Statement of Management Responsibility including Internal Control over Financial Reporting Annex for the Fiscal Year 2019 - 2020

1. Introduction

This document provides summary information on the measures taken by Veterans Affairs Canada to maintain an effective system of internal control over financial reporting, including 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 Status Report.

2. Departmental system of internal control over financial reporting

2.1 Internal Control Management

Veterans Affairs Canada 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 management framework, approved by the Deputy Head, is in place and comprises:

• organizational accountability structures as they relate to internal control management to support sound financial management, including roles and responsibilities of senior departmental managers for control management in their areas of responsibility,
• values and ethics,
• ongoing communication and training on statutory, and policies and procedures for sound financial management and control,
• at least semi-annual monitoring of, and regular updates to, internal control management, as well as the provision of related assessment results and action plans to the Deputy Head and senior departmental management, and as applicable, the Departmental Audit Committee.

The Departmental Audit Committee provides advice to the Deputy Head on the adequacy and functioning of the department’s risk management, control and governance frameworks and processes.

2.2.1 Common service arrangements

Veterans Affairs Canada relies on other organizations for processing certain transactions that are recorded in its financial statements, as follows:

• Public Services and Procurement Canada, which administers payment of salaries and the procurement of goods and services, and provides accommodation services
• Shared Services Canada, which provides information technology (IT) infrastructure services
• Department of Justice Canada, which provides legal services
• Treasury Board of Canada Secretariat, which provides information on public service insurance and centrally administers payment of the employers share of contributions towards statutory employee benefit plans

Readers of this annex may refer to the annexes of the above-noted departments for a greater understanding of the systems of internal control over financial reporting related to these specific services.

As well, Veterans Affairs Canada relies on other external service providers for the processing of certain information or transactions that are recorded in its financial statements, as follows:

2.2.2 Specific Arrangements

• An external service provider administers the Federal Health Claims Processing System on behalf of the Service Delivery Branch. The external service provider has the responsibility to ensure that payments are made in accordance with the conditions set out by the department. As a result, reliance is placed on the control procedures of the external service provider which are subject to a CSAE 3416 audit.
• Another external service provider administers portions of the Vocational Rehabilitation program to help disabled CF Veterans who need support to re-enter civilian life through the provision of medical, psycho/social, and vocational assistance/services. Reliance is placed on the control procedures of the external service provider which are subject to a CSAE 3416 audit.

3. Departmental assessment results for the 2019 to 2020 fiscal year

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

Previous year’s rotational on-going monitoring plan for current year	Status
IT general controls under departmental management	Completed as planned, remedial actions started
Pension for Life	Completed as planned and no remedial actions required
Income Replacement Benefit	Completed as planned, remedial actions started
Payroll	Completed as planned and no remedial actions required
Treatment benefits under departmental management	Completed as planned and remedial actions started

3.1 New or significantly amended key controls

In the current fiscal year, there were no significantly amended key controls in existing processes that required a reassessment. Late in the review period, the operational environment was significantly impacted by the Covid 19 pandemic. As the significant disruption to operations was not able to be foreseen, the controls surrounding the acceptance of electronic authorizations for financial transactions had to be amended, to ensure continuity of service. This did not impact any of the transactions selected for testing for the current review period, but will impact the control environment for transactions in the 2020/2021 fiscal year. Impacts on this change will be evaluated and reported on for the 2020/2021 reporting year.

3.2 Ongoing monitoring program

As part of its rotational ongoing monitoring plan, the department completed its reassessment of controls as detailed in the table represented in Section A.3. For the most part, the key controls that were tested performed as intended, with remediation required as follows:

• The review for Information Technology General Controls was completed by an external contractor and they have presented their report. Minor control issues were noted which were consistent with past reviews. A plan to address the noted inconsistencies is being developed.
• Control issues were noted in the Veterans Health Related Travel program. An on-going plan to address the deficiencies is being actioned by the process owner.
• Minor control discrepancies were noted in the Income Replacement Benefit review. These issues will be corrected and monitored going forward.

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

Veterans Affairs Canada’s rotational ongoing monitoring plan over the next three fiscal years, based on an annual validation of the high-risk processes and controls and related adjustments to the ongoing monitoring plan as required, is shown in the following table.

Rotational ongoing monitoring plan

Key control areas	2020/2021 Fiscal Year	2021/2022 Fiscal Year	2022/2023 Fiscal Year
Entity Level Controls			✔
IT general controls under departmental management			✔
Contract Administration		✔
Pension for Life			✔
Disability Pensions	✔
Income Replacement Benefit			✔
Financial Close and Reporting	✔
Long Term Care	✔
Operating and Maintenance Payables		✔
OSI Clinics		✔
Payroll			✔
Treatment Benefits under Departmental Management		✔
Veterans Independence Program	✔

5. Common service providers’ annual assessment results for the 2019 to 2020 fiscal year

Veterans Affairs Canada, as a common service provider of disability pension processing services and third party management services for health care services has completed a risk-based assessment of the internal controls for these services. The results of this assessment are outlined below.

Status of assessment of common services

Key control areas	Design effectiveness testing/ remediation	Operational effectiveness testing/ remediation	Ongoing monitoring rotation
Entity Level Controls	Complete	Complete	2022/2023 fiscal year
IT general controls	Complete	Complete	2020/2021 fiscal year
Disability pensions	Complete	Complete	2020/2021 fiscal year
Treatment Benefits under departmental management	Complete	Complete	2021/2022 fiscal year