Authority for management controls
The Parliament (legislature) is the highest level of authority for management controls in the Canadian government. It is the supreme legislative authority, and any legislative powers it delegates are subordinate in nature. Subject only to the Constitution and the Charter of Rights and Freedoms, Parliament is empowered to enact any laws it chooses. It has, however, delegated extensive authority to the executive. This allows the government in power considerable latitude in carrying out its responsibilities.
The Financial Administration Act (FAA) is the legislative basis for management controls. This Act includes a number of control standards, but, perhaps most important, it requires by law a permanent committee of government ministers, called the Treasury Board (TB), which is responsible for all matters related to the public service administration. Separate from the Ministry of Finance but working in close daily collaboration, the TB is responsible for all aspects of the Expenditure Budget.
This legislative requirement is unusual, as the establishment of committees of ministers -- known as cabinet committees -- is ordinarily the prerogative of the Prime Minister, not the legislature. However, it reflects a Canadian tradition that public service administration, expenditures and related controls must be a central concern of government. Indeed, the legislative requirement was first introduced over 125 years ago, not long after Canada was constituted as a separate country.
The FAA also requires that a senior minister of the government be appointed as the President of the Treasury Board and that the board comprise four other ministers. The Minister of Finance is recognised as an ex officio member of the board because of the impact of his or her recommendations and decisions on the government s internal planning and budgetary process. These are strong conventions encouraging ministers on the Treasury Board to set aside their own portfolio interests in favour of collective governmental interests during TB deliberations.
Development and promulgation of management controls
With the exception of some broadly applicable controls contained in the Financial Administration Act, most legislated controls are in separate Acts related to specific government programmes, such as those for the collection of taxes and duties. The majority of management controls that make up the government-wide framework are not legislated. These controls are developed and promulgated in the form of TB policies and guidelines.
TB policies have the status of regulations backed by legislation whereas guidelines provide guidance or examples of best practices. While these guidelines are not mandatory, they are often used by auditors as standards. However, an auditor would not normally criticise an alternative to a guideline so long as it was equally efficient and cost-effective.
TB policies and guidelines are promulgated through a Treasury Board Manual for ministries. TBS also issues a Manager s Deskbook that highlights, in non-technical language, the most important management controls that a manager should be familiar with. The information contained in these and similar TB documents is now available in electronic form through government and ministerial information networks. It is also available within government and for public use on a compact disc.
Role of central agencies
As well as requiring a President of the Treasury Board, the FAA also establishes the post of Secretary of the Treasury Board with the rank and all the powers of the deputy head of a ministry, that is, the most senior public servant in a ministry. This has led to the establishment of a central agency known as the Treasury Board Secretariat (TBS), which is the administrative arm of the Treasury Board Cabinet Committee for developing and maintaining TB management control framework for government ministries. This is in keeping with INTOSAI s suggestion that this responsibility could be given to a central organisation with authority across various governmental organisations (I, para. 64).
While Canada s Auditor General (AG) has no formal authority or responsibility for management controls, he has considerable influence over their development and promulgation. This is because, in addition to assessing, on behalf of the legislature, the adequacy of management controls and reporting on any deficiencies or opportunities for improvement, he or she does extensive research on improved management controls in Canada and abroad and publishes the results in periodic reports to the legislature. These published research studies and the interest they provoke in committees of the legislature -- primarily the Public Accounts Committee -- serve as a stimulus to the Treasury Board to improve its framework for management controls.
The Public Service Commission, an independent agency reporting to Parliament, regulates the processes of staffing and promotion in the public service. Management control features are built into its operations and include sanctions and audit requirements.
Comparison with INTOSAI Guidelines
The INTOSAI standards are not systematically incorporated into a management control framework in Canada. However, TB does have, in effect, a number of separate sub-frameworks for each functional area of management. For instance, it has reasonably coherent direction and guidance for financial management (financial accounting, controls, and reporting), expenditure management (budgeting and performance reporting), procurement management, risk management, human resource management, and so on. It also has similar functional frameworks for internal audit and programme evaluation.
In addition, the Secretary of the Treasury Board has been endeavouring to encourage improved understanding of management s responsibility for control through the issuance of new guidance on the comptrollership function in government organisations, which is described as the essential,\ integrated business processes that must be in place in any organisation to:
-- manage financial risks;
-- understand the financial implications of decisions before they are taken;
-- properly track and account for the financial transactions and operating results of all financial decisions;
-- protect against fraud, financial negligence, violation of financial rules and principles, and losses of assets.
Monitoring and evaluating management control systems
The most senior public servant in each ministry generally holds the title of deputy head (DH). The DH is accountable to the responsible minister for the day-to-day management of the ministry, the implementation of the minister s priorities, and the quality of the policy advice provided to the minister. In addition, the DH is accountable to the Prime Minister for his overall good management performance, which is assessed annually on the basis of TB criteria. While different terminology is used, some of these criteria cover areas similar to those in INTOSAI s management control standards. Advice to the Prime Minister on the managerial performance of each DH is provided by central agencies.
As part of his or her management control responsibilities, the DH is required to sign each year with his or her senior financial officer a Letter of Representation to the Treasury Board and the Auditor General certifying the accuracy and reliability of the ministry’s recorded financial results for the year just ended. Each of these certified letters is used by TBS to prepare the government s annual financial report and by the Auditor General to audit this report. These annual financial reports contain financial statements for which the Auditor General provides an official audit opinion as to whether they represent fairly the government s financial position.
Each ministry also has its own internal audit and evaluation groups which normally report directly to the DH or to an audit committee chaired by the DH. However, their reports are considered public documents and are therefore available to the legislature and the public at large.
Working under TB standards, these groups are responsible for carrying out independent reviews much like those of the Auditor General, except that their reports are prepared as a service to top management rather than for the legislature.
In addition to the monitoring and evaluation activities carried out by ministries and the Auditor General, the government occasionally commissions independent reviews, either through the Treasury Board or through special commissions of experts from outside of government. Such reports are given considerable attention by the media and the parliamentary opposition, as well as by educational institutions and other interested parties, and serve as a point of reference and debate for many years after they are published. An example of the latter was a Royal Commission on Financial Management and Accountability, which issued a public report making extensive recommendations for improved management and control by the government.
Resources, skills, and training for implementing management control systems
When TBS staff review the expenditure plans of ministries, they endeavour to ensure that any reallocations or budget cuts will not impair the ability of ministries to maintain adequate management controls. For example, they may not recommend approval of the discontinuance of an administrative step if they think it will result in unacceptable control risks. An example was a ministry’s request to have salary cheques for employees distributed by its personnel staff rather than its financial staff. These cheques, which are prepared by the Receiver General (the Canadian government s centralized Payments Office), are sent to ministry financial officers for distribution. While this request would have saved some administrative time and overhead, TBS did not accept it, because it would have contravened the basic control standard of separation of duties (I, para. 55), as the personnel staff who prepared the payroll information would have had control of the cheques written on the basis of their input.
TBS establishes professional standards for those who perform accounting and financial control functions. Its executives participate on the promotion and recruitment boards which assess the technical competence of all candidates for senior financial, audit, and evaluation appointments throughout the government.
TBS also plays a leadership role in the government s professional recruitment from universities and in development programmes (training and redeployment) for financial officers, internal auditors, and programme evaluation staff. In addition, it conducts training courses for operational managers in a number of functional areas, such as finance, risk, and project management. These activities are consistent with INTOSAI s general standard for ensuring the integrity and competence of those responsible for management controls (I, para. 28).