to be phased in, depends on characteristics of department: size, readiness, capacity DISCUSSIONDRAFT

29. Conclusion • Changes are coming • Further review, analysis, consultation, planning is underway • Implementation will be phased, resources will be available Questions?