Financial Statements

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Annex to the Statement of Management Responsibility including Internal Control over Financial Reporting of Justice Canada for Fiscal year 2018-2019 (Unaudited)

For the year ended March 31

1. Introduction

This document provides summary information on the measures taken by the Department of Justice Canada (the Department) to maintain an effective system of internal control over financial reporting (ICFR), as well as information on internal control management, assessment results and related action plans.

Detailed information on the Department’s authority, mandate and core responsibilities can be found in the Departmental Plan and the Departmental Results Report.

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 control financial management framework, approved by the Chief Financial Officer, is in place, which includes:

• Organizational accountability structures as they relate to internal control management to support sound financial management, including roles and responsibilities of senior managers in their areas of responsibility for internal control management;
• Values and Ethics unit, which provides educational and awareness programs and has developed a departmental code of conduct;
• Ongoing communication and training on the legislative and policy requirements for sound financial management and control; and
• Semi-annual monitoring of, and regular updates on, internal control management, as well as provision of related assessment results and action plans to the deputy head and departmental senior management and, as applicable, the Departmental Audit Committee (DAC).

The DAC is an independent and objective committee that provides advice to the Deputy Minister on the adequacy and functioning of the department’s governance, risk management and control frameworks and processes.

2.2 Service arrangements relevant to financial statements

The Department relies on other organizations to process certain transactions that are recorded in its financial statements, as follows:

Common Arrangements within the Government of Canada

• Public Services and Procurement Canada (PSPC) centrally administers the payments of salaries and the procurement of goods and services consistent with the Department’s delegation of authority, and provides accommodation services;
• Treasury Board of Canada Secretariat (TBS), which provides information on public service insurance and centrally administers payment of the employer’s share of contributions toward statutory employee benefit plans; and
• Shared Services Canada (SSC) provides information technology (IT) infrastructure services to the Department in the areas of data centre and network services.

Readers of this Annex may refer to the Annexes of the above-noted organizations for a greater understanding of the systems of ICFR related to these specific services.

Specific Arrangements for the Department

The Department provides certain corporate (internal) services to the Public Prosecution Service of Canada (PPSC), and also an SAP financial system platform to capture and report all financial transactions.

Common Services provided by the Department

• The Department is the common service provider of legal services to federal departments and agencies, and as such, the Department charges these organizations with the cost of providing legal services pursuant to legal services agreements, and provides an annual dollar figure for those legal services it provides without charge.
• To support the common services provided, the Department is responsible for the appointment of legal agents when in-house expertise is not available. The term legal agents refers to private sector law practitioners who are occasionally retained to provide legal services to federal departments and agencies. The expenses related to legal agents are typically paid by other federal departments and agencies.
• The Department provides information on pending litigation cases in order to assist federal departments and agencies in the reporting of contingencies.

3. Departmental assessment results for the 2018-19 fiscal year

The following table summarizes the status of the ongoing monitoring activities according to the previous fiscal year’s rotational plan.

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

3.1 New or significantly amended controls

In the current year, the Department launched a new legal case management system to replace the legacy system and align with the Government of Canada’s Shared Case Management System initiative. The system is integrated with the departmental financial management system to support revenue recognition and reporting as it relates to legal service billable time. The results of the assessment of the system’s ITGCs are presented in section 5 given that the solution supports the common services provided to other government departments.

3.2 Ongoing monitoring program

As part of its rotational ongoing monitoring plan, the Department began its first formal assessment of the financial close and reporting controls. The areas for improvement and remediation will be disclosed in the 2019-20 Annex to the Statement of Management Responsibility Including Internal Control over Financial Reporting.

The Department also completed the reassessment of the financial controls within the business processes of tangible capital assets, relocation, travel, hospitality, conference and event expenditures. For the most part, the key controls that were tested performed as intended, with remediation required as follows:

Process owners have developed management action plans addressing the recommendations above.

4. Departmental action plan for the next fiscal year and subsequent fiscal years

Given that the Department has completed a full assessment of the whole departmental system of ICFR in the past, it is at a state of ongoing monitoring. Building on progress to date, the Department is positioned to complete the full assessment of its system of ICFR in the 2019-20 fiscal year. At that time, the Department will be applying its rotational ongoing monitoring plan to reassess control performance on a risk basis across all control areas.

The Department will start its assessment of Internal Controls over Financial Management (ICFM) in the 2019-2020 fiscal year. The plan over the next three fiscal years is shown in the following table. It is based on an annual validation of the high-risk processes and controls and related adjustments to the ongoing monitoring plan as required. The plan is comprehensive of ICFM elements to meet the Policy on Financial Management requirements. The three year plan covers all general elements of ICFM.

5. Departmental assessment results for common services during the 2018-19 fiscal year

The Department of Justice Canada, as a common service provider of legal services, has completed an annual assessment of the internal controls related to the legal services it provides. This fiscal year’s assessment focused on the legal case management system’s ITGCs. The results of this assessment are described below.

It should be noted that control testing was performed on a new legal case management system that was scheduled to replace the previous system during the 2018-19 fiscal year.

As a result of the design effectiveness testing completed on the system’s general controls, the Department did not note any observations that had an impact on financial reporting. It was determined that the controls in place were satisfactory.

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