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Report of the Senior Committee on the Review of the Financial Management Framework of the Government of Canada


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Annex E - Financial Management Policy Framework and Related Suite of Policies

E-1: Financial Management Policy Framework - Draft

Contents

1. Purpose
2. Effective date
3. Context
4. Structure
5. Financial management policies
6. Financial management directives and standards
7. Relationship to other Treasury Board frameworks
8. Monitoring and reporting
9. Consequences

Appendix A - Accountability Model of Selected Stakeholders in Financial Management
Appendix B - Expenditure Management/Financial Management
Appendix C - List of Policies, Directives, Standards and Regulations

1. Purpose

The purpose of the Financial Management Policy Framework (FMPF ) is to establish the context and structure of financial management policies for the Government of Canada. The FMPF also provides an overview of the financial management governance, roles and responsibilities of key stakeholders.

This framework applies to all departments and organizations defined as departments within the meaning of section 2 of the Financial Administration Act (FAA). The term "deputy head" refers to deputy ministers and deputy heads of these organizations. Throughout this framework, the terms "government-wide" and "across government" refer to these organizations.

2. Effective date

The Financial Management Policy Framework takes effect on XXX 1, 20XX.

3. Context

The Treasury Board of Canada has the authority to take effective measures to ensure that the government as a whole is managed in a coherent and effective manner. This committee of Cabinet acts as the "management board" of the public service and issues policies and regulations on all matters relating to general administrative policy, the organization of the public service and financial management.

The financial management policy suite is set out in the Financial Management Policy Framework (FMPF), which elaborates on the five financial management core policies. The suite also includes a series of directives and standards supporting the policies.

The FMPF is consistent with the principles and commitments set out in the Management, Resources and Results Structure Policy (MRRS), the Values and Ethics Code , and the Risk Management Framework . The FMPF builds on the success and the direction set in the Modern Comptrollership Initiative implemented by the Government of Canada over the last 10 years and the subsequent development of the Management Accountability Framework (MAF). The FMPF also directly supports the Financial Administration Act (FAA) and its regulations, any other applicable legislation, and is consistent with the most recent amendments to the FAA further to the adoption of the Federal Accountability Act (FedAA).

The financial management policy suite, along with the FAA and its regulations, convey an integrated approach to the discipline of public sector management. Applied consistently across government, this framework fosters public service values such as probity, prudence, equity and transparency and provides clear direction to senior departmental managers on how to be good stewards of public resources and assets, and assists ministers in their accountability to Parliament.

The financial management policy suite states clearly the expectations of Treasury Board. The policy requirements are designed to put in place the mechanisms that, when implemented, will assist and support deputy heads in meeting their legal obligations under the FAA. Deputy heads benefit from the roles and responsibilities attributed to the CFO, which are designed to support the deputy head in discharging his or her responsibilities. Stronger central direction and clear expectations of the Comptroller General of Canada reinforce functional direction through the CFO model and increase the capacity and capability of the financial community. Furthermore, deputy heads benefit from a better understanding by program and functional assistant deputy ministers (ADMs) of their roles and responsibility with respect to financial management.

A compelling vision of improved financial management and control across the government is supported by an on-going review of the effectiveness of the systems of internal control and better oversight capability by Treasury Board through better accountability processes and mechanisms government-wide. Furthermore, improved use of financial systems, reliable financial information, and improved reporting and disclosures ensure that the Government of Canada is aligned with the world's best financial management practices.

4. Structure

The FMPF establishes the Treasury Board financial management policy structure and provides an overview of the financial management roles and responsibilities of deputy heads and key offices for each policy. Appendix A illustrates some of the accountabilities of selected stakeholders for financial management. For the purpose of the Framework and the five core policies, the sections entitled "assistant deputy minister or equivalent" are directed at officials reporting directly to a deputy head. In larger departments, these officials are at the ADM level. However, a deputy head may decide that these requirements are also applicable to other lower ranking officers reporting directly to him or her. In smaller organizations, this section applies to officials reporting directly to the deputy head.

A second set of Treasury Board documents, the Policy on Internal Audit and related directives and standards, establishes the responsibilities and accountabilities for effective internal audit. The FMPF and the Policy on Internal Audit should be read in conjunction and with the Foundation Framework for Treasury Board Policy Instruments.

For clarity purposes, the meaning of the expressions "financial management" and "expenditure management" is elaborated upon in Appendix B.

5. Financial management policies

The Treasury Board financial management policies set the tone and foundation for effective financial management across government. The five core financial management policies are:

  • Policy on Financial Management Governance (PFMG). It defines the financial management capabilities and the governance responsibilities that deputy heads, the Comptroller General of Canada, Chief Financial Officers, departmental ADMs and financial officers are accountable for in their management of public resources.
  • The PFMG outlines the key elements that must be understood and addressed by deputy heads and their managers across the government. These responsibilities are designed to ensure strong financial management of public resources and to contribute to better decision-making through the development and maintenance of human resources capabilities and capacity for financial management.
  • As well, the PFMG supports the establishment of an effective accountability regime by outlining and communicating clearly the roles, responsibilities and capabilities of the key stakeholders of financial management. The PFMG also contributes to the strengthening of financial management across the government by ensuring that departmental financial management organizations meet professional standards and competency levels.
  • Policy on Internal Control (PIC). It defines the responsibilities of deputy heads for the maintenance of an effective and integrated system of internal controls.
  • Internal control is an essential element of financial management as it facilitates the effectiveness and efficiency of departmental programs and operations, helps ensure the reliability of internal and external financial reporting and disclosures, and supports compliance with laws, regulations and policies. Supporting the deputy head in the achievement of the departmental mandate, the PIC also ensures that the government-wide system of internal controls is effective.
  • Policy on Financial Resource Management (PFRM). It defines responsibilities of deputy heads for strategic planning and budgeting, resource allocation, resource utilization, performance management, and departmental funding of programs and activities through appropriations and authorities.
  • The PFRM reaffirms the importance of the application of sound financial management and control as an integral part of the strategic and operational management governance regime of every department. The PRM supports sound financial decision-making to achieve efficiency, effectiveness, and economy in the management of public resources.
  • Policy on Financial Information and Reporting (PFIR). It defines the responsibilities of deputy heads for management and control of financial information, and requires the production of departmental financial statements in accordance with stated accounting principles and standards.
  • The PFIR ensures that departmental decision-making and reporting is supported by integrated financial and related non-financial information that is timely, relevant, reliable, accurate and complete. The PFIR ensures that managers can be confident that the financial and related non-financial information at their disposal allows them to make better-informed decisions. In addition, it provides assurance to all users of departmental financial information that this information is reliable.
  • Policy on Financial Systems (PFS). It defines the responsibilities of deputy heads for the implementation and maintenance of reliable financial systems that are in compliance with government-wide standards and protocols.
  • The PFS fosters the integration of operational and functional systems and the use of government-wide standards and protocols. It also defines the role of the Comptroller General of Canada to approve changes to Government of Canada financial systems.

In addition to the five core financial management policies, Treasury Board may also approve related policies and assign responsibility for implementation and monitoring to the Comptroller General of Canada.

6. Financial management directives and standards

The policies set strategic level roles and responsibilities and are directed specifically at deputy heads. Directives define the mandatory requirements with respect to specific aspects of financial management. Standards also define mandatory requirements but are more technical in nature and are directed at functional specialists. A list of policies, related directives and standards, and regulations is provided in Appendix C.

Treasury Board has delegated to the Comptroller General the authority to establish and amend financial management directives and standards.

7. Relationship to other Treasury Board frameworks

All the policies, directives and standards under the Financial Management Policy Framework are influenced by, and influence, other Treasury Board Secretariat and Public Service Human Resources Management Agency of Canada policy frameworks. They have been collectively designed to function on an integrated basis.

8. Monitoring and reporting

At the departmental level, monitoring of all the policies, directives and standards under this framework will be effected through the:

  • Management Accountability Framework process;
  • Review of recommendations prepared by the Departmental Audit Committee;
  • Review of internal and external auditor reports; and
  • Review of the reports and management representations issued by the department;

In addition, the Comptroller General will have measures in place to monitor the adequacy and skill capacity and capability of the financial management community across government for all aspects of financial management.

The Comptroller General will report periodically to Treasury Board on the state of financial management, control and reporting across government.

The Comptroller General will establish a framework to guide the evaluation of all policies, directives and standards under this framework.

9. Consequences

Consequences of non-compliance with this policy can include any measure allowed by the Financial Administration Act that the Treasury Board would determine as appropriate and acceptable in the circumstances, such as the establishment and freezing of an allotment under section 31 of the Financial Administration Act .

Two types of consequences are applicable, institutional or personal. Institutional consequences may involve withdrawal of delegated authorities, imposition of various conditions, additional reporting, special audits or reviews, and request that corrective action be taken and reported to Treasury Board. Personal consequences may involve a range of disciplinary measures, including the withdrawal of financial authorities delegated to managers and executives.

When corrective action is not implemented satisfactorily, the Secretary of the Treasury Board may recommend to Treasury Board the withdrawal of spending authority or other measures as appropriate.

Appendix A - Accountability Model of Selected Stakeholders in Financial Management

Accountability Model of Selected Stakeholders in Financial Management

Appendix B - Expenditure Management/Financial Management

Expenditure management

The Expenditure Management System is the framework for identifying and implementing the Government's spending plans in support of its priorities. EMS guides decisions on government spending and the development of expenditure plans which include priority spending, fiscal and Budget decisions, and resource allocations for departmental programs. It also provides for Parliamentary scrutiny and approval of these plans.

A key element of a sound EMS is the timely availability of high quality information and analysis to support results-based management and decision-making. This is essential to assess the performance and relevance of all spending and for making decisions on new spending proposals. For Ministers to allocate resources effectively between new initiatives and existing programs, new policy proposals must be well developed, accurately costed and respond to Government priorities. New proposals must be considered in the context of existing programs, and robust performance assessments and analyses of the efficiency, effectiveness and relevance of existing programs must be available to decision-makers throughout the policy process. This information must support results-based management, decision-making, and reporting.

Expenditure management comprises the many processes and components that collect and analyze information from departments and agencies about priorities, programs and activities, and then integrate this information in reports and documents that decision-makers use. It consists of information on programs' costs, expected results and evaluations of performance in terms of objectives achieved and the efficiency and timeliness with which the objectives were achieved, continued alignment with priorities, and optimal funding levels. This information supports Cabinet in allocating and reallocating resources and departments and agencies in designing and managing programs. It also provides better information to Parliament to hold government to account on spending and results.

Expenditure management includes the governance, rules, policies, guidelines, processes and publications on the use of the spending authorities approved by Parliament to ensure that no more than the approved amount of funds is used for the purposes intended.

Sound financial management, including accounting practices, control and reporting, is an essential pillar for reliable expenditure management. Proposed changes to the EMS will ensure good management and value for money of all spending.

Financial management

Financial management encompasses all the activities required for the sound management of all the monetary aspects of resource management. The term "financial management" refers to a continuum of finance-related activities undertaken to ensure prudent use of public resources in an effective, efficient and economic manner. These activities include planning, budgeting, accounting, reporting, internal control and oversight, analysis, costing, decision support and advice, and the management of financial systems. Financial management's focus is primarily to ensure rigorous accounting, control and reporting at the departmental level.

Financial management provides the governance, rules, guidelines, processes, information, advice, oversight and disclosure requirements necessary to protect the integrity of the public resources management system. In addition, financial management supports three essential requirements of modern management: transparency, accountability and control.

Transparency is ensured by full disclosure of financial information used by all key stakeholders, from parliamentarians to Canadians in general, including central agencies and decision makers at every level of the public service. Financial information is not limited to accounting data, but includes aggregated information and knowledge developed and used to understand, manage and report on the monetary aspects of any activity.

Accountability is supported through full financial disclosure and by tracking financial plans and results at all levels, from each individual manager to departments government-wide.

Control is achieved through the implementation of a system of internal controls that provides assurance that objectives of transparency and accountability are achieved while also ensuring that departmental objectives and priorities are achieved.

Appendix C - List of Policies, Directives, Standards and Regulations

The policies set strategic level roles and responsibilities and are directed specifically at deputy heads. Directives define the mandatory requirements with respect to specific aspects of financial management. Standards also define mandatory requirements but are more technical in nature and are directed at functional specialists.

Policy on Financial Management Governance

  • Directive on Delegation of Authorities
  • Directive on the Payment of Financial Management Professional Dues
  • Directive on Financial Officers Competencies Profile
  • Directive on the Appointment of Chief Financial Officers

Policy on Internal Control

  • Directive on Internal Control

Expenditure

  • Directive on Account Verification
  • Directive on Acquisition Cards
  • Directive on Claims and Ex Gratia Payment
  • Directive on Commitment Control
  • Directive on Financial Management of Pay Administration
  • Directive on Contingencies
  • Directive on Departmental Bank Accounts
  • Directive on Electronic Authorization and Authentication
  • Directive on Period End Recording
  • Directive on Payment Requisitioning and Cheque Control
  • Directive on Travel Cards and Travellers Cheques

Revenue and receivables

  • Directive on Accountable Advances
  • Directive on Losses of Money and Offences and Other Illegal Acts Against the Crown
  • Directive on Receipt, Deposit and Recording Money
  • Directive on Receivables Management and Charging Interest on Overdue Accounts
  • Directive on Security for Debts Due to Her Majesty

Tax management

  • Directive on Application of the Goods and Services Tax and the Harmonized Sales Tax
  • Directive on Payment, Collection and Remittance of Provincial Sales Taxes

Other

  • Directive on the Use of Consolidated Revenue Fund for Crown Corporations
  • Directive on Financial Management of Assets and Inventories

Policy on Resource Management

  • Directive on Financial Planning and Budgeting
  • Directive on Loans and Loan Guarantees
  • Directive on Self-Insurance
  • Directive on Special Revenue Spending Authorities
  • Directive on Specified Purpose Accounts

Policy on Financial Information and Reporting

  • Treasury Board Accounting Standard XX - Accounting Manual
  • Treasury Board Accounting Standard 1.A - Statement of Management Responsibility
  • Treasury Board Accounting Standard 1.B - Financial Statements Discussion and Analyses
  • Treasury Board Accounting Standard 1.2 - Departmental and Agency Financial Statements
  • Treasury Board Accounting Standard 2.2 - Materiality
  • Treasury Board Accounting Standard 3.1 - Capital Assets
  • Treasury Board Accounting Standard 3.1.1 - Software
  • Treasury Board Accounting Standard 3.2 - Transfer Payments (Grants and Contributions)
  • Treasury Board Accounting Standard 3.3 - Prepayments
  • Treasury Board Accounting Standard 3.4 - Inventories
  • Treasury Board Accounting Standard 3.6 - Contingencies

Policy on Financial Systems

  • Directive on Financial Systems
  • Directive on Recording of Financial Transactions in the Central Accounts
  • Treasury Board Financial Systems Standards

Regulations issued pursuant to the Financial Administration Act

  • Accountable Advances Regulations
  • Assignment of Crown Debt Regulations
  • Cheque Issue Regulations
  • Debt Write-Off Regulations
  • Destruction of Paid Instruments Regulations, 1996
  • Electronic Payments Regulations
  • Interest and Administrative Charges Regulations
  • Payments and Settlements Requisitioning Regulations, 1997
  • Payments to Estates Regulations, 1997
  • Receipt and Deposit of Public Money Regulations
  • Regulations Respecting Revenue Trust Accounts
  • Repayment of Receipts Regulations
  • Security for Debts Due to Her Majesty Regulations
Other Policies

Policy on Transfer Payments

  • Directive on Grants, Contributions and Repayable Contributions
  • Directive on Conditional Grants
  • Directive on Transfers to Other Levels of Government
  • Directive on Transfers to International Organizations
  • Directive on Aboriginal Transfer Payments



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