PPSC Financial Statements 2012–2013

Office of the Director of Public Prosecutions

Financial Statements

• Management Responsibility Including Internal Control over Financial Reporting
• Statement of Financial Position (unaudited)
• Statement of Operations and Departmental Net Financial Position (unaudited)
• Statement of Change in Departmental Net Debt (unaudited)
• Statement of Cash Flows (unaudited)
• Notes to the Financial Statements (unaudited)
• Annex – Assessment of Internal Control over Financial Reporting

Management Responsibility Including Internal Control over Financial Reporting

Reporting Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2013, and all information contained in these statements rests with the management of the Office of the Director of Public Prosecutions (ODPP), also known as the Public Prosecution Service of Canada (PPSC). These financial statements have been prepared by management using the Government's accounting policies, which are based on Canadian public sector accounting standards.

Management is responsible for the integrity and objectivity of the information in these financial statements. Some of the information in the financial statements is based on management's best estimates and judgment, and gives due consideration to materiality. To fulfil its accounting and reporting responsibilities, management maintains a set of accounts that provides a centralized record of the ODPP’s financial transactions. Financial information submitted in the preparation of the Public Accounts of Canada, and included in the PPSC’s Departmental Performance Report, is consistent with these financial statements.

Management is also responsible for maintaining an effective system of internal control over financial reporting (ICFR) designed to provide reasonable assurance that financial information is reliable, that assets are safeguarded and that transactions are properly authorized and recorded in accordance with the Financial Administration Act and other applicable legislation, regulations, authorities and policies.

Management seeks to ensure the objectivity and integrity of data in its financial statements through careful selection, training and development of qualified staff; through organizational arrangements that provide appropriate divisions of responsibility; through communication programs aimed at ensuring that regulations, policies, standards, and managerial authorities are understood throughout the ODPP; and through conducting an annual risk-based assessment of the effectiveness of the system of ICFR.

The system of ICFR is designed to mitigate risks to a reasonable level based on an on-going process to identify key risks, to assess effectiveness of associated key controls, and to make any necessary adjustments.

A risk-based assessment of the system of ICFR for the year ended March 31, 2013 was completed in accordance with the Treasury Board Policy on Internal Control and the results and action plans are summarized in the annex.

The effectiveness and adequacy of the ODPP’s system of internal control is reviewed by the work of internal audit staff, who conduct periodic audits of different areas of the ODPP's operations, by the work of the financial officers who conduct quality assurance review and by the Finance and Acquisitions Committee, which oversees management's responsibilities for maintaining adequate control systems and the quality of financial reporting.

The financial statements of the ODPP have not been audited.

Original signed by Brian Saunders and Lucie Bourcier

___________________________
Brian Saunders
Director of Public Prosecutions

___________________________
Lucie Bourcier, CPA, CGA
Chief Financial Officer

Ottawa, Canada
Date: ______________________

Statement of Financial Position (Unaudited)

Contingent liabilities (note 8)

The accompanying notes form an integral part of the financial statements.

Original signed by Brian Saunders and Lucie Bourcier

___________________________
Brian Saunders
Director of Public Prosecutions

___________________________
Lucie Bourcier, CPA, CGA
Chief Financial Officer

Ottawa, Canada
Date: ______________________

Statement of Operations and Departmental Net Financial Position (Unaudited)

Segmented information (note 10)

The accompanying notes form an integral part of the financial statements.

Statement of Change in Departmental Net Debt (Unaudited)

The accompanying notes form an integral part of the financial statements.

Statement of Cash Flows (Unaudited)

The accompanying notes form an integral part of the financial statements.

Notes to the Financial Statements (Unaudited)

1. Authority and objectives

On December 12, 2006, the Office of the Director of Public Prosecution (ODPP) also, known as the Public Prosecution Service of Canada, was created by the Director of Public Prosecutions Act which is Part 3 of the Federal Accountability Act. This Office took over the duties of the former Federal Prosecution Service within the Department of Justice.

The Office has three (3) program activities :

1- Drug, Criminal Code and terrorism prosecution program

This program supports the protection of society against crime through the provision of legal advice and litigation support during police investigations, and the prosecution of: all drug offences under the Controlled Drugs and Substances Act and any related organized crime offences throughout Canada, except in Quebec and New Brunswick, where the Office of the Director of Public Prosecutions prosecutes such offences only where charges are laid by the Royal Canadian Mounted Police; proceeds of crime offences; pursuant to understandings with the provinces, Criminal Code offences where they are related to drug charges; all Criminal Code offences in the three territories; terrorism offences; and war crimes and crimes against humanity offences. This program activity also involves the promotion of federal/provincial/territorial cooperation on criminal justice issues of mutual concern.

2- Regulatory offences and economic crime prosecution program

This program supports the protection of society against crime through the provision of legal advice and litigation support to federal investigative agencies, and the prosecution of: offences under federal statutes aimed at protecting the environment and natural resources as well as the country’s economic and social health (e.g., Fisheries Act, Income Tax Act, Copyright Act, Canada Elections Act, Canadian Environmental Protection Act, Competition Act, Customs Act, Excise Act, and the Excise Tax Act); offences involving fraud against the government; capital market fraud offences; and any organized crime offences related to the foregoing offences. This program also includes the recovery of outstanding federal fines and the promotion of federal/provincial/territorial cooperation on criminal justice issues of mutual concern.

3- Internal services

Internal Services are groups of related activities and resources that are administered to support the needs of programs and other corporate obligations of an organization. These groups are: Communications Services; Human Resources Management Services; Financial Management Services; Information Management Services; Information Technology Services; Material Services; Acquisition Services; Internal Audit; Ministerial and External Relations; Strategic Planning and Performance Management, and Travel and Other Administrative Services. Internal Services include only those activities and resources that apply across an organization and not to those provided specifically to a program.

2. Summary of significant accounting policies

These financial statements have been prepared using the Government's accounting policies stated below, which are based on Canadian public sector accounting standards. The presentation and results using the stated accounting policies do not result in any significant differences from Canadian public sector accounting standards.

Significant accounting policies are as follows:

(a) Parliamentary authorities

The Office is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to the Office do not parallel financial reporting according to generally accepted accounting principles since authorities are primarily based on cash flow requirements. Consequently, items recognized in the Statement of Operations and Departmental Net Financial Position and in the Statement of Financial Position are not necessarily the same as those provided through authorities from Parliament. Note 3 provides a reconciliation between the bases of reporting. The planned results amounts in the Statement of Operations and Departmental Net Financial Position are the amounts reported in the future-oriented financial statements included in the 2012-2013 Report on Plans and Priorities.

(b) Net Cash Provided by Government

The Office operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by the Office is deposited to the CRF and all cash disbursements made by the Office are paid from the CRF. The net cash provided by Government is the difference between all cash receipts and all cash disbursements including transactions between departments of the Government.

(c) Amounts due from/to the CRF

Amounts due from/to the CRF are the result of timing differences at year-end between when a transaction affects authorities and when it is processed through the CRF. Amounts due from the CRF represent the net amount of cash that the Office is entitled to draw from the CRF without further appropriations to discharge its liabilities.

(d) Revenues

Revenues derived from the provision of legal services are recognized in the year the services are rendered.

Fines, forfeitures and court costs are recognized upon receipt of payment by the department.

Revenues that are non-respendable are not available to discharge the Office's liabilities. While the Deputy Head is expected to maintain accounting control, he has no authority regarding the disposition of non-respendable revenues. As a result, non-respendable revenues are considered to be earned on behalf of the Government of Canada and are therefore presented in reduction of the entity's gross revenues.

(e) Expenses

Expenses are recorded on the accrual basis:

• Vacation pay and compensatory leave are accrued as the benefits are earned by employees under their respective terms of employment.
• Expenses related to the provision of advisory and prosecution functions are limited to those costs borne and settled directly by the Office. These functions may or may not be recovered as revenue from the government department and agencies. The costs of the provision of advisory and prosecution services which are paid directly by government departments and agencies to outside suppliers such as legal agents, are not included in the expenses.
• Services provided without charge by other government departments for accommodation and employer contributions to the health and dental insurance plans are recorded as operating expenses at their estimated cost.

(f) Employee future benefits

• Pension benefits: Eligible employees participate in the Public Service Pension Plan, a multiemployer pension plan administered by the Government. The Office's contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to the Plan. The Office's responsibility with regard to the Plan is limited to its contributions. Actuarial surpluses or deficiencies are recognized in the financial statements of the Government of Canada, as the Plan's sponsor.
• Severance benefits: Employees entitled to severance benefits under labour contracts or conditions of employment earn these benefits as services necessary to earn them are rendered. The obligation relating to the benefits earned by employees is calculated using information derived from the results of the actuarially determined liability for employee severance benefits for the Government as a whole.

(g) Accounts receivable

Accounts receivable are stated at the lower of cost and net recoverable value; a valuation allowance is recorded for receivables where recovery is considered uncertain.

(h) Contingent liabilities

Contingent liabilities are potential liabilities which may become actual liabilities when one or more future events occur or fail to occur. To the extent that the future event is likely to occur or fail to occur, and a reasonable estimate of the loss can be made, an estimated liability is accrued and an expense recorded. If the likelihood is not determinable or an amount cannot be reasonably estimated, the contingency is disclosed in the notes to the financial statements.

(i) Tangible capital assets

All tangible capital assets and leasehold improvements are recorded at their acquisition cost according to the table below. The Office does not capitalize intangibles, works of art and historical treasures that have cultural, aesthetic or historical value, assets located on Indian Reserves and museum collections.

Amortization of tangible capital assets is done on a straight-line basis over the estimated useful life of the asset as follows:

(j) Measurement uncertainty

The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses reported in the financial statements. At the time of preparation of these statements, management believes the estimates and assumptions to be reasonable. The most significant items where estimates are used are contingent liabilities, the liability for employee future benefits and the useful life of tangible capital assets . Actual results could significantly differ from those estimated. Management's estimates are reviewed periodically and, as adjustments become necessary, they are recorded in the financial statements in the year they become known.

3. Parliamentary Authorities

The Office receives most of its funding through annual Parliamentary authorities. Items recognized in the Statement of Operations and Departmental Net Financial Position and the Statement of Financial Position in one year may be funded through Parliamentary authorities in prior, current or future years. Accordingly, the Office has different net results of operations for the year on a government funding basis than on an accrual accounting basis. The differences are reconciled in the following tables:

(a) Reconciliation of net cost of operations to current year authorities used

(b) Authorities provided and used

4. Accounts payable and accrued liabilities

The following table presents details of the Office’s accounts payable and accrued liabilities:

5. Employee future benefits

(a) Pension benefits

The Office's employees participate in the Public Service Pension Plan, which is sponsored and administered by the Government. Pension benefits accrue up to a maximum period of 35 years at a rate of 2 percent per year of pensionable service, times the average of the best five consecutive years of earnings. The benefits are integrated with Canada/Quebec Pension Plans benefits and they are indexed to inflation.

Both the employees and the Office contribute to the cost of the Plan. The 2012-13 expense amounts to $10,852,409 ($10,760,335 in 2011-12), which represents approximately 1.7 times (1.8 times in 2011-12) the contributions by employees.

The Office's responsibility with regard to the Plan is limited to its contributions.  Actuarial surpluses or deficiencies are recognized in the financial statements of the Government of Canada, as the Plan's sponsor.

(b) Severance benefits

The Office provides severance benefits to its employees based on eligibility, years of service and salary at termination of employment. These severance benefits are not pre-funded. Benefits will be paid from future authorities. Information about the severance benefits, measured as at March 31, is as follows:

As part of collective agreement negotiations with certain employee groups, and changes to conditions of employment for executives and certain non-represented employees, the accumulation of severance benefits under the employee severance pay program ceased for these employees commencing in 2012. Employees subject to these changes have been given the option to be immediately paid the full or partial value of benefits earned to date or collect the full or remaining value of benefits on termination from the public service. These changes have been reflected in the calculation of the outstanding severance benefit obligation.

6. Accounts receivable and advances

The following table presents details of the Office's accounts receivable and advances balances:

7. Tangible capital assets

* Adjustments include a transfer in of capital assets of $23 as well as a corrpesponding transfer in of accumulated amortization of $14.

8. Contingent liabilities

Claims have been made against the Office in the normal course of operations. These claims include items with pleading amounts and other for which no amount is specified.  While the total amount claimed in these actions is significant, their outcomes are not determinable. The Office will record an allowance for claims and litigations where it is likely that there will be a future payment and a reasonable estimate of the loss can be made. Claims and litigations for which the outcome is not determinable and a reasonable estimate can be made by management amount to approximately $8,520,000 ($9,050,000 at March 31, 2012) at March 31, 2013.

9. Related party transactions

The Office is related as a result of common ownership to all Government departments, agencies, and Crown Corporations. The Office enters into transactions with these entities in the normal course of business and on normal trade terms. During the year, the Office received and provided common services which were obtained without charge from other Government departments as disclosed below.

a) Common services provided without charge by other government departments

During the year, the Office received services without charge from certain common service organizations, related to accommodation, legal services and the employer's contribution to the health and dental insurance plans . These services provided without charge have been recorded in the Office's Statement of Operations  as follows:

The Government has centralized some of its administrative activities for efficiency, cost-effectiveness purposes and economic delivery of programs to the public. As a result, the Government uses central agencies and common service organizations so that one department performs services for all other departments and agencies without charge. The costs of these services, such as the payroll and cheque issuance services provided by Public Works and Government Services are not included in the Statement of Operations .

(b) Common services provided without charge to other government departments

During the year, the Office provided services without charge to other government departments, related to the provision of legal services, in the amount of $9,103,027 ($8,424,085 in 2011-12).

(c) Other transactions with related parties

Expenses and revenues disclosed in (c) exclude common services provided without charge, which are already disclosed in (a).

10. Segmented Information

Presentation by segment is based on the Office's program alignment architecture. The presentation by segment is based on the same accounting policies as described in the Summary of significant accounting policies in note 2. The following table presents the expenses incurred and revenues generated for the main programs, by major object of expense and by major type of revenue. The segment results for the period are as follows:

11. Comparative information

Comparative figures have been reclassified to conform to the current year’s presentation.

12. Adjustment to prior year's results

In 2011-2012, the Office did not record legal services received without charge from common service organizations. Consequently, the comparitive financial statements presented for the year ended March 31, 2012 have been restated. The effect of this adjustment is presented in the table below.

Annex – Assessment of Internal Control over Financial Reporting

With the Treasury Board Policy on Internal Control, effective April 1, 2009, departments are now required to demonstrate the measures they are taking to maintain an effective system of internal control over financial reporting (ICFR).

As part of this policy, departments are expected to conduct annual assessments of their system of ICFR, establish action plan(s) to address any necessary adjustments, and to attach to their Statement of Management Responsibility, a summary of their assessment results and action plans.

Effective systems of ICFR aim to achieve reliable financial statements and to provide assurance that:

• Transactions are appropriately authorized;
• Financial records are properly maintained;
• Assets are safeguarded from risks such as waste, abuse, loss, fraud and mismanagement; and
• Applicable laws, regulations and policies are followed.

It is important to note that the system of ICFR is not designed to eliminate all risks, but rather to mitigate risks to a reasonable level with controls that are balanced with and proportionate to the risks they aim to mitigate.

The maintenance of the ICFR systems is an on-going process designed to identify key risks and assess the effectiveness and adjust as required key controls. It also serves to monitor performance in support of continuous improvement. As a result, the scope, pace and status of departmental assessments of the effectiveness of their respective ICFR system vary from one organization to the other based on risks and taking into account their unique circumstances.

1. Introduction

This document is an annex to the Statement of Management Responsibility Including Internal Control over Financial Reporting for the Fiscal Year 2012-13 of the Office of the Director of Public Prosecutions (ODPP), also known as the Public Prosecution Service of Canada (PPSC). This annex provides summary information on the measures taken by the ODPP to maintain an effective system of ICFR. In particular, it provides summary information on the assessments conducted by the ODPP as at March 31, 2013, including progress, results and related action plans, along with some financial highlights pertinent to understanding the control environment of the Office.

1.1 Authority, mandate and program activities

Detailed information on the ODPP’s authority, mandate and program activities can be found in the PPSC Departmental Performance Report and in Section I of the PPSC Report on Plans and Priorities.

1.2 Financial highlights

ODPP’s financial reports can be found at:

 https://www.ppsc-sppc.gc.ca/eng/pub/index.html#s020.

Additional organizational financial information for Fiscal Year 2012-13 can be found in the PPSC Departmental Performance Report under Section III – Supplementary information and in the ODPP Public Accounts of Canada.

1.2.1 Financial environment

The ODPP’s entire budget is dedicated to operations. The ODPP has neither major capital and projects funds, nor grants and contributions. The key financial highlights from the 2012-13 financial statement include:

• Total expenses are $193.4 million with salaries representing $118.2 million (61% of total expenses) and O&M $75.2 million (remaining 39%);
• Total revenues are $16.8 million from the delivery of prosecution services to federal departments and agencies;
• Total liabilities are $44.5 million including accounts payables at year end and employee vacation pay and benefits; representing an increase of $1.6M compared to 2011-12 mainly due to an increase in accounts payables and accrued liabilities;
• Total capital assets amount to $9 million; representing an increase of $2.1 million compared to 2011-12 due to the relocation of offices and leasehold improvements; and
• Net cost of operations is $176.6 million; representing an increase of 3% compared to $171.4 million in 2011-12 mainly due to the increase in staff.

The savings measures, announced in Budgets 2010 and 2012 and implemented in 2012-13, generated savings of $8.9 million through:

• the rationalization of some of its operations in the North ($0.5 million);
• a reduction of the funding associated with the Federal Policing Initiative ($7.4 million);
• a reduction of the number of print and electronic legal research services ($0.2 million); and
• a reduction in use of professional services ($0.8 million).

None of the measures affected staff levels and none contained any financial risks or uncertainties.

1.2.2 Operational environment

As of March 31, 2013, the ODPP had 1,024 employees, 529 of whom were lawyers. In addition to staff prosecutors, the ODPP retained the services of some 205 private-sector law firms, or 450 individually appointed lawyers, as standing agents to conduct prosecutions where it does not have a regional office or where it is impractical or otherwise not cost-effective for staff counsel to handle cases.

The key operational highlights for the fiscal year ending March 31, 2013 include:

• The ODPP has 11 regional offices across the country, as well as a number of local offices. Each local office reports to a regional office, and each regional office is headed by a Chief Federal Prosecutor (CFP);
• The ODPP worked on 77,926 files including 46,685 files opened during the fiscal year and 31,241 carried over from previous fiscal years. The volume is similar to the number of files worked on in 2011-12 (78,698 of which 48,140 were new). Agents handled 41,741 of the files: 22,501 new files and 19,240 carried over from previous years; The files divided by offence: drug-related offences (65%), criminal code offences (22%), regulatory offences, economic offences (9%), proceeds of crime and offence-related property (3%) and other offence types (1%); and
• The ODPP continued to implement its administrative priorities. These priorities included ensuring the personal security of employees, ensuring staff are deployed effectively and have the resources they need, investing in employee training and development, and working more collaboratively with investigative agencies.

1.3 Service arrangements relevant to financial statements

The ODPP relies on other organizations for the processing of certain transactions and the provision of information. This impacts its financial statements:

Common Services Arrangements:

• The Deparment of Public Works and Government Services Canada administers the payment of salaries and benefits, the procurement of some goods and services, and the provision of accommodations, on behalf of the ODPP;
• The Department of Justice provides legal services (as a common service provider) without charge; and
• Treasury Board Secretariat (TBS) provides the ODPP with an annual dollar figure for the centrally funded health and dental insurance plans, and with information used to calculate various accruals and allowances, such as the employee severance benefit.

Shared Services Arrangements:

• The Department of Justice provides certain corporate (internal) services for all regional offices, except those situated in the Northern Regions. These services include human resources operation service, financial services, administration services, security services, information management and technology services. The two main information technology systems administered by the Department of Justice that relate to financial reporting are the Integrated Financial Management System (IFMS) and iCase. Although the Department of Justice administers these systems, they are beyond the scope of the ODPP’s ICFR efforts. Nevertheless, the ODPP relies upon these systems for the purpose of its own financial statements.

Further information on service arrangements is available in the financial statements under Note 9 – Related party transactions.

1.4 Service arrangements where the ODPP is the common service provider

The ODPP is the common service provider of prosecution services to government departments and agencies and as such, the ODPP charges these organizations with the cost of providing prosecution services related to regulatory and economic crimes. The ODPP provides certain corporate (internal) services to the Department of Justice’s Northern Region similar to the services provided by the Department of Justice to the ODPP, excluding the Northern Regions.

1.5 Material changes in Fiscal Year 2012-13

There have been no material changes from the previous year.

2. Control environment relevant to ICFR

The ODPP recognizes the importance of setting the tone from the top to help ensure that staff at all levels understand their roles in maintaining effective systems of ICFR and are well equipped to exercise these responsibilities effectively. The ODPP’s focus is to ensure risks are managed well through a responsive and risk-based control environment that enables continuous improvement and innovation.

2.1 Key positions, roles and responsibilities

Below are the ODPP’s key positions and committees with responsibilities for maintaining and reviewing the effectiveness of its system of ICFR.

Director of Public Prosecutions (DPP):

The DPP is the Accounting Officer and assumes overall responsibility and leadership for the measures taken to maintain an effective system of internal control. In this role, the DPP chairs the Departmental Audit Committee.

Chief Financial Officer (CFO):

The CFO reports directly to the DPP and provides leadership for the coordination, coherence and focus on the design and maintenance of an effective and integrated system of ICFR, including its annual assessment. The CFO co-chairs the Finance and Acquisitions Committee.

Senior Departmental Managers (SDM):

Senior Departmental Managers in charge of services and program delivery are responsible for maintaining and reviewing the effectiveness of the system of ICFR falling within their mandate.

Chief Audit Executive (CAE):

The CAE reports directly to the DPP and provides assurance through periodic internal audits which are instrumental to the maintenance of an effective system of ICFR. The CAE is an ex-officio member at the Departmental Audit Committee meetings.

Departmental Audit Committee (DAC):

The DAC is an advisory committee that provides objective views on the ODPP’s risk management, control and governance frameworks. It is comprised of three external members and the DPP. The DAC reviews the corporate risk profile and the system of internal control, including the assessment and action plans relating to the system of ICFR.

Executive Council (EC):

Establishes the strategic direction and priorities of the ODPP and monitors their implementation. The Council is chaired by the Director Public Prosecutions (DPP), and includes the two Deputy Directors of Public Prosecutions (DDPP), and four Chief Federal Prosecutors (CFP).

Senior Advisory Board (SAB):

Makes recommendations to the EC on emerging issues; discusses strategic directions and priorities taking into account regional, national and horizontal perspectives, and serves as a forum for horizontal integration of “lessons learned” (i.e. performance management frameworks). The SAB is chaired by the DPP and includes the two DDPPs and all CFPs; all Associate Chief Federal Prosecutors (ACFP), Chief Financial Officer (CFO), Director General of Human Resources, Chief Information Officer (CIO), and all Headquarter Directors.

Finance and Acquisitions Committee (FAC):

Recommends resource allocations to the EC; approves resource reallocations and provides a challenge function on financial management (planning, budgeting, monitoring and reporting), acquisition matters (procurement and material management) and use of public resources across the ODPP. The FAC approves financial management and acquisition directives. The FAC is composed of the two DDPPs, CFO, three CFPs, Director General of Human Resources, and Executive Director of the Agent Affairs Unit.

Human Resources Management Committee (HRMC):

Reviews and approves Human Resources Plans (HRP), recommends Human Resource Management Policies and strategies, and associated action plans to Executive Council, and oversees and monitors the implementation and progress of key legislation, initiatives and priorities related to HR management. The HRMC is composed of the two DDPPs, Director General of Human Resources, three CFPs, Director of Law Practice Management, Director of Administration Services, and CFO.

Information Management and Technology Committee (IMTC):

Recommends information management and information technology vision, direction and strategic plans to the Executive Council to foster a culture that values knowledge sharing, good information management practices and the preservation of corporate memory. In addition, the IMTC recommends protocols and practices for records management. The Committee is composed of the DDPP responsible for the Regulatory and Economic Prosecutions and Management Branch, CIO and three CFPs.

Security Committee (SC):

Develops and recommends to EC procedures and policies for a security program including the following elements: employee protection, information security, information technology security and security investigations. The SC is composed of the DDPP responsible for the Regulatory and Economic Prosecutions and Management Branch, three CFPs and Director of Administration Services Division.

Organizational and Operational Review (OOR):

Conducts an organizational review of the PPSC and develops standards of organizational structuring. This includes establishing a streamlined, transparent and cost-effective organization through the assessment of current structure and of the performance of existing functions, work processes and core competencies. The Committee is composed of the two DDPPs, four CFPs, Director General of Human Resources, CFO and Executive Director of the Agent Affairs Unit.

Performance Measurement Committee (PMC):

Directs the development and establishment of a comprehensive approach to tracking, measuring and improving organizational performance, including the efficiency with which processes and activities are carried out; the suitability and capacity of business applications used for case management; the quality of the services provided; the quality, relevance and type of performance data collected and used; and the extent to which strategic and operational objectives are achieved. The PMC is composed of the two DDPPs, Director of Strategic Planning and Performance Management (SPPM), Director, Agent Affairs (AA), Manager, Audits and Systems, Senior Business Analyst, National Business Application Analyst (iCase); and two CFPs.

2.2 Key measures taken by ODPP

The ODPP’s control environment includes a series of measures to equip its staff to manage risks. The measures do so by raising awareness, providing appropriate knowledge and tools, as well as developing skills. Key measures include:

• An established governance structure and provision of strategic direction through Executive Council and standing Committees;
• A Strategic Planning and Performance Management Division that coordinates and supports organization-wide planning, including integrated business planning, risk management, environment scanning, and preparation of the corporate risk profile.
• Departmental Audit Committee meets three times per year;
• The Corporate Counsel provides a general legal advisory function to the ODPP and to its management of conflict of interest, values and ethics, government contracts and procurement, and the Financial Administration Act;
• Regular reporting of financial performance;
• Annual performance agreements with clearly set out financial management responsibilities;
• Human Resources People Management Strategy which addresses performance management, security, knowledge management, and recruitment and retention;
• Regularly updated delegation of financial authorities instruments;
• Documentation of main business processes and related key risk and control points to support the management and oversight of its system of ICFR;
• Policies and procedures tailored to the ODPP’s control environment;
• A Policy and Quality Assurance Division responsible for addressing control weaknesses identified as a part of the implementation of the Policy on Internal Control;
• A dedicated Internal Audit Division within the Headquarters region; and
• A three-year risk-based internal audit plan for 2013-2014 to 2015-2016 developed by the Internal Audit Division with input from the ODPP’s management team and the DAC.

3. Assessment of the ODPP’s system of ICFR

3.1 Assessment approach

In support of the Policy on Internal Control, the ODPP must be able to maintain an effective system of ICFR with the objective to provide reasonable assurance that:

• Transactions are appropriately authorized;
• Financial records are properly maintained;
• Assets are safeguarded; and
• Applicable laws, regulations and policies are followed.

The Policy and Quality Assurance Division assesses the design and operating effectiveness of new processes that result in changes to its system of ICFR, conducts on-going monitoring and ensures continuous improvement to its system of ICFR.

Over time, this includes assessment of design and operating effectiveness of the system of ICFR to ensure the on-going monitoring and continuous improvement of the system.

Design effectiveness:

Means that the key control points are identified, documented, and in place, and that they are aligned with the risks (i.e. controls are balanced with, and proportionate to, the risks they aim to mitigate), and that any required remediation is addressed. This includes the mapping of key processes and IT systems to the financial statement line items and to a relevant location, whether Headquarters or a region, depending on the significance of the control and balance at each location.

Operating effectiveness:

Means the application of key controls has been tested over a defined period to confirm they are operating consistently and that any required remediation is implemented.

On-going monitoring:

Means that a systematic, integrated approach to monitoring is in place in support of continuous improvement, including periodic risk-based assessments and timely remediation.

3.2 Scope of ODPP’s assessment during Fiscal Year 2012-13

To satisfy the Policy on Internal Control, the ODPP has taken measures to assess its system of ICFR. It used its annual financial statements as a starting point to identify its main business processes. During Fiscal Year 2012-13, the ODPP concentrated its efforts on the implementation of the remediation action plan.

The following steps were accomplished as of March 31, 2013:

• Updated internal control documentation to reflect changes to the procurement, payable and payments business process where account verification procedures have been centralized;
• Finalized the remediation management action plan and completed all the remediation actions for 2012-13; and
• Monitored remedial actions in response to the findings of prior year audits.

4. ODPP’s assessment results during Fiscal Year 2012-13

The significant findings from the current year assessment are summarized below.

4.1 Design effectiveness of key controls

Upon finalizing remediation of design effectiveness testing for its business processes, the ODPP took action on entity level controls related to Integrity, Values and Ethics; Management’s Philosophy and Operating Style; Commitment to Competence; Organizational Structure; Entity Level Objectives; and Assessment of Fraud.

The ODPP also took action on 20 process level controls as well as two operating effectiveness controls. The Internal Audit Division (IAD) assessed the effectiveness of the ODPP’s processes and worked with the Departmental Audit Committee (DAC) to provide objective advice and recommendations to the DPP. In 2012-13, the ODPP published three internal audit reports:

• the Audit of the Northwest Territories Regional Office;
• the Audit of Governance and Integrated Planning; and
• the Audit of the Alberta Regional Office.

4.1.1 Entity Level Controls

Strengthening Integrity and Ethical Values:

• Engaged in meaningful dialogue on ethics and conflict of interest with employees on a regular basis through training sessions, team meetings, and soliciting feedback through the intranet to increase employee awareness;
• Implemented a formal process to obtain certification from all employees on an annual basis that they are in compliance with the Values and Ethics Code for the Public Service and related statements; and
• Introduced a Code of Conduct to establish employees’ responsibilities and standards of discipline.

Strengthening Risk Assessment

• Strengthened the planning and communication of strategic objectives.
• Developed and integrated a Fraud Protocol in the Internal Audit Charter which outlines the responsibilities related to Fraud.

4.1.2 Process Level Controls

Documentation of Controls and Evidence of Controls

• Implemented monitoring procedures for the process of granting Delegation of Authority within the Department;
• Implemented procedures and reporting for compliance monitoring with financial policies;
• Strengthened controls over financial reporting through the use of technology; and
• Strengthened account verification procedures by the production of formalized documentation and resources.

Monitoring and Segregation of Duties

• Strengthened internal controls over segregation of duties including user access to the Integrated Financial Management System (IFMS).
• Financial management roles and responsibilities have been clarified and communicated.

Data Reconciliation

• Increased consistency of reconciliations and source data.

Cost Recovery Process Improvement Project (CRPI)

• Implemented CRPI to streamline the invoicing process and to enhance forecasting and reporting to the ODPP and concerned organizations. The ODPP was successful in recovering 97% of the costs of prosecution services.

4.2 Operating effectiveness

The ODPP will begin the testing of the operating effectiveness of internal controls once design effectiveness weaknesses have been addressed. The approach will involve a risk-based testing plan that identifies key controls to be tested over a defined period of time, which leverages departmental compliance.

4.3 On-going monitoring program

The Policy and Quality Assurance Division is responsible for managing the documentation and testing of internal controls. This division is monitoring any required remedial actions to its entity level, financial transaction, and financial reporting based on lessons learned from the annual assessments and the results of internal and external audits. This includes ensuring that there is a program in place that raises awareness and understanding of the ODPP's system of ICFR at all levels and ensures that employees have the knowledge, skills and tools required to carry out their responsibilities.

5. Action plan

5.1 Progress during Fiscal Year 2012-13

During 2012-13, the ODPP has continued to make significant progress in assessing its key financial controls. Below is a summary of the main progress made by the organization:

5.2 Status and action plan for the next fiscal year and subsequent years

Building on progress to date, the ODPP is positioned to complete the full assessment of its system of ICFR in 2014-15. As at 2015-16, the ODPP will be applying its rotational on-going monitoring plan to reassess control performance on a risk basis across all control areas. The status and action plan for the completion of the identified control areas for 2013-14 and subsequent years is as follows: