Improving Public Sector Financial Management

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Improving Public Sector Financial Management

Capacity Building and Community
Development Office of the Comptroller
General RDIMS 384903
February 2006
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Financial Management Environment

• Canadians and Parliament are interested in the
  way public funds are managed
• Instances of failure of financial management
  control frameworks
• Increasing complexity of transactions and
  reporting requirements
• Call from stakeholders for increased transparency
  of financial and performance information
• Insufficient financial management expertise and
  capacity (skills and numbers) to match increasing
  demand

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OCG Mandate

• Stronger financial audit controls
• Financial standards
• Professional development
• Overseeing government spending
• Government wide financial systems
• Financial management advice support

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Strengthening Internal Audit and Financial
Management
Minister
Deputy Head
Chief Audit Executive
Chief Financial Officer
Independent Audit Committee
Accountability
Comptroller General
Advice
Assurance Findings
Functional Direction
to improve the fundamentals
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Strengthening Internal Audit
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Context and Background Re Internal Audit

• Budget 2003 - intention to strengthen internal
  audit
• OAG and PAC reports on internal audit
  performance
• Budget 2004 further strengthening
• Presidents November 2004 - bolster the internal
  audit, government-wide important element of the
  Governments agenda to improve public sector
  management and ensure the rigorous stewardship of
  public funds
• January 2005 start of consultations and
  analysis
• October 2005 - New internal audit policy approved
  for April, 2006 fully implemented by April 2009

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Vision for Internal Audit

• Provide fact based assurance to Deputy Heads on
  the health of the internal controls of their
  departments
• Refocus on the basics and ensure adequate audit
  coverage each year
• Provide a base for balanced reporting
• Make the IA function credible to Parliamentarians
  and Canadians

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Key Pillars of the Internal Audit Vision

• Reposition Internal Audit as a critical for
  effective and credible governance at deptl and
  govt wide levels
• Qualified Chief Audit Executives (CAEs), audit
  committee members and audit professionals
• Standardized approaches, tools, methodologies,
  periodic practice inspections
• Independence and effective governance
  arrangements, within departments and centrally
• Independent audit committees
• Independent audit function
• Deputy Head responsibilities
• Comptroller General responsibilities
• Timely, effective reporting and oversight.

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Scope of the Policy Change

• Deputy heads of all departments are responsible
  for ensuring
• Procedures for systematic review of control and
  accountability processes in their departments.
• Audit committee receives all of the information
  needed to fulfill its responsibilities
• Management action plans adequately address the
  recommendations and findings arising from
  internal audits, and that the action plans have
  been implemented.
• Timely audit reports, accessible, bilingual and
  on departmental web sites.
• Minister is briefed periodically on significant
  items arising from the work of internal audit and
  the audit committee. Minister to meet annually
  in camera with the Internal Audit Committee.
• Full access to Office of the Comptroller General
  and its agents.
• Management representations needed to support the
  planning, conduct, and reporting of audits by the
  Comptroller General.

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Scope of the Policy Change

• Deputy Heads of large organizations
• Appropriately resourced internal audit function.
• Independent departmental audit committee
• Qualified chief audit executive at a senior
  executive level, reporting to the deputy head.
• Departmental internal audit plan addresses all
  areas of higher risk.
• Appropriate internal audit coverage for special
  operating agencies and other entities within
  their departments and under their control.
• Comptroller General
• Small agencies and horizontal audits
• Oversee capacity of government-wide internal
  audit function
• Appointments and appraisals of Heads stewardship
  of function and reporting on performance
• Capacity building through recruitment and
  learning initiatives
• Overall assurance on internal controls
  government-wide external reporting on
  performance of function
• Review effectiveness of new policy

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Strengthening Financial Management
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Context and Background CFO Model

• Budget 2004
• Re-establish the Office of the Comptroller
  General of Canada to rigorously oversee all
  government spending.
• Appoint professionally accredited comptrollers to
  sign off on all new spending initiatives in every
  government department.
• The appointment of departmental comptrollers
  will be subject to approval of the Comptroller
  General and, Departmental Comptrollers will
  also have a functional reporting relationship to
  the Comptroller General
• Professional certification standards for
  departmental comptrollers will be established
  before the end of the year and these standards
  are to be met by departmental senior financial
  officers within three years.
• The Government is moving forward to audit all
  annual financial statements of departments and
  agencies within five years.

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High level diagnostic

• Observations of Comptroller General
• Senior Financial Officers (SFOs) in medium to
  large departments
• The role of the SFO has taken many different
  forms general administrator, chief
  accountant or CFO.
• Uneven focus on financial management. Potential
  conflict of interest
• Uneven qualifications and professional background
  in financial management and reporting
• Uneven organizational positioning and authority
  vis-à-vis Program delivery organization
• Lack of preparedness to deliver annual
  departmental audited financial statements
• Lack of back up capacity and succession
• Over extended and stretched
• Senior Full-time Financial Officers (SFFOs) in
  medium to large departments and SFOs in Small
  departments and Agencies
• Uneven qualifications and professional
  background in financial management and reporting
• Uneven level of readiness for executive table
• Lack of back-up capacity and succession

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Overriding Principles for Proposed Solution
Limited delegation of authorities to departments
by TBS
Greater delegation of authorities to departments
by TBS
From
To
Focusing on short and medium term needs of the
organization
Focusing on short and longer term needs of the
organization from a strategic perspective.
From
To
Performing a Corporate Services / Administration
role and the breadth of related activities (e.g.
Finance, HR, IM/IT Administration, etc,)
Focusing on full spectrum of financial
management, and the associated depth of knowledge
and understanding, as a full-time seasoned
business and financial executive
From
To
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Proposed Delivery Model

• Multi-tier, risk based approach for all
  organizations under functional direction of
  Office of Comptroller General
• Criteria for segmentation
• Size of managed cash-flows (revenue, expenses and
  capital expenditures)
• Accounting value of assets and liabilities under
  management
• Complexities of operations (e.g. geographic
  distribution, decentralized management, stability
  of organization/operations)
• Inherent risks ( e.g. extensive use GC)
• 3-Tier model

Tier 1 20-25 largest and most complex
organizations Initial target 80-90 of
expenditures
Tier 2 15 -20 medium size departments
Tier 3 all others
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Proposed Delivery Model (continued)

• Responsibilities of departmental CFOs
• Full spectrum of financial management (short-term
  and long-term)
• Planning, budgeting and forecasting
• Accounting and reporting, internal and external (
  financial and performance)
• Financial Management policies and internal
  controls
• Financial analysis, monitoring and challenge
• Departmental financial systems
• Investments
• Analysis of business case of opportunities
• Sign-offs and recommendation for approval by
  Deputy Head
• Subsequent on-going monitoring of implementation
• Budget integrity
• Value for money monitoring (e.g. via program
  evaluations)

CFO In-House TBS
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Tier 1 Departments
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Sign-offs

• Comptroller General
• Signs off on new initiatives above a given GoC
  materiality and / or risk threshold (to be
  determined anticipate only 30 50 per year)
• Formally monitors the initiatives he recommends,
  once approved by the Secretary
• Monitoring report by CG (government-wide or
  multi-departmental) goes to Secretary
• Periodically undertakes a risk based horizontal
  audit of the sign-off process in departments

• Chief Financial Officers
• Exercise the same role as the Comptroller General
  (CG) but within departmental domain
• Functionally reports to CG
• In support of the Deputy Head, as a minimum,
  sign-off on all new initiatives
• Monitor new initiatives, once approved by their
  current respective DM
• Monitoring report by CFO (departmental) goes to
  DM

Approval of new spending initiatives by Deputy
Heads and Departmental Ministers occur before
submitted to TBS for sign off and recommendation
to Cabinet or TB Ministers.
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Sign-off Outcomes

• Reasonable assurance that new spending
  initiatives are sound before being submitted
  for approval to the DM, Treasury Board or Cabinet
• Sound includes but is NOT restricted to
  financial management

• At the government-wide level
• Comptroller General provides his assurance to the
  Secretary.
• Secretary takes the assurances of Comptroller
  General into account before submitting to
  Treasury Board.

• At the departmental level
• Chief Financial Officers provides assurance to
  the Deputy Head.
• Deputy Head takes the assurances of Chief
  Financial Officer into account before seeking
  approval of the Cabinet or Treasury Board..

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Summary Statement of Qualifications
Professional Experience Attributes of a CFO

• 1. Professional Attributes
• University degree, preferably but not
  exclusively, in financial management.
• AND
• Professional certification CA, CMA or CGA
• 2. Experience Attributes
• Experience, preferably but not exclusively, in
  management of public sector organizations
• Extensive experience, preferably but not
  exclusively, in financial management of public
  sector organizations

• PROFILE
• Professional attributes
• - University education
• - Accreditation
• - Financial mgt knowledge
• Experience attributes
• Seasoned financial expert
• Leadership experience
• Business knowledge

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Summary Statement of Qualifications
Executive and Personal Attributes of CFO

• 3. Executive Attributes
• As defined for the Public Service
• with special emphasis for
• Leadership
• Strategic thinking
• Attention to details
• Communication (upwards, downwards, internal and
  external)
• Strong organizational compass

• PROFILE
• Executive attributes
• Meets linguistic and competency requirements for
  public service executives
• Personal attributes of CFO
• Meets the specific personal attributes for a CFO

A fully qualified CFO must meet ALL 3
attributes and CFO Specific Competencies
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Other Initiatives

• Grants and Contributions
• Audited Departmental Financial Statements
• Policy Suite Renewal

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Capacity Building and Community Development
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Office of the Comptroller General new
organization
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Capacity Building and Community Development Sector
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CBCD Mission

• To strengthen nurture the HR capacity of the
  internal audit financial management communities
  by providing client focused initiatives
  programs in partnership with those communities
  others.

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Capacity Building

• Demographics
• Recruitment
• FORD/IARD
• Pre-qualified pools
• Interchange
• Staffing and recruitment protocols (work
  descriptions, statements of qualification,
  competency profiles

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Capacity Building

• Professional Development and learning
• Support to the functional community at all levels
• FI-03/04 development program
• CAP, AEXDP
• Special development pools for targeted needs
• Orientation and training for external recruits
• Required learning for functional community and
  for non-financial managers at all levels

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Capacity Building

• Accreditation/Certification
• Working with professional associations (CMA, CGA,
  CA, IIA )
• CMA/CIPFA new joint certification program
• CICA working on initiative to have certain
  Government of Canada departments be recognized
  for work placements
• CGA exploring avenues for collaboration

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Community Development

• Liaison and outreach federal/provincial/
  international
• Professional institutes and associations
• Conference Board new Council for Public Sector
  CFOs
• SFO/SFFO communities
• Move to community-based approaches to allow
  greater flexibility and opportunity for the
  community

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• Questions?

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Contact infoDena Palamedes613-952-6255Palamed
es.Dena_at_tbs-sct.gc.ca
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