Improving Public Sector Financial Management February 2006 Capacity Building and Community...
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Transcript of Improving Public Sector Financial Management February 2006 Capacity Building and Community...
Improving Public Sector Financial Management
February 2006Capacity Building and Community DevelopmentOffice of the Comptroller GeneralRDIMS #384903
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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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Accountability
Advice
Assurance Findings
Functional Direction
Comptroller General
DeputyHead
ChiefAudit
Executive
ChiefFinancialOfficer
IndependentAudit
Committee
Minister
Strengthening Internal Audit and Financial Management …
… to improve the fundamentals
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• President’s November 2004 - bolster the internal
audit, government-wide “important element of the Government’s 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 dept’l and gov’t 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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• 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
Scope of the Policy Change
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
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
Limited delegation of authorities to departments by TBS
Greater delegation of authorities to departments by TBSFrom
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
From
To
To
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 G&C)
• 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 3all 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 DepartmentsAgriculture and Agri-Food
Canada Revenue Agency
Canada Border Services Agency
Heritage
Citizenship and Immigration
Environment
Finance
Fisheries and Oceans
Foreign Affairs
CIDA
Health Canada
Human Resources and Skills Development Canada
Social Development Canada
Indian and Northern Affairs
Industry
Justice
Defence
National Resources
PWGSC
Correctional Services
RCMP
Service Canada
Transport
Treasury Board Secretariat
Veterans Affairs
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Sign-offsComptroller 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
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
+
Professional & Experience Attributes of a CFO
+
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Summary Statement of Qualifications
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 attributesand CFO Specific Competencies
Executive and Personal Attributes of CFO
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Other Initiatives
• Grants and Contributions• Audited Departmental Financial
Statements• Policy Suite Renewal
Capacity Building and Community Development
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Office of the Comptroller General – new organization
O ffice o f th e C o m ptro lle r G en e ra l
F in a nc ia l M a na g em e ntS e c to r
C a p a city B u ild in g &C o m m u n ity D eve lo pm e nt
S e c to r
In te rn a l A u d itS e c to r
F in a nc ia l M a na g em e ntP o licy R e n e w a l
S h a red S ys te m s
C o m p tro lle r G e n e ra l
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Capacity Building and Community Development Sector
Senior DirectorF inancial Managem ent
Senior DirectorCom m unity Recru itment and
Developm ent Division.
Senior DirectorIn ternal Audit
Assistant Com ptro ller General
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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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